Ready to Operate

By Dan Goodgame/Washington

Not since Moses came down from the mountain bearing the Ten Commandments, Hillary Clinton joked last week, has a document been so anxiously awaited as her husband's proposal to reorganize radically the nation's ailing health-care system. That plan -- a 239-page brick of plain white paper printed last Tuesday and stamped PRIVILEGED AND CONFIDENTIAL -- would represent the boldest, most expensive social initiative since the New Deal, bigger even than F.D.R.'s institution of Social Security half a century ago. It would intimately affect the health and livelihood of every American, while shifting billions of dollars in costs and savings among the country's biggest industries and tiniest shops. And despite occasional press leaks, the First Lady, assigned by the President to oversee health reform, jealously guarded the full text of the proposal.

Until last Thursday. On that day, Mrs. Clinton visited Capitol Hill to persuade key Congressmen that she welcomed their suggestions. But Fortney Stark, the irascible California Democrat who chairs the House health subcommittee, complained that he could not seriously study the plan under Mrs. Clinton's ground rules: that legislators could see it only in guarded "reading rooms" in the Capitol, where they would be forbidden to make copies or take notes. By early evening, majority leader Dick Gephardt ordered that they be given copies of the plan. And by 6 p.m., copies of those copies began making their way to news organizations, including Time.

While many details had been published earlier, those stories failed to convey the proposal's sheer size, audacity and intrusiveness into personal and business decisions. The plan, which President Clinton is scheduled to announce next Wednesday night, would push Americans away from private doctors and into less expensive group medical practices such as health-maintenance organizations. It would hold down the income of many doctors, hospitals, insurers and drug manufacturers through stringent federal cost controls. It would dramatically cut health-care costs for many large, high-wage companies such as automakers. But those costs would increase for many mom-and-pop businesses that now pay nothing toward their workers' health insurance and would be forced to do so under Clinton's proposal.

Overall, the President's plan would cost a budget-boggling $700 billion over five years, half of which represents new spending. Clinton proposes to cover the cost mainly through a new $1-a-pack tax on cigarettes and savings in existing federal health-care programs, with $91 billion left over to reduce the federal budget deficit. Meanwhile, the plan promises to:

Guarantee a generous, minimum package of health insurance to all Americans. The 37 million people who now lack health insurance would be covered either through their employer (85% of the uninsured are workers and their dependents) or through expanded welfare schemes. The basic package of benefits would be comparable to that offered by most major corporations and would include extra benefits for primary and preventive care. Well-baby visits and annual physicals, for example, would be covered with no out-of-pocket cost. The U.S. is the only industrial democracy that does not provide such universal coverage, a situation that Clinton has decried as "a national disgrace" and that spurred him more than anything else to reform the system.

Safeguard the security and "portability" of health insurance, even for workers who change jobs, get laid off or develop chronic illnesses. Though 86% of Americans have health insurance, White House polls have shown that many people are anxious that they will lose their coverage because of layoffs or cutbacks in employer-provided insurance. The Clinton plan would ensure that workers can get insurance at any new employer, at comparable prices, even if they already need medical treatment.

Make health insurance more affordable. At the heart of the Clinton plan is the concept of "managed competition." Health-insurance buyers would band together in large "alliances" to bargain with competing networks of doctors, hospitals and other health-care providers for the best service at the best price. The theory is that such bargaining will encourage lower costs and greater efficiency (fewer unnecessary tests, for example). Rather than simply trust in this theory, however, the Clinton plan would also strictly enforce limits on health-care spending through a powerful new National Health Board that would decide when health-care providers were charging "too much." Some providers warn that such cost controls will result in development of fewer new drugs and in rationing of care. Example: requiring that elderly patients in declining health be denied such operations as hip replacements and cardiac bypasses.

Require all employers to contribute to the cost of their workers' health care. Employers would pay 80% of whatever an average health-insurance plan costs. The White House estimates that in 1994 such policies would be $1,800 a year for an individual and $4,200 for a two-parent family. Workers who want this average plan would pay the remaining 20% of the premium. Those who want a more expensive plan would have the option of paying more out of their own pocket. And those willing to settle for a no-frills (HMO) could pay less.

