new game-plans take shape in Washington

Proposals range from tax credits to national insurance to 'rationing' Medicaid

REFORM proposals for the American health-care system - more than 30 so far - are dropping onto Capitol Hill like autumn leaves.They range from the tinkering, such as allowing Medicaid to fund home visits to pregnant women, to the radical, meaning comprehensive national health insurance. The proposals come because public frustration over the health-care system is deep and wide. For much of the past year, some political strategists and pollsters for both parties have been forecasting health care as the dominant national issue in the 1990s. The Pennsylvania Senate race early this month snapped the issue into sharper focus. Harris Wofford's call for national health insurance was a major issue in his come-from-behind victory over former Attorney General Dick Thornburgh. The upshot is that Democratic candidates in 1992 are even more likely to campaign on health-care reform and the Bush administration is more likely to bring a reform plan of its own to the election campaign. A full-blown reform of the health-care system, however, is still unlikely within the next couple of years. Instead, conventional wisdom here has reform bubbling along incrementally and state-by-state while public concern builds and knowledge grows. The only consensus so far is that the health-care system is a serious problem for everyone from businesses and middle-class families paying crushing insurance premiums to the near-poor who can't buy insurance. Resistance to reform is wearing down among the interest groups. Even physicians, who stand to bear much of the burden of any reform to control health costs, "realize we're on a course they cannot sustain," notes Louis Sullivan, secretary of the Department of Health and Human Services (HHS).

Consensus a long way off But no consensus has even begun to emerge on the shape of reform. Any major reform scheme will extract costs up front. The White House has stayed on the defensive. Nearly a year after President Bush's original deadline for a health-care reform proposal from HHS, his administration has still not signaled a direction. The actual deadline for national reform may be enforced by the buildup of public frustration. Sen. Jay Rockefeller (D) of West Virginia, a leading advocate of a universal health insurance plan that builds on the current system, says that if the federal politicians fail to reform the system significantly in the next eight years, then frustration will force the most radical solution - national health insurance. Proposals for comprehensive reform take three basic shapes. National health insurance. The government would become the sole payer of health-care bills. Everyone would be covered. Costs would be contained through the leverage the government could exert as the sole customer. Other savings would come through cutting out most of the middlemen - by wiping out the private health insurance industry. (Henry Aaron of the Brookings Institution estimates health insurance administrative costs to be as high as $100 billion.) The Canadians use this system and pay about 25 perc ent less for health care than Americans, but they also have longer waits and fewer medical options than Americans. Play or pay. This option patches, stretches, and backs up the current health insurance system, based on employer contributions. Employers would be required to offer health insurance to their employees or else to pay into a government fund that supplies fallback insurance. This has become the middle ground in the health insurance debate. It has many variations. In most of them, everyone would be covered, either through work or under the government backup insurance. Some play-or-pay plans include cost-control schemes such as regional commissions that set payment rates to doctors and hospitals. The basic costs and incentives of the current health-care system would not necessarily change, however. Tax credits. The government currently gives businesses a full tax exemption for their contributions to health insurance premiums for employees. Under a plan developed at the conservative Heritage Foundation, consumers would get a refundable tax credit for health-care expenses - whether insurance premiums or out-of-pocket expenses. The credit for the average family might be 20 cents for each dollar spent. For people with far more health-care expenses than income, the credit could rise to perhaps 90 cents per dollar. For the very wealthy, the credit might be phased out altogether. Coverage could be universal if the credits were generous enough. Costs would be controlled through market competition, since all would pay a portion of their own health-care costs, as long as the credits were not too generous. Meanwhile, Congress is touching up the system to fill in its gaps, chiefly through expanding the coverage of Medicaid benefits for poor people. State governments, which administer Medicaid and share costs with the federal government, are under escalating pressure. On average, Medicaid consumes 14 percent of state budgets. And the ever-rising costs probably increased 23 percent in fiscal 1991. A study by a Bush administration task force forecast in July that total Medicaid costs would nearly triple from 1990 to 1996. The states, in turn, squeeze doctors and hospitals. The American Hospital Association claims that only five states paid hospitals as much as it cost to take care of Medicaid patients in 1989. The average was 78 cents of reimbursement for each dollar of cost. Some states have made bold choices. Oregon. Oregon plans to expand its Medicaid program to cover all families under the poverty line, but also to ration their care by paring down the list of medical procedures Medicaid would pay for. The present program pays for more procedures but covers people only up to 50 percent of the poverty line. Congress has to approve the Oregon plan before the state can put it into practice next July. Under the plan, hundreds of medical treatments are ranked in importance. In the top categories are treatments of life-threatening conditions, maternity care, and preventive care for children. Down on the list are treatments that simply speed recovery or that do little to improve the patient's quality of life. Arizona. The Medicaid program in Arizona uses managed care much like that of private health maintenance organizations. Managed care means a third party, in this case a state commission, monitors and advises the treatment of patients in order to contain costs. One state survey indicates that the Arizona system cuts costs 7 percent. The concept of managed care is likely to spread to more states. At least one bill in Congress proposes that all Medicaid and Medicare programs use managed care. These are the kind of adjustments to existing programs that Congress is using to patch the holes in the health-care system until more sweeping reform comes along.

Democrats first to seize the issue So far, the debate has largely been carried on by Democrats. Republicans, including the Bush administration, have proposed restrictions on malpractice lawsuits as a way of cutting the cost of medical care. But no comprehensive reform. The coming presidential campaign is likely to be a proving ground for shaping the politics of health-care reform. The challenge for the Democrats will be to avoid beating each other up over differences on programs and strategies. Senator Rockefeller, now that he is not running for president, seeks the role of a kind of enforcer - keeping health care in the debate, but reminding Democrats that they share goals that the Republicans do not. The challenge for Republicans will be take back some of the health-care agenda from the Democrats. They will certainly work to derail any momentum that leads toward national health insurance, which one White House official says would create a bureaucracy "with all the warmth of the IRS, the efficiency of the postal service, and the cost-control of the Pentagon." Recent polls show that about 85 percent of the public believes the health-care system is in crisis and needs major reform. Over two-thirds endorse national health insurance - about the same support as the public showed for Medicare just before it was adopted. But a recent New York Times survey that compared specific programs showed a 2-to-1 preference for an employer-based insurance system to government insurance. The public has yet to seriously focus on solutions, according to political strategists.

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