States to get health care flexibility Clinton task force wants latitude, sources report


WASHINGTON -- The White House task force on health care reform has decided to give states broad flexibility in carrying out reforms, an approach that could create a patchwork of different systems for controlling costs and stimulating competition, sources said yesterday.

"They want to give the states quite a lot of latitude in implementing this thing," said one source familiar with the work of the administration's task force on health care reform.

A White House official would not confirm or deny this and cautioned that the task force would not complete its work before May 1.

Beginning this past weekend, the task force has begun to shorten the list of options that President Clinton will consider.

States would have flexibility in achieving two major administration reform goals: the establishment of annual, state-by-state limits on health care spending and the development of a so-called "managed competition" system of care. Under this system, large numbers of consumers and employers would band together through state-regulated insurance purchasing organizations that would negotiate with private insurers for coverage.

Maryland, for example, could continue using a state agency to control costs by setting hospital rates and perhaps expand it to doctors' fees. Other states might avoid rate-setting, relying on the purchasing power of the cooperatives to control costs.

For doctors and hospitals, the differences from state to state could have a dramatic effect on their fees and could make some states more attractive places to do business than others.

One thing that wouldn't change from one state to another, however, would be the basic health benefits package guaranteed to each American under the administration's plan.

The flexibility for states would carry a price -- strict accountability. Sources said the administration was leaning toward setting firm budgets on health care for each state, with the provision that the federal government could step in with cost controls when states exceeded their budgets. That could prove controversial among some governors.

It's not surprising that Mr. Clinton would give states flexibility. He told the National Governors' Association last month that he would authorize more waivers from federal regulations so that states could experiment with their programs. About two dozen states, including Maryland, have acted on their own to reform health care.

Last week, the administration announced that Oregon could go ahead with a controversial expansion of Medicaid, the health program for the poor, which would extend coverage to more people but ultimately result in some rationing of care.

It's more surprising that the flexibility might extend to the purchasing cooperatives, a core element of the administration's reform plans. While details remain to be determined, states could choose to set up these cooperatives as nonprofit, independent institutions, for example, or as branches of state government.

Some people advising the administration on health care reform oppose giving states such broad freedom. They advocate a stricter federal regulatory role, fearing that some states might mishandle their responsibility to restrain spending and to assure adequate services for all citizens.

But South Dakota Gov. George S. Mickelson said yesterday he saw no alternative to flexibility.

"Every state has different priorities," he said.

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