Require that all Americans be given a greater choice of insurance plans at different levels of price and service. Under the current system, says Paul Starr, a Princeton health-care expert who helped write the Clinton plan, "most people don't have a choice of any plan. They just take whatever their employer gives them." Under the Clinton plan, people would be offered several options. The most expensive would be the traditional fee-for-service medicine from an individual doctor. Less expensive would be the so-called preferred-provider organizations (PPOs) that many companies are now using; these require that workers go to specified doctors and hospitals that are part of the plan. An even cheaper option would be the HMOs that provide health care for a fixed price, although often with some waiting and rationing of specialist's services. Given such choices, health-care economists believe, consumers will economize by shifting toward HMOs and PPOs, which will further drive down health-care costs.

Relieve consumers from the nightmare of medical billing and insurance-claim $ forms. Clinton's plan envisions a world of instant electronic billing before the patient leaves the doctor's office. Consumers will spend less time listening to Muzak on the phone while waiting for someone at the insurance company to track down their reimbursement, while care providers and insurers will spend less time and money processing piles of claims and bills and other paperwork.

Allow states flexibility in choosing various health-care plans. A state might, for example, implement a Canadian-style "single-payer" system, in which the state pays its residents' medical bills from tax revenues. Single- payer plans are expected to be popular in rural areas that have too few health-care providers to allow for the managed-competition approach.

Provide financial relief for companies that currently spend the most on health care. The employer contribution to workers' health insurance would be capped at 7.9% of payroll. This would represent a huge saving for big manufacturers with unionized workers, notably General Motors, which now spends 19%. It would also help the average company, which spends about 12%. Automakers and other unionized corporations would benefit from a new health- care subsidy for their employees who retire before age 62.

Subsidize the health-care premiums of small businesses that employ low- income workers. While big companies that save on health insurance are expected to create new jobs, internal White House studies predict that those gains would be more than offset by jobs lost among low-wage workers at small businesses. Many of these businesses do not now pay anything to insure their workers, and would be required to pay at least 3.5% of payroll under the Clinton plan -- a payment some could finance only by shedding workers. President Clinton recently approved new transitional subsidies for businesses with fewer than 50 employees and average wages of less than $12,000. Those subsidies are expected to avert some but not all of the net job losses caused by health-care reform.

Offer new benefits for mental-health care. Tipper Gore, the Vice President's wife, led those who wanted full coverage of mental-health care, including weekly therapy sessions. The White House judged that it could not afford to create another expensive subsidy for the middle class. Yet it proposed significant new mental-health benefits: for example, covering 30 visits a year for psychotherapy.

Provide new federal subsidies for prescription drugs. Patients treated in lower-cost group medical networks would pay only $4 a prescription. Those in more expensive health plans would be insured for 80% of the cost of prescriptions, after paying a $250 annual deductible.

Offer new benefits for long-term care for the elderly. Medical care at home (for example, by a visiting nurse) would be covered as an alternative to hospitalization. Long-term care, usually in a nursing home, would be covered for as many as 100 days a year.

The Clinton plan is surprisingly persuasive in supporting the longtime claim of the Clintons and their top health-care strategist, Ira Magaziner, that reform can be financed almost entirely from savings, without broad-based new taxes and with enough left over to reduce the federal budget deficit. Ever since the campaign, when Clinton first floated this claim, budget experts have derided it as a "free lunch" approach. But now the President has backed it up with tough choices on spending -- choices that might prove politically impractical or diminish the quality of health care, but which at least demonstrate his seriousness.

The boldest of these proposals would cut in half the runaway rate of growth in spending on the two largest federal health-care programs. Clinton would cut spending on the Medicaid program for the poor by $114 billion over five years. And he would cut the Medicare program for the elderly and disabled by a whopping $124 billion, mainly by slowing inflation of payments to doctors and hospitals. These care providers would not be able to shift costs to non- Medicare patients, as they do now, because of new federal cost controls.

