The next problem: implementing reform - health care reform - Column

The Rose Garden signing of a health reform bill by President Clinton is still months away--if it occurs at all this year. But health care analysts and scholars already have begun to ponder the next phase: implementation. And they are worried. Their message is that putting a health reform law into effect promises to be just as complex, entangled, and bitter as getting the law passed.

To be fair, this issue has been a concern all long. The Clinton plan foundered in part because lawmakers were perplexed and annoyed by its administrative complexity. But in truth, any reform law will require far-reaching public policy changes and complicated new regulations, even if it only reforms the insurance market and encourages states to establish voluntary purchasing cooperatives for small employers. If the law is more comprehensive, its legal, administrative, and regulatory tentacles will reach into almost every level of government and affect every employer and citizen.

What is little appreciated in the debate is that much of the administrative infrastructure required for health reform is in the early stages of planning or the issue hasn't been addressed at all yet.

Here are some of the key issues at stake and lessons to keep in mind, as discussed in two recent publications, "Making Health Reform Work: Implementation, Management and Federalism," (April 1994) by the Center for Public Management at the Brookings Institution, in Washington; and "The Clinton Reform Plan," a series of papers in the Journal of Health Politics, Policy and Law (Spring 1994).

State insurance regulation must be enhanced significantly. States spend widely varying amounts on health insurance regulation. A report last year from the General Accounting Office, in Washington, for example, found that some states spend less than 5% of their insurance budget on health care while others spend 25%. The same report found that 14 states had no health insurance actuary on staff and nine did not investigate consumer complaints against insurers.

Health reform will place big new burdens on state insurance regulators. They'll have to oversee new community rating laws and the establishment of purchasing pools, for example. "Their job is going to get a lot bigger and tougher," says Lawrence Brown, a health policy expert at Columbia University and consultant on the Brookings report. "I'm not sure many of the states are going to be up to the task in time or able to commit the money to it."

If they are not, problems will develop that could delay reform. The glimmerings of those problems can be seen in some states already. Minnesota and Washington enacted comprehensive reform laws last year. Both are slogging through implementation problems. "Our state bill is almost completely stalled right now," says Andrea Castell, executive director of the Health Care Purchasers Association of Seattle, an employer coalition. "One of the big problems is that the people who got the bill passed didn't know how to establish the systems to implement it. That is proving very difficult."

In fact, many business groups in Washington state are pressing lawmakers to reconsider the employer mandate the legislature passed last year. Their case certainly will be strengthened if Congress fails to enact an employer mandate. This situation could be an early sign of a serious problem in implementing health reform. Namely, states could--if allowed by a federal reform law--go forward with their own reforms over the next few years only to change directions if trends or political winds shift.

While that's a common problem in other public policy areas, such as welfare, housing, and education, its effects could be particularly disastrous in health care. Imagine the chaos if a state adopted a singlepayer system for several years and then dropped it.

Subsidies to help low income persons buy health insurance must be crafted carefully. Much of any new money required for health reform will involve subsidies for the poor. The systems to administer these subsidies could make the difference between a law that works and one that fails.

Congress has been unable to designate any subsidy system yet because it hasn't agreed on how the subsidies would be administered or exactly who would qualify and how. If lawmakers require employers to pay for coverage, for example, then most of the subsidies eventually would be administered through employers and probably regulated by the U.S. Department of Labor.

If, however, there is no employer mandate, subsidies may have to be administered by the Internal Revenue Service and take the form of tax credits. Some bills now in Congress would allow employers and individuals to buy coverage through the Federal Employees Health Benefit Plan or Medicare. If such measures are retained in the final bill, it's not clear who will administer the subsidies.

The potential for chaos is palpable. The subsidy program could involve $100 billion to $150 billion a year if Congress passes universal coverage. Bureaucratic infighting to control it will be intense. And the states will have a significant role because they'll be fighting for their fair share.

Changes to tax laws required by reform shouldn't be complicated. Tax simplicity may be an oxymoron to some, but any new tax rules required by health reform need to be as simple as possible. Even today, such a goal seems difficult. Each of the bills passed by congressional committees requires 15 to 30 specific and major changes to federal tax law. One committee has proposed a 25% excise tax on high-priced insurance plans. How will that be determined? Two committees voted to impose a tax on overall insurance premiums, either 1.75% or 2%. That tax would be imposed on self-insured plans as well. A third committee wants a 1% payroll tax on all companies with 1,000 or more workers and on those with 500 to 999 workers that buy coverage outside of purchasing pools.

It's uncertain which new taxes will be in a final bill. But employers should steel themselves for some complicated new rules.

Data collection requirements must be clear and standardized. Any reform bill will impose new requirements on employers, health plans, insurers, and providers to gather data on coverage, health status, quality, and outcomes. The need for such data is recognized widely, but the need has obscured the difficulty of collecting that information in a way that serves everyone. A federal commission likely will be established to oversee the effort.

The danger lies in the certainty that states will be granted most of the administrative power to collect the new data. Therefore, multistate employers may be subjected to varying rules. Also, most states will need to enhance significantly their ability to gather and to analyze such data. More important, one failure of the current system must be overcome: Results and analyses of health care data are poorly communicated to stake holders in a way that alters behavior efficiently or at all.

The big fear is that health care reform will go the way of environmental reform. In 1970, America launched a major national effort to clean up and protect the environment. This included establishment of the federal Environmental Protection Agency and the enactment of hundreds of new laws, which led to complex federal-state regulatory collaboration and the involvement of myriad private contractors.

Twenty-four years and hundreds of billions of dollars later, no one is satisfied with the effort, though clearly our environment is better off. The environmental program was mismanaged, inefficient, and too complex administratively. Congress played a role in that and is still trying to clean up the bureaucratic and fiscal mess the program created. We can only hope lawmakers learned some lessons there.

COPYRIGHT 1994 A Thomson Healthcare Company
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