Analysts Unnerved by Clinton's Cap on Health-Care Spending

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It's no secret that Bill Clinton was not Wall Street's odds-on favorite for President. So, not surprisingly, when the New York Society of Security Analysts invited two members to speak on the post-election outlook for the pharmaceutical and hospital industries, they didn't have too many nice things to say.

According to Ron Nordmann, senior analyst at PaineWebber, Clinton's plan to control health-care spending through managed competition contains many flaws. Under the plan, a cap on health-care spending would be administered by a national health board. Nordmann feels that this could lead to price controls on physicians and hospitals, rationing of health care, a slowing of medical innovations, and reduced access to the technology Americans now take for granted.

Clinton's plan also envisions health care as a right for everyone; as yet unclear, criticized Nordmann, is how this plan will be financed. How will the government make up for the loss of revenues from granting tax credits to small employers so they can provide health insurance for their employees?

Finally, Clinton's proposal, as it now stands, moves away from the concept of a national health-care insurance bill, Nordmann observed. So it could be opposed by liberal members of Congress. won't get a clear picture of Clinton's health-care reform plan until he submits his request for health-care spending in the fiscal 1994 budget. So true health-care reform is probably years away, he believes.

Like Nordmann, John Hindelong, senior analyst at Donaldson Lufkin & Jenrette, doesn't think much of Clinton's managed-competition approach. With a national board determining how much we can spend on health care annually and allocating it on a state-by-state basis, that's going to "ensure civil war," he contended. What it comes down to is, if your grandma lives in Maine, she may be taken care of, but if she lives in Rhode Island, she may not, he warned.

Hindelong said there are two key issues facing Clinton: how to control runaway health-care costs and provide access to those who don't have this benefit. Of the two, the access problem is easier to address than cost, he believes. …