Reform: what direction in '95? - health care reform - Column

Just hours after Senate Majority Leader George Mitchell (D-Maine) pulled the plug on health reform in late September, the speculation began: What course of action next year? Everyone agrees the battle will be engaged again next year, but much will depend on the outcome of the mid-term elections. If the Republicans gain control of the Senate, there's little doubt the health reform debate will be on their terms. Democrats and Clinton will be playing defense and will have to decide whether to accept the incremental approach the Republicans will take. If it remains a goal at all, achieving universal coverage may involve a much longer time frame. If Republicans gain only a few seats, however, the political dynamics won't change much, and stalemate could loom again if both sides refuse to compromise.

In any event, health policy experts and congressional staffers agree that tectonic shifts in the debate have already put health reform on new ground--ground that is either more stable or less stable depending on one's view.

All of this year's reform proposals, for example, sought to use "savings" from cuts in Medicare and Medicaid over the next decade to extend subsidies to low-income persons so they could afford to buy health insurance. The cuts/savings were huge, climbing to $40 billion a year by 2002 in some proposals. The goal of deficit reduction was secondary. But as the debate wore on, the fear of uncontrolled spending in a new entitlement program grew deeper and deeper. Simultaneously, deficit hawks were troubled anew with the most recent deficit projections--rising to $237 billion in 1999 from $197 billion in 1996.

Thus, the government's deepening sinkhole of red ink became the front-burner issue. By September, the bipartisan Mainstream Coalition in the Senate was proposing a much scaled back package of subsidies combined with a deficit reduction target of $100 billion over 10 years. The momentum for deficit reduction is expected to build. "The debate next year will shift to either cuts or caps in Medicare and Medicaid spending," forecasts Drew Altman, president of the Henry J. Kaiser Family Foundation, a health care philanthropy in Menlo Park, Calif. "And the aim will be deficit reduction, not expansion of coverage."

Altman and others believe that if any subsidy program survives next year it will be in "bite size" chunks, not the full scale, all-at-one-time program to help the uninsured that was debated this year. For example, as a last-ditch effort this year, several coalitions of lawmakers proposed a "kids first" approach--to extend subsidies to the families of the 8 million young people under age 18 who lack insurance. But even that could cost $20 billion a year by 2000.

Nevertheless, the Clinton administration could propose such a program in the 1996 budget. The strategy might be to couple cuts/savings in Medicare and Medicaid with a kids-first plan; the savings would be split between deficit reduction and the new subsidy program. Wrapping the program in the budget process might also bypass the machinations over a separate health reform proposal. Among the numerous potential problems with this approach: The administration is expected to submit its welfare reform proposal to Congress early next year. That program also will cost big money, although not as much as health reform. Some discussion has revolved around combining the two efforts, but that may be asking for trouble.

Intriguingly, one way to pay for the expansion of health coverage already involves redirecting Medicaid "savings" in the states, and the approach is gaining momentum.. Six states have Medicaid waivers and at least three--Tennessee, Florida, and Oregon--are aggressively shifting Medicaid beneficiaries into managed care and using the savings to help the non-Medicaid uninsured buy health insurance. The administration announced in September that it was speeding up the waiver process. Eight states have waivers pending. The administration or Congress next year could formalize the program, encouraging or even mandating Medicaid experimentation that aims to cover more of the uninsured.

A dozen or more states also will press Congress next year for ERISA waivers. This battle is widely expected to be the other nexus of the 1995 health reform debate. Absent comprehensive reform at the federal level, states want the freedom to move forward with their own reform agendas. And they can't do so without a rewrite of the law or ERISA waivers to let them regulate or tax self-insured plans.

Large multistate companies fought successfully against any changes in ERISA this year. But the fight in Congress behind closed doors was bruising, congressional staffers say. There are strong feelings on both sides, but hill staffers concur that a coalition could be put together next year to push ERISA waivers or changes in the law. That coalition could include the single-payer Democrats, moderate Democrats and Republicans who wanted bolder federal reforms and think the states should now have their chance, and conservative Republicans who believe strongly in states' rights.

Signaling his position on the issue early, Senate Finance Committee Chairman Daniel P. Moynihan (D-N.Y.) said in a speech on the Senate floor in mid-September, "The failure to enact national reform should not be allowed to prevent states from moving ahead with their own reforms. In fact, in the absence of universal coverage, you must allow state flexibility, fostered by ERISA waivers."

For their part, state officials have already begun to court big business groups, hoping for a compromise. "We are seeking a new approach," says Charlene Rydell, a Maine state legislator who heads a new coalition called The Reforming States Group. "We want to convince business leaders that a new set of national standards is needed for self-insured plans." Under the group's still-evolving position, large multi-state companies would continue to have ERISA protection as long as their plans met minimum standards. But single state employers, no matter how big, would lose ERISA protection, though not the ability to self-insure.

A key insurance group has also entered the fray. In a report to Congress this fall, the National Association of Insurance Commissioners urged Congress to change ERISA to give state regulators more power to oversee self-insured plans.

Thus, the ERISA argument in Congress could be four-sided: 1) those who support port no change in the law itself, but who favor the liberal granting of waivers; 2) those who support major changes in the law no matter what business wants; 3) those who advocate major changes in the law, but only with the advice and consent of business; and 4) those adamantly opposed to letting states regulate self-insured plans in any way, including waiver programs.

This last group could include big business but also some lawmakers who doggedly cling to national comprehensive reform and oppose a state-by-state approach.

Finally, there's the issue of just how Congress will "process" health reform next year. That's not clear as of this writing and may not become so until late January. The new leaders may prefer or even demand that reform be tackled, as was the intent this year, in a single piece of legislation. Or they may allow lawmakers to propose a series of smaller, targeted bills. One bill, for example, may be directed entirely at changing ERISA.

In addition, lawmakers could choose to start their deliberations from scratch, discarding all of this year's proposals and beginning a new round of committee hearings and mark-ups. Alternatively, they could pick up more or less where they left off in September, with the Senate Mainstream Coalition bill, a kids first bill, and perhaps a couple of new compromise proposals. In any case, the health reform roller coaster ride is far from over.

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