Five Firms Will Laugh All the Way to the Bank


Chicago -- Despite its brilliant prime-time debut, President Clinton's plan to reform health care is emerging as a bureaucratic nightmare. It would increase costs and produce a multi-tiered system in which low- and middle-income working people are likely to be able to afford only limited coverage.

Mr. Clinton's "managed competition" would complete the transformation of American medicine from a system that allows patients to choose doctors and hospitals into one tightly controlled by insurance giants. All but the wealthy would be pushed into stripped-down HMOs and given only limited choices among assigned and overworked physicians. The regulation of this system would guarantee higher administrative costs.

Because advocates of a Canadian-style single-payer plan have steadily insisted on guaranteed access, simplification, and cost control, Mr. Clinton found it politically unthinkable to propose anything less. But his unwillingness to challenge the big five insurance companies has made it impossible to deliver on these principles.

The president could, and did, include things that cost little or nothing, and that don't threaten entrenched interests. He adopted the single-payer movement's universal health-care card and uniform insurance-reporting form. But the complexity of the plan -- 245 pages for the "short" version -- gives the game away.

In contrast, the Canadian single-payer plan does provide simplicity. It eliminates patient billing -- doctors and hospitals bill the provincial authorities directly. It sets up a single entity to negotiate prices with doctors and hospitals. It puts no restrictions on consumers' choice of doctors or a doