US States Seek A `Reality Check' On Health Plan

AS President Clinton finalizes his plan to overhaul the nation's health-insurance system, state governments worry that the reforms would leave them in a familiar bind: bearing the burdens and costs of a program developed by federal policymakers.

``I don't see how the states can guarantee back to the feds'' that local health spending will not exceed limits set by federal bureaucrats, complains Robert Harder, secretary of the Kansas Department of Health and Environment. Such spending caps are a central part of Mr. Clinton's plan to rein in medical-cost inflation.

Mr. Harder, like other officials who may wind up administering the complex plan, is eager to put it through a state-level reality check.

``In Kansas we really do understand millions of dollars,'' as opposed to the gargantuan numbers in White House projections, Harder says. For example, he estimates that covering the uninsured in his state will cost $450 to $500 million a year. Given the economy's slow pace, he wonders whether employers will be a reliable source of funding. (Vermont grapples with access, Page 2.)

Under the Clinton proposal, if a health-insurance plan runs into financial trouble, states must ensure that its participants don't lose access to health services. A state-administered guaranty fund would have to ensure that doctors and hospitals are paid.

Beyond these financial concerns, state officials also worry that the plan to extend health coverage to all Americans would limit states' ability to experiment with alternative solutions.

Despite undercurrents of skepticism, many in state government express admiration for the plan's boldness. Indeed, its agenda parallels reforms undertaken in states such as Washington and Oregon. The current system, observers agree, has failed to control costs and has left many working Americans without coverage.

Clinton's American Health Security Act would attack these twin problems:

* Universal coverage. All employers (including the self-employed) would have to pay at least 80 percent of insurance premiums for workers and their dependents. Individuals would pay remaining costs.

* Cost control. Costs would be contained by a mixture of market incentives and spending caps placed by a federal board on each state. Individuals and all but the largest businesses would buy their insurance through regional ``alliances,'' set up by each state. These purchasing pools would press insurance companies to offer medical services at low cost.

If this system works as envisioned, huge inefficiencies will be forced out of the system, bringing costs into line even as coverage is expanded to all Americans.

But what if not enough efficiencies materialize?

According to a draft version of the Clinton plan, which has been undergoing numerous revisions in recent days, states could use several heavy-handed tools if an alliance isn't meeting its budget, including limiting enrollment in high-cost plans or setting providers' rates.

The threat of these measures raises a hot-button concern: the dreaded ``R'' word, rationing. Price controls are viewed by economists as a recipe for shortages and pent-up inflationary pressures. Put differently, states could find themselves trying to force doctors and hospitals to do more work - so citizens get all the services mandated by federal law - for less money.

The White House says these measures are only a last resort, that the cost-cutting will occur largely through competition among health plans and the incentive for individuals to enroll in low-cost plans.

Clinton's plan gives states a wide degree of latitude in carrying out their new administrative and regulatory responsibilities.

``They've ... made a very public commitment to state flexibility,'' says Gwen Baldwin, spokeswomen for Oregon Gov. Barbara Roberts (D).

A state could, for example, adopt a ``single-payer'' system for all or part of its territory. Under this system an alliance would negotiate directly with doctors and hospitals without insurance companies as intermediaries.

As another option an alliance in one state could coordinate its activities with a neighboring state's alliance, negotiating jointly with health insurers.

But states could not stray outside the framework of the Clinton plan, trying less-radical reforms for example.

``That takes away a lot of your freedom to manage your own system,'' says Mark Liedl, spokesman for Gov. Tommy Thompson (R) of Wisconsin, who is co-chairman of a governors' task force on health-care reform.

Mr. Liedl says many governors share this concern about flexibility. Wisconsin, he notes, is moving to pass a law that would establish regional purchasing pools, like the Clinton plan, but would make participation voluntary.

``We want to see what kind of impact this will have on the uninsured population,'' many of whom might buy insurance if the purchasing pools make it more affordable, Liedl says.

Several states also are preventing insurers from pricing their products based on the health of enrollees.

Harder, the Kansas health secretary, suspects that under the Clinton plan a handful of state formats for implementation would emerge. States that have already passed their own reforms might take the lead. States would have to win federal approval of their plans and would get federal aid for start-up costs.

Clinton's speech tomorrow will mark only the beginning of lengthy political discussions.

``We're interested in watching the debate,'' Liedl says.