Hammering out a health reform plan - includes related articles on issues surrounding health care reform

As Congress's struggle for consensus intensifies, employers grow wary of a major overhaul. Will the president veto a scaled-back reform bill?

What a mess. Congress may yet pass a health care reform bill this year--and that bill may be a good start at realigning the incentives in one-seventh of the economy. But the process surely will never be cited as a model of public policy development.

At B&H press time, Congress continued to juggle the components of several bills and dozens of proposed amendments to bills. And partisan posturing and rhetoric continued to obscure any clear consensus, as well as the broad areas of agreement on health reform.

By the time you read this, both houses of Congress may have voted out a bill. If not, health reform this year probably hangs by a thread. If they have voted, the two bills go to a joint House-Senate conference committee--another battle front. A "unified" bill, if one can be hammered out in time from this group of 10 to 20 lawmakers, then goes back to each chamber for debate and a final vote. Changes at that point must be agreed to by both houses.

Anything could happen, from smooth passage to complete fragmentation of the process ending in a stalemate and postponement of the issue until next year. Most ominously, it looks increasingly possible that Congress could approve a bill that the president might veto, because it does not achieve or even promise universal coverage.

As health policy analysts and political observers anticipated months ago, the cost of health reform and the federal spending it requires would be the critical issue in the end. By late August, lawmakers were suffering serious sticker shock. They appeared increasingly unwilling to vote for a bill that added to the federal budget deficit. Both Democrats and Republicans complained as well that the goal of health care cost containment (in both government programs and the private sector) had gotten dangerously lost in the push for universal coverage.

In a bit of irony, on the very day last month (Aug. 9) that the Senate began debate on health reform, a bipartisan presidential commission, made up mostly of congressmen, released a report on the critical need to reduce entitlement spending. Federal spending on health care programs for the elderly and poor, left unchecked, could consume 35% to 40% of the federal budget by the year 2003, the sommission said. The proportion is now 17%. Clearly, adding another $30 to $50-billion-a-year federal entitlement to subsidize health insurance for an estimated 30 million low-income, uninsured people looks like a poorly timed idea.

But this justifiable rumination only underscored the fundamental dilemma in health reform: Absent an employer mandate (which was fading fast as an option), there is no alternative to a massive government subsidy program if universal coverage is to be even approached. That leaves lawmakers with a stark choice: scale the subsidies back and aim for universal coverage over a much longer time frame (10 to 20 years) or raise more money through additional taxes or cutting other federal programs. Scaling the subsidies back seems the likelier choice.

At B&H press time, a bipartisan group of 20 senators (the so-called "mainstream coalition") did exactly that. Where the Senate leadership bill proposed by George Mitchell (D-Maine) proposed $30 billion a year in subsidies, the bipartisan group proposed $10 billion. And the group, led by Sen John Chaffee (RR.I.), intentionally shifted the focus to deficit reduction. Members claimed their plan, which has no employer or individual mandate, would shave $100 billion off the federal deficit over the next 10 years. In contrast, the Congressional Budget Office estimated the Mitchell bill would add $9 billion to the deficit by 2000.

Two problems with the mainstream coalition's approach will provide grist for the congressional mill until a final bill emerges. One, such a plan would leave an estimated 18 to 22 million people--7% to 8.5% of the population--unable to afford health insurance. Second, without an employer mandate, or the threat of one at some point in the future, many small employers have an incentive to drop coverage so their employees can qualify for government-subsidized health insurance. And that will add to federal spending nobody is even hazarding a guess how much.

Will Clinton accept such a plan? And will the senators accept any bill with an employer mandate if they vote out a bill without one and then it gets added back in conference? These will be the political issues at play as the process comes down to the wire.

Meanwhile, business, too, has focused its attention on the bottom line. Several key business groups announced opposition to both the House and Senate leadership bills, and embraced the more moderate approaches advanced by Sen. Robert Dole (R-Kan.), the Senate mainstream coalition, and a bipartisan group in the House. (See sidebar on page 18 for a brief description of these plans.)

The Business Alliance for Health Reform, a hastily formed mega-coalition of business groups, argued that the leadership bills would:

* Increase the cost of health insurance by undermining the Employee Retirement Income Security Act (ERISA), forcing large multi-state companies to run separate plans in some states.

* Increase costs by imposing taxes on health benefits and making private insurers and self-insured companies absorb the cost of "mainstreaming" the Medicaid population. The government now pays only 60 cents on the dollar for Medicaid care.

* Wreak havoc on self-insured employers' ability to control costs by forcing them to offer costly fee-for-service plans. Many large companies have eliminated

that option.

* Undermine cost containment and managed care through any-willingprovider laws (House/Gephardt bill only).

The alliance includes the Association of Private Pension and Welfare Plans, the ERISA Industry Committee, the Self-Insurance Institute of America, the National Association of Manufacturers, and National Small Business United.

Several corporate giants also took an unprecedented plunge into the debate. IBM urged its 110,000 employees to oppose the leadership bills, and specifically to demand that Congress allow large companies total control over their multi-state plans. Eastman Kodak and DuPont made similar moves.

But the opposition was far form unanimous. The Ad Hoc Business Group on Health Care Reform, which includes among its 50 Fortune 500 members Safeway, Ford Motor Co., GM, USX, Westinghouse, Time-Warner Inc. and Bethlehem Steel, urged Congress to support a full employer mandate and universal coverage.

In the middle is the Corporate Health Care Coalition, representing 24 large companies including Boeing, ARCO, Intel, Dow Chemical, Digital Equipment and AlliedSignal. It supports an employer mandate and universal coverage, but only in the context of a bill that maintains ERISA pre-emption, shifts no federal costs to large employers, and doesn't force companies to subsidize the coverage of employees in small firms.

"There's no real unity below the surface in the business community," says Kristin Bass, legislative director for the Corporate Health Care Coalition. "What will make the National Federation of Independent Business happy are not the same things that will make our group happy."

Indeed, the dilemma for employers was as complex as for lawmakers. Many CEOs and benefit managers realize that if they support universal coverage, but don't favor an employer mandate, then they must support government subsidies to low-income people. The solution for many is stated succinctly by Edwin Wingate, a vice president at department store giant Dayton Hudson Co. "I would favor using general tax revenues to pay for subsidies for the working poor."

In the end, the health care debate will end where it began in the 1992 election: comprehensive reform versus incremental reform. Clinton won the election on a platform of a major overhaul. But most analysts agree he has failed to convince the American people that the risks are worth the benefits. As of this writing, the incrementalists were clearly winning, though they had been pushed a good bit from their 1992 position favoring only insurance market reform. They now embrace purchasing cooperatives and community rating, for example.

Whether the advocates of a more comprehensive approach, with a stand-by employer mandate, can regain momentum looks increasingly doubtful. But, to repeat, anything could happen.

COPYRIGHT 1994 A Thomson Healthcare Company
COPYRIGHT 2004 Gale Group