Health Reform Revision Caps Federal Subsidies

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NOW that the Clinton health plan is fleshed out in 1,342 pages of legislative language, the costs estimates are becoming more clear.

The average American household, Clinton staffers estimate, would pay about 2 percent of its income on health insurance premiums under the plan. The plan would cap the amount a family would pay at 3.9 percent of income.

Some families pay far more than that currently, but most households would probably pay more for their health care than they do now in the early years of the health plan as the program spreads costs around more evenly.

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The plan would be fully phased in, offering a basic package of health benefits to all Americans, by the end of calendar year 1997. States would move into the plan in groups beginning in 1995.

If the plan were fully in effect in 1994, which it would not be under the plan, it would add $60 billion to $65 billion to the $998 billion the nation is expected to spend on health care that year, according to Deputy Treasury Secretary Roger Altman.

The plan would probably raise health costs above what they would otherwise be through 1998, he says. Beginning in 1999, the plan should begin cutting costs.

The administration expects about 17 percent of the costs to be paid by private households, 59 percent by business, and 24 percent by government.

While the federal government will pick up a bigger tab to subsidize low-income families and small businesses, state and local governments should see their health care bills going down, says Mr. Altman. These governments usually subsidize the community hospitals that provide large amounts of uncompensated care - that is, care to nonpaying patients - under the current health-care system.

The biggest change in the plan since the draft widely leaked in September was to add limits to the federal subsidies. Since the federal government is the gaurantor of health benefits when neither people nor their employers can afford them, the original plan would have created an entitlement with an open-ended account at the United States Treasury.

Instead, the plan would cap this entitlement, so that if health-care subsidies ran above a certain figure in the federal budget, then the government would have to cut benefits.

This scenario, however, is ``unlikely in the extreme,'' says Altman, since the federal caps on insurance premiums will make it unlikely that federal spending limits are ever reached.

Another change in the revised plan has pharamceutical companies fuming. The Clintons have repeatedly rebuked the industry for what they call unconscionable pricing of certain drugs and vaccines. Under the revision, these firms would have to pay the government rebates of up to 17 percent on brand-name drugs sold to Medicare patients when the elderly get a new prescription drug benefit in 1996. The earlier plan had rebates of 15 percent.

The government already gets $1.4 billion a year in rebates on drugs sold to low-income Medicaid recipients. The drug industry contends that adding rebates for Medicare beneficiaries would force it to sell more than half its brand-name drugs at deep discount.

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