Clinton's Plan: Doa?

By Michael Duffy/Washington

For a man who was watching two years' work go down the drain in about 48 hours, Ira Magaziner, the architect of Bill Clinton's health-care reform plan, had a strangely delighted air at the White House senior staff meeting last Thursday morning. The afternoon before, the Business Roundtable, a group of corporate executives, had supported the alternative plan drafted by Congressman Jim Cooper of Tennessee. In a few hours, the U.S. Chamber of Commerce would use harsher language to reject the Clinton approach. Earlier in the week, Clinton offered to trade away two key elements of Magaziner's design in order to win support from Republican Governors. But through it all, Magaziner was upbeat. Clinton, he reported with a tone of mock confidence, was at a prayer breakfast across town with religious leaders. "After 14 hours of protracted negotiations," he joked, "Mother Teresa will not endorse the Cooper bill."

It's easy to see why Washington has shied away from health-care reform for generations. Not even the eternal optimists at the Clinton White House, where the grand strategy of keeping intact as many provisions as possible for as long as possible has more or less collapsed, were prepared for the theatrical skirmishing that surrounded the unofficial start of the congressional health- care marathon. Clinton and his aides struggled last week to maintain their footing as business groups ridiculed the plan, the Governors stopped short of a full endorsement, and new questions emerged about who would pay more under the President's approach. Clinton, who in his State of the Union speech acknowledged that most of the details were negotiable, dismissed the opposition as a natural part of the legislative process. "I wouldn't read too much into it," he said. But as one West Wing official put it, "It's been a bad couple of days."

Some of the damage, typically, was self-inflicted; Clinton suffered another attack of premature capitulation. (He had a bad bout of it last year during the budget fight, junking his proposed BTU tax at the first sign of protest and backing off grazing-fee increases when Western Senators threatened to stampede.) The latest relapse hit, not coincidentally, when the National Governors' Association met in Washington last weekend. Clinton considers himself a lifetime member of the N.G.A. and sometimes forgets that Governors are not as important to him now, compared with members of Congress. In White House meetings, Clinton stunned allies when he hinted to his former colleagues that he was willing to cave on two central, and controversial, provisions of his reform plan: the spending caps on insurance premiums, and the large purchasing pools known as alliances that are designed to help drive down costs.

Though Treasury Secretary Lloyd Bentsen had sent many of the same signals the week before, the headlong retreat by the President sent the true believers in Clinton's camp around the bend. Several suggested privately that he did not understand his own plan; others complained that the desire to be liked had again gotten the better of the President. West Virginia Senator John D. Rockefeller IV, who alone has stuck with the Clinton plan through thick and thin and obviously felt abandoned, grabbed a microphone at a Senate Finance Committee hearing and lectured the President in absentia. "Like the President, I've been a Governor. I like Governors, and I like being around Governors. But I'm more interested in health care than in the collegial feeling of being with Governors." Rockefeller was not alone in his dismay. 'It's the side of Bill Clinton that scares everybody," said another top adviser to the health-care team. "When you push him, he doesn't stick to his guns."

Clinton instantly fired back. "Senator Rockefeller is a wonderful man," he declared. "But he made a big mistake: he read a press report and assumed it was true." Within hours, however, White House officials affirmed the signals were no accident. Caps on insurance premiums, they said, might not be the only way to help drive down costs. As for the cumbersome alliances, they might well turn out to be smaller than the 5,000-person minimum outlined in the Clinton plan. Stated Jeff Eller, director of White House media affairs: "We've said all along, 'You want to take the alliances down from 5,000 to 4,500? Fine, let's talk.' "

The President's comments to the Governors were tied to a deliberate if somewhat confusing White House strategy: as Clinton feels his way toward a compromise bill, he must make concessions to moderate lawmakers now to prevent rival plans from gaining strength. If the Governors' package did not mirror the Clinton plan in every way -- the Governors balked at requiring employers to pay for 80% of workers' insurance premiums -- Clinton knows the outcome could have been much worse. An aide to a senior Democrat on Capitol Hill described the White House tactics this way: "They don't know what they're going to have to endorse down the road, so they don't want to draw lines in the sand that they may have to cross later."

That helps to explain why the White House tried to prevent the Business Roundtable from embracing the Cooper plan last Wednesday. For weeks Deputy Treasury Secretary Roger Altman, national economics chief Robert Rubin and Magaziner had been telephoning corporate CEOs, urging them to stay on the fence and "keep your powder dry." Hillary Rodham Clinton made calls and was host to nearly a dozen CEOs at the White House, where the President himself dropped by to urge them to keep their options open. But the next day, the Roundtable backed the Cooper measure "as a starting point" by better than 2 to 1.

Many on Capitol Hill said Rubin, Altman and other Wall Streeters on the Clinton team had deluded themselves about their ability to woo big business and had inflated the influence of the Roundtable as well. Congressman Jim McDermott, whose Canadian-style single-payer plan is anathema to Roundtable types, said the White House was wrong to think it would "ever get the support of people who don't want Bill Clinton to get re-elected."

