Health Care Alliances Vie for Center Stage

AT the heart of President Clinton's design for a new health-care system are big new quasi-governmental bodies called health alliances.

In recent months, the conventional wisdom has increasingly concluded that the alliances idea is out of the health-care sweepstakes.

Part purchasing pool and part regulatory agency, the alliances are a new, untested idea in public policy. They are the way that Clinton envisions bringing informed choice in health-care plans to even poor consumers. They are also the required-membership, bureaucratic monopolies that have made the Clinton plan vulnerable to attack.

But the conventional wisdom on their demise is ``tremendously premature,'' says Patrick Griffin, White House head lobbyist. As members of Congress try to craft a health system that meets the goals of universal coverage and cost control, according to many lobbyists and activists as well as administration officials, alliances will return to the stage.

Senate majority leader George Mitchell (D) of Maine, in a bid to begin driving health reform through the Senate, offered three cost-saving versions to his fellow Democrats this weekend. All of them relied on Clinton's design for health alliances.

Alliances, exactly as envisioned in the Clinton plan, do not exist anywhere. The idea was conjured up by a group of academic and health-industry experts that call themselves the Jackson Hole Group, after their meeting place.

The basic idea is that people organized into large groups - that is, people who work for large companies or the government - get substantially better deals on health insurance than other people. Individuals and people who work for small companies, in fact, sometimes cannot find health insurance at all. Insurers find both the administrative efficiencies and the risk-pooling of large employers more attractive.

So the alliance would provide a health-insurance purchasing pool to provide big-company buying power and economy of scale to everybody else. Under the Clinton plan, companies with more than 5,000 employees nationally could each form their own in-house alliance. Alliances then would offer their members a menu of health plans to choose from, creating a wider choice and thus a more competitive market between insurers.

This kind of alliance is already in operation in some places. Florida now allows voluntary regional alliances. Washington State has begun a similar system. California state employees and federal employees each have an alliance-like structure for choosing their insurance plan.

Increasingly, these alliances are amassing performance data on the health plans they offer to help their members make more informed choices about quality as well as cost.

But the Clinton plan takes the alliances a step further. Everyone has to join and purchase a comprehensive health plan. This prevents the healthiest, lowest-cost people from opting out and thus not helping to pay for the more expensive people. It also prevents the wealthy from opting out and thus leaving the alliances with a concentration of people who need subsidies. In an age of great skepticism about government and close scrutiny about how incentives are structured, however, some experts and politicians question how the alliances would really work.

Alliances would not just have purchasing power, but the power to regulate and monitor health-care providers and insurers - judging their financial integrity and monitoring the quality of their care.

``Alliances would be analogous to a cartel,'' says Princeton political scientist Gerald Garvey, ``private organizations but vested with quasi-legal powers. That's where the specter of this horrendous new Clinton bureacracy is raised.''

``Who are they accountable to?'' asks Paul Feldstein, a University of California, Irvine, management professor, of the proposed alliances. If California created a statewide alliance, he notes, it would handle funds nearly twice the size of the state budget. Like defense procurement officers or agriculture department officials, alliance officials could be expected to be very close to the industry they deal with - far closer than to the consumers they serve, Dr. Feldstein suggests. ``There is tremendous potential for abuse.''

A related risk is that alliance decisions could become politicized, as health-providers look for leverage in Congress, statehouses, or in court over the alliance managers, notes Cornell political scientist Roger Battistela. A too-cozy relationship between alliance managers and the health industry could arrest the restructuring under way in health care now, he says.

Henry Aaron of the Brookings Institutions supports the alliances concept, but recognizes that they could be run in a range of ways. ``You could have alliances as great cathedrals where you walk under high arches and your feet echo on the marble floor as you approach a window,'' he says, painting a scene of intimidating, unresponsive bureaucracy. Or alliances could have street-front offices with helpful, simple, consumer-friendly information on choosing health plans.

People probably face the same range of realities already, he says.