As Congress and special-interest groups began kicking Clinton's plan around last week, its political strengths and vulnerabilities began to emerge. Among the President's allies are the major lobbies for the elderly, who like the new benefits for drugs and long-term care. Says John Rother, legislative director for the American Association of Retired Persons: "There are people with a lot at stake who will try to derail this plan: the insurance industry, the National Federation of Independent Business." The small-business lobby, led by the NFIB, has targeted the plan's requirement that all employers pay at least 3.5% of payroll for health insurance. Most small businesses that don't offer health insurance "just cannot afford to do so," even with the subsidies proposed in the Clinton plan, contends FBI spokesman Terry Hill.

At the same time, Clinton's proposed cuts in Medicare and Medicaid are drawing fire from liberals. And some health experts think Clinton may be going too far. "No one can tell you with any assurance that these levels of cuts will not affect patients," says Stuart Altman, an economist at Brandeis University.

Republicans and conservative Democrats criticize Clinton's proposed caps on insurance premiums as a back-door version of oppressive government price controls. Says Lawrence English, president of the health-care division of Cigna, a major insurer: "I was initially encouraged to hear them say they were rejecting price controls. So I have a hard time understanding how that squares with the notion of caps on insurance premiums."

California, Texas and other states with large populations of illegal aliens will not be pleased with the plan's exclusion of illegals from guaranteed coverage. Those states would have to continue to cover the unpaid medical bills of illegals who seek treatment at hospital emergency rooms -- and with less federal aid for such care.

Others think Clinton is replacing one mess with another. Congressman Stark of California faults the President's plan as "amazingly complex. It creates many new bureaucracies. It is confusing. It eliminates traditional fee-for- service medicine as we know it."

Politicians and lobbyists are keenly aware of polls that reflect little public trust in Clinton's attempt to reform health care. In a Time/CNN survey conducted last week, only 15% of those polled had "a lot of confidence" in Clinton's ability to reform the health-care system, while twice as many expressed "no confidence" and 52% had "only some." Asked what effect Clinton's reforms would have on the quality of health care, only 19% said it would "get better," while 35% expected it would "get worse" and 41% predicted "no effect." A majority, 56%, expect that reform will increase the cost of their medical care.

Even so, there are reasons to believe that Congress will pass a plan like Clinton's within the next year or so. When voters are asked which issues concern them most, health care is right behind the economy and jobs. Even some conservative Republicans report that they are under pressure from constituents to "do something" about the price and security of health care, and some, notably Utah Senator Orrin Hatch, have submitted their own thoughtful, more market-oriented plans.

+ Part of the political problem is that there is little consensus either in Congress or among the public about the "something" that should be done with health care. Lawmakers are splintered among liberals who want a government- run, Canadian-style single-payer system; conservatives who prefer minimalist reforms to the insurance market; and those in the middle who support various versions of managed competition.

This leaves Clinton where he wants to be: somewhere near the political center with a plan that incorporates some market mechanisms and a lot of government regulation, cuts in some spending programs, and new health benefits in other areas. "The Clinton health-care bill," predicts Senator Tom Daschle of South Dakota, "will be the only vehicle in town with real credibility."

Robert Blendon, a Harvard expert on public opinion about health care, predicts that Clinton's plan will be popular because it offers "new benefits, no new taxes except for cigarettes," and control of the prices charged by doctors, hospitals and drug companies. Says he: "To be popular, the public has to think the money is coming from the provider community, which they think is doing too well anyway."

But Blendon's assessment will hold only after the tangled complexities of the Clinton plan begin to sink into public consciousness. "There has never been a national debate over health care, and these terms are all new to the American people," says Clinton pollster Stan Greenberg. "We're going to have an extraordinary period of public education."

That campaign will be dramatically joined next Wednesday night when Clinton delivers his televised address on the issue. An advocacy group has prepared a billboard near the Capitol that will light up that night and begin ticking off the number of Americans who have lost their health insurance: 50 every minute, or almost one a second. That should serve as a reminder of what Mrs. Clinton often calls "the cost of doing nothing" on this issue.

With reporting by Laurence I. Barrett and Dick Thompson/ Washington