Others said the Roundtable's action was not so much a vote for Cooper as it was a political hit on Clinton. Even John Breaux, the Louisiana Senator who co-sponsored the Cooper bill, told TIME he had never spoken with anyone at the Roundtable about his bill. "I'd like to say it's the most critical thing that's happened so far in the health-care debate," said Breaux, "but I can't, because it's not true." Junior White House officials spread out to say, as one put it, that "we never intended to win this thing." A senior official, however, acknowledged that the Roundtable bid was a mistake. "It seems to me," he said, "we allowed this thing to be built up to more than it was."

More worrisome to White House officials are poll results that indicate many Americans who already have insurance are convinced they will pay more for the same, or worse, coverage under the Clinton plan -- results supported by new evidence concerning the plan's cost. The White House estimated last fall that the average premium for health insurance under its plan would be $1,800 for individuals and $4,200 for a typical family of four. But a study by the health-care consulting firm of Lewin-VHI that was hailed by the White House in December found the premiums would be $2,732 for individuals and $5,975 for an average family. Lewin economist John Sheils estimates that 44% of Americans will pay more for coverage -- and that 14.6% will pay $1,000 more. "Under the Clinton plan," he says, "you're either a big winner or a big loser."

The 17% increase in premium costs will require the government to spend $35 billion more than it estimated to subsidize small business over the next five years, and the premium hike will also force employers to spend 14% more than Clinton estimated. Moreover, Sheils notes, the subsidies themselves are more generous than they need to be. By 1998 subsidies will total $75 billion, while the current cost of uncompensated care is $16 billion. "You're spending $5 to save $1," says Sheils.

The recognition of the plan's hidden costs is one reason why the Clinton approach seemed to be coming apart last week. But another is that the President's plan hangs on a string of interlocking parts: if one piece is removed in the legislative process, the rest of the mechanisms are quickly overloaded and bound to fail. For example, Clinton aims to pay for universal coverage in part by restraining health-care inflation through premium caps. If he backs away from caps, as he did last week, though, controlling inflation will be harder. So would be paying for universal coverage.

Though Clinton waved his fountain pen two weeks ago and dramatically vowed to veto any bill that omitted universal coverage, there is a quiet debate inside the White House about what "universal" really means. Already it is clear that the reforms will not be fully phased in for years and that Clinton proposes not to cover illegal immigrants. Such purists as Magaziner and the First Lady oppose any further concessions, but Administration pragmatists -- including the President -- reportedly believe Clinton will have to stagger coverage further to win congressional support. As a first public step toward redefining the terms of debate, House Speaker Tom Foley pointed out last week that Clinton had not used the term "universal coverage" but had instead said "guaranteed coverage for every American." The wink was not lost on liberals -- who already felt abused by the White House's ardent courtship of moderates -- Governors and the Business Roundtable. "They're even waffling on universal coverage," said the top aide to a Midwestern Senator. "The message is that if you fight hard for progressive principles, the White House may cut you off."

Administration officials deny that suggestion, but they concede there is disagreement about how strenuously to attack Cooper's plan, in part because the White House may have to work with him soon and in part because Cooper is running for the Senate this year. Having accidentally elevated his proposal to its status as the official alternative, the White House may be hoping the closer scrutiny will show up its flaws. By some estimates, it would increase the budget deficit by $70 billion over the next five years. "We haven't been able to get the message out that if people want to pay $3,000 for health insurance, then Cooper is their plan," said Sara Rosenbaum, a co-architect with Magaziner of the Clinton approach. "But if they want to pay $700, they | should vote for the Clinton model.'

The White House has trouble playing offense partly because it spends so much time playing defense. In Philadelphia on Friday, Hillary Rodham Clinton announced that it was time to "cut through the expensive television- advertising campaigns" and "start talking some sense." But several White House officials admitted the Clintons are reluctant to take to the airwaves until the legislative situation is clarified. If there was a bright moment for Clinton last week, it was the inelegant pirouette performed by Senate Minority Leader Robert Dole. Less than a week after he told Americans the nation did "not have a health-care crisis," he dismissed that question and instead said, "I think we ought to drop the theatrics and talk about the problem." That was touching coming from Dole, who, on national television a week earlier, posed before a chart showing what a labyrinth the Clinton plan would be.

The withering fire that riddled the Clinton plan this week will not end soon. The Democratically controlled Congressional Budget Office is expected to release its own report on the Administration proposal, and aides to Senate Democrats predict the findings will be, as one put it, "unfavorable." If the CBO decides the new insurance premiums are actually a tax in disguise, critics will find it even easier to condemn the whole approach as a tax-and-spend extravaganza that would add 25% to the federal budget by 1998. "Bad as this week was," said one Democratic Senate aide, "next week will make this week look easy."

With reporting by Julie Johnson and Dick Thompson/Washington