AFTER SEVEN MONTHS OF SECRET DELIBERATIONS AND AT least three false starts, the long-awaited debate on U.S. health-care reform burst into the news last week–12 days before Bill Clinton was scheduled to address a joint session of Congress, and to the apparent dismay of the White House. The reason was the leaked release of a 246-page draft of Clinton’s plan for restructuring the nation’s health-care system. This document, marked “privileged and confidential,” had been distributed to key players on Capitol Hill, where it set off frenzied competition among the news media to Get the Whole Thing. Within 24 hours, everybody, including NEWSWEEK, had it. Now Congress, the voters and all powerfully entrenched in est groups that dominate the $912 billion-a-year health-care industry can see what the president has in mind–and it’s a lot. Let the games begin.
A senior White House aide insisted the megaleak had been unintended, and he professed concern that the administration had once again lost control of its media spin. If so, Clinton’s elaborate campaign to sell healthcare reform to the voters now be buried beneath an lanche of skeptical news coverage and hostile reactions from the special-interest groups. But it was hard to believe that the White House had overlooked the probability the plan would leak: Washington is Washington, and reporters are reporters. The document was clearly only a draft, and aides acknowledged that Clinton is likely to fiddle with the details right up to the moment of next week’s televised speech to the nation. And since the president does not intend to send his legislative proposals to Congress until mid-October, he actually has more than a month to make further adjustments. The leaked plan, in other words, may well have been the dirigible of all trial balloons.
But the basic outlines of the Clinton plan are clear, and the stakes for the nation are enormous–nothing less than the health and welfare of every single living American and millions yet unborn. Clinton’s approach to reform would dramatically affect 630,000 American doctors and 3 million other health professionals, and it would radically restructure an industry that is bigger, in dollar value, than the entire Italian economy. It would sharply expand the role of government in managing health care nationwide, and it would push Congress and the governors and legislatures of all 50 states to the limits of their political resolve. Health reform will be the defining issue of Bill Clinton’s presidency–his crowning achievement or his political undoing. “None of this will be easy,” Hillary Rodham Clinton conceded last week, insisting that she and her husband remain open to ideas for “better, more efficient” reforms. “But what we are not open to,” she added tartly, “is a stand-pat, negative, nay-saying opposition that will not recognize the reality of the problem facing this country in both human and economic terms.”
The country’s problem is twofold–the gross moral failure of a system that excludes 37 million Americans from even the most rudimentary health-care coverage and leaves millions more demonstrably underinsured; and the sustained and unsupportable rise in national health-care spending. Health-care costs, thanks to the chaotic growth of a delivery system that has never had top-down control, are eating the national lunch-eroding the competitiveness of U.S. firms in international markets, chewing up at least half of all the gain in real per capita income over the past decade and threatening the financial stability of millions of American-households. Total U.S. health-care spending more than tripled between 1980 and 1992, and it will reach $1 trillion in 1995. That will be 15 percent of the entire U.S. economy, and the end is nowhere in sight: without reform, healthcare spending is conservatively projected to grow to 18.9 percent of the economy by the end of the century.
No nation could afford this trend. Clinton’s goal, which is broadly supported by the American Medical Association, the American Hospital Association and other major interest groups, is to break the cost spiral by the end of the current decade. According to projections contained in the leaked master plan, the rise in U.S. healthcare spending would continue through 1999, then plateau at 17.3 percent of the gross domestic product by the year 2000. That projection may be optimistic: critics are already attacking the underlying fiscal and economic assumptions of the plan as the product of smoke and mirrors (page 36). It also assumes, probably optimistically, that Congress will enact the Clinton plan (or something like it) in 1994. “The Senate has moved a long way, but the House is an emotionally responsive body and has fewer people who are specialists in health care, " says Lynn Etheredge, a health economist who has been a key observer in the administration’s deliberations. “Until they feel their constituents understand this, they will not be ready to gel.”
There is plenty to understand–a complex, ambitious plan surrounded by a jungle of jargon which, to millions of uneasy voters, seems to mask the dismal inevitability that the real meaning of health reform is paying more for less. Poll after poll shows that the vast majority of American consumers are broadly satisfied with the medical care they receive; to them, the happily insured, change can only be threatening. Change means higher taxes, being forced to join an HMO or maybe medical rationing. And although it is arguably true that millions of Americans are worried about the prospect of losing their health insurance, only a fool would assume that the electorate at large is much concerned about the abstract notion of health-care costs as a percentage of GDP. That is Bill Clinton’s political problem, and it has already shaped his strategy. Simply put, the president must control a crisis that only economists, policy wonks and corporate CEOs understand, and he must do so without disrupting the flow of medical services that Americans now a right. As Etheredge says, “This issue has the potential for getting more people mad at the political system than anything I can imagine.”
