TODAY, President Bush breaks new ground by spelling out his plans for using the federal government to control costs and spread coverage of health insurance.
Mr. Bush has avoided making a major proposal on the high cost of health care through more than three years as president.
His plan is built around the use of free-market principles to promote managed care - where insurers control their costs by controlling the patient's choice of treatment.
He is proposing voucher-style tax credits for health care to poor families. This approach is similar to the voucher-style system he has promoted for parental choice in education and for child care.
But on health care Bush is not traveling very far down the road to reform. His plans do not directly confront controlling the costs to middle-class families. And virtually no one intimate with health-care policy expects any major changes to be made law this year. "Neither of the major bills [from the Republicans or the Democrats] will pass this year," says Sen. Dave Durenberger (R) of Minnesota, who is a leader on health-care matters. "The price tag will stop them."
This is also an election year. Voters will be less keen on choosing one health-care program over another than on determining which candidates are serious about the problem, says Robert Blendon, a Harvard University expert on politics and health policy.
The test for Bush today, he says, is to show he is giving health-care policy serious attention. "People will try to listen to the difference [among various programs for reform], but it will be lost in the noise of the election," says Dr. Blendon.
Bush is making his speech today in Cleveland to a group that illustrates the kind of efficiencies he is promoting. The Council of Smaller Enterprises (COSE), a group of 8,500 small firms that joined to buy group health insurance, claims to cut the health-care costs of new members by 35 percent.
Small businesses often find health insurance more difficult to obtain and far more expensive when they do obtain it. For firms with fewer than 25 employees, administrative overhead alone accounts for 40 percent of health-care premiums. In large corporations, administrative costs are closer to 5 percent.
COSE aggressively manages the care of its members and keeps its administrative costs down. As a result, it reports only a 35 percent increase in costs from 1984 through 1990, while other small businesses saw their health costs rise 150 percent.
Overall, one dollar in every eight that Americans produce is consumed for health care. This year, costs are forecast to increase about 12 percent, while wages rise only about 3 percent.
The elements of Bush's plan that the White House discussed either publicly or with Republican congressmen include the following:
* Tax credits for as much as $3,750 for poor families, with the amount tapering off for families above poverty level. In most places, that amount easily buys a basic family insurance policy. The credit would be sent directly to the states.
* Tax deductions of up to $3,750 for a wider array of health-care costs for families with incomes up to $80,000.
* Various changes to encourage small businesses to form insurance-buying pools, ensure coverage for hard-to-insure individuals, and promote the efficiencies of managed-care plans.
* Adjust malpractice liability to reduce the exposure of doctors and hospitals to the risk of high-dollar lawsuits.
* Capping the growth of the Medicaid contribution that the federal government sends to states for the treatment of the poor. The cap would be set at about 2 percent a year, per person, above inflation. This would help pay for the new tax credit and tax deductions.
The White House estimates the cost of its proposals, not counting the benefit of the Medicaid cap, at about $100 billion over five years - twice the amount it proposes to save through defense cuts.
At the conservative Heritage Foundation, policy analyst Edmund Haislmaier approves of market-based direction of the Bush plan, but dubs it "sort of a halfway measure. A lot more needs to be done."
"What people want most is cost control," says Blendon, who surveys public opinion on health-care issues. The Bush plan, he adds, "doesn't look like it addresses any of the structural problems of costs."
The tax credit, says Paul Feldstein, a professor of health management at the University of California, Irvine, "won't cut costs, but it will help cover the poor."
The approaches to reforming the health-care system are taking three general forms.
One is national health insurance, where the government is the sole payer of medical bills and controls costs by regulating fees. At the other extreme, free-market approaches use tax shifts to help people pay for health care but keep them shopping for competitive rates, while the health maintenance organizations and insurers keep the medical fees down. In the middle ground is the "play-or-pay" approach, where employers must either provide insurance or pay into a government system to provide it.
Play or pay has the widest support on Capitol Hill.