Deficit Position Pins Clinton on Health-Care Policy

Article excerpt

On a hopefully sunlit but assuredly cold day this month, President-elect Bill Clinton will raise his hand and take the oath as the new president of our nation. On that day, he will assume responsibility for many issues which, as campaign rhetoric, sounded reasonably easy to solve. Now that he must deal in the reality of the problems, he may find them more difficult to solve than he anticipated.

One of the most difficult and troubling issues, and one around which he campaigned the hardest, is the issue of solving the country's health-care crisis.

The twin pillars of Clinton's health policy were to control escalating costs of health care and improve access for all Americans, particularly the 30-plus million who have no health insurance. Yet because of the promises that Clinton made to address the deficit, he has potentially placed himself on a collision course between that initiative and his commitment to health-care reform.

In order to understand where our president-elect is going, one needs to have a fairly firm fix on the three major tenets of his proposals.

The first basic tenet is that of "play or pay." Essentially, in this mechanism, Clinton intends to use a series of attractive tax benefits to encourage or require that all employers offer a basic level of health benefits. The basic benefits, determined by a national policy board, would become a requirement for governmental programs and serve as a floor for all private industry programs.

The second tenet is global budgeting. This is the manner in which Clinton intends to achieve his cost containment strategy. Again, the national policy board will be responsible for setting target limits on health-care expenditures.

Although the president-elect has talked a great deal about global budgeting, he has not been particularly specific in terms of exactly what it would mean to the lives and businesses of Americans. Does it mean rate controls on providers with some sort of adjustment for volume? Does it mean premium controls on insurance, again with some kind of volume control? Does it mean a limit or cap on tax subsidies for private health-care spending, since employer's health plans are now tax deductible?

Although it's not clear which of these kinds of alternatives Clinton is referring to when he mentions global budgeting, it is clear that some form of combination of these three will emerge.

The third piece of his platform calls for the introduction of managed competition into the health-care arena. In this concept, the government lays the ground rules for an entirely new market. In this market, incentives in the system would motivate providers, insurers and consumers to pursue the most cost-effective medical care.

One way in which these strategies might be implemented is through health insurance purchasing cooperatives (HIPCs), groups of large and small employers that combine to get maximum leverage in the market. Cooperatives would negotiate with groups of providers and insurers for the most favorable terms. …