Consensus Seen Developing on Methods For Improving US Health-Care System

THE growing prominence of the ways business and government budgets are straining to support the health-care system is heightening the urgency of calls for a program to control its costs.

A sense of crisis may be necessary to forge the difficult consensus needed to act on overhauling the health-care system, according to Gregory Schmid, a senior research fellow at the California-based Institute for the Future, which forecasts long-term policy shifts.

Signs indicate that such a consensus is beginning - crudely - to form.

The Clinton transition team for health-care issues has met with key senators and representatives and confirmed ambitious plans to submit a comprehensive health-care reform plan to Congress within 100 days of President-elect Clinton's Jan. 20 inauguration, and to pass it into law by the end of this year.

The impetus to control costs, however, appears to be outpacing the will to expand access to health care to the 37 million Americans currently either without health insurance at all or with policies that do not provide enough coverage.

The Clinton team does not plan to overhaul the health system without offering everyone access to it - a principle of the Clinton health-care platform was that everyone has a right to it. But access costs money.

The way in which the overhaul is eventually phased in, if it becomes law, can give priority either to the economic discipline of controlling costs or to the social goal of expanding coverage.

The consensus thus far centers around the concept of managed competition, which builds on the job-based health-insurance system now in place. Little consensus has formed, however, on how managed competition should work.

One way is to limit the amount employers or employees can deduct from their taxes for health-care costs. The theory is that this could introduce some market pressure on health-services prices now insulated by tax deductions. A common objection among the many opponents of this approach, however, is that it raises taxes on the middle class.

Even strong supporters of managed competition, such as the Clinton campaign, are not sure that it will work to hold down costs.

The transition team has a "healthy skepticism about its prospects," says Jack Hadley, co-director of the Center for Health Policy Studies at Georgetown University. The other co-director is the Clinton transition director of health issues, Judith Feder.

"Managed competition is untried, untested," a Senate aide says. "We need to back it up."

The backup is likely to be the very direct form of price regulation that the president-elect promoted in his campaign: setting a global budget, nationally and state by state, for all health-care spending.

Mr. Clinton described panels of experts that would set prices for various health services. A far easier method to implement, some say, would be to simply cap health-insurance premiums, letting insurance companies work to force down the cost of services.

The other advantage of direct price or premium regulation is that it can take effect much faster than the process of implementing managed competition would take.

"The urgency of the cost-control program is so great that people involved don't want to wait for managed competition to work," Dr. Hadley says.

Hadley estimates three to five years before an effective system of managed competition could be in place. Tracy Hyams, deputy director of the Harvard Program on the Future of Health Care, estimates it will take at least a year for a sufficient consensus to pass a comprehensive bill, then a year or two to implement it.

But health-care reform does present Clinton an opportunity to take action that might start to make an impact on budgets by the end of his first term, notes Ms. Hyams.

Health-care costs hit a new benchmark last year of 14 percent of the gross domestic product, according to new Commerce Department figures. The Congressional Budget Office estimates that by the end of the decade health care will consume 18 percent of GDP.

Nearly one-third of all health costs are paid by the federal government, largely through Medicaid and Medicare payments.

The federal deficit is rising even faster than was apparent last fall, and health care costs are among the largest and fastest-growing spending categories.

American consumers are becoming more conscious of rising costs. So much of the cost is borne by businesses and the government that in spite of steady escalation in health-care costs in the past two decades, individuals actually spend less of their income on health than 20 years ago, according to Labor Department figures.

But individual costs have been rising, too, in the past two or three years as employers shed some of the burden onto their employees. Roughly 80 percent of union job actions in the past two years have involved health benefits.