And so the Clinton strategy is to leave the health care that Americans receive mostly untouched. while attempting truly radical change to the system that delivers it. Consumers–all of them–would be assured of getting health benefits (chart) that are roughly equivalent to those now enjoyed by 80 percent of the insured population. No one would be excluded because of inability to pay, and no one would pay higher premiums because of pre-existing medical conditions. The new health-insurance system would be employment-based, just as it is now: employers would pay 80 percent of the cost, and workers would pay the remaining 20 percent. The poor and the unemployed would be covered by government subsidies, and self-employed workers would be able to deduct 100 percent of their premiums. The new system would offer consumers at least three different health-delivery plans, including HMOs and fee-for-service medicine. Because so many employers are pushing HMOs, reformers say, the Clinton Plan could give many Americans more choices than they have now.
But beyond the level of consumer benefits and consumer choice, the health-care system would be radically changed. This is a complicated and potentially risky business, and no one knows bow it will turn out. Essentially, Clinton and his advisers are giving the free-enterprise health-care system one last chance to get spending under control. The primary mechanism is an unproven economic theory known as managed competition, which is an attempt to create price competition among doctors, hospitals and health-insurance companies. As economists see it, the health-care industry has historically avoided competing on the price and value of its products because there has been no real bargaining between consumers and “providers” (doctors and hospitals), and also because third parties (employers or the government) actually pay the bills. American medicine, in other words, has allowed both patients and doctors to ignore the cost, value and necessity of the care that is given and received. Nobody is accountable.
Managed competition is an attempt to change all that. The Clinton plan would put millions of American consumers into regional purchaser cartels, known as health alliances, that would do their bargaining for them. It would also establish a standard benefit package at a publicly identified price (about $1,800 for an individual and $4,200 for a family) so that everyone would know what they and their employers are paying for. Doctors, hospitals and insurance companies would reorganize in “provider networks” that would be forced to compete for patients on the basis of price and value. Insurers would no longer be able to pass along rising health costs in the form of higher premiums; they would be compelled by market pressure to resist price increases by doctors and hospitals.
But that’s only theory–and the Clinton administration is hedging its bet on managed competition with a wholly new form of government price control. This is known as a global budget, which is an estimate of what it should cost, in any given year, to provide the standard health-insurance package to all Americans. Under the Clinton plan, the formula for the global budget would be set by Congress and enforced by a newly created national health board. The board would then compute “target” budgets for each state based on the number of residents, and for each regional health alliance based on the number of enrolled consumers. The health alliances would collect premiums from employers and consumers and use them to pay the provider networks for the health care they deliver. These health alliances, in short, would substantially assume the financial role now played by private health-insurance companies. As a result, many experts think the health-insurance industry is due fora shake-out-one that would downsize the industry from about 500 to as few as five or 10 competing firms, and cost thousands of jobs.
And that is only one possible effect of the Clinton plan. Given the fact that health-care reform affects every single sector of the economy, the plan is a vast minefield of potentially explosive issues. Big business is vitally interested, and so is small business: larger firms would be required to contribute up to 7.9 percent of payroll in premiums, while small firms would contribute as little as 3.5 percent. Lawyers will probably oppose Clinton’s call for capping legal fees in malpractice cases at 33 percent, and they will surely fight his proposal to exempt doctors who comply with “appropriate practice guidelines” from legal liability. Doctors will fight to preserve fee-for-service medicine, and some worry that managed competition will set off huge battles within the profession over shares of a shrinking pie.
The health-care debate at this point is mostly shadow play-an exchange of feints designed to test the limits of consensus within the Beltway. Last week’s flap over Medicare and Medicaid is a perfect example. The Clinton plan calls for slowing the growth in Medicare and Medicaid spending by $238 billion over the next five years. That prompted howls of outrage from the National Committee to Preserve Social Security and Medicare, and may yet rouse millions of older voters to righteous fury. But a congressional staffer saw the proposal as a ploy to bluff Congress into raising taxes. The administration is “desperate,” this staffer said. “So they’re going to say to the Hill, ‘Fine, if you can’t do it that way, find another way to come up with the money’.”
There will be hundreds of such episodes before the debate is done, and there is no guarantee that Bill Clinton will get his way. If he loses, it will probably be because his plan, with its Rube Goldberg combination of economic theory and elaborate regulation, appears to skeptical legislators to be a giant social experiment. It is exactly that. “I’m not sure anyone believes it will work out the way it’s down on paper,” one expert says cheerily. “And if it doesn’t work, we can go a couple of different ways”–to a single-payer system like Canada’s or, more likely, toward a multiple-payer system with government price controls, like Germany’s. But the Clinton Plan is an attempt to derive a uniquely American solution to a national crisis–and it ultimately depends on a uniquely American faith in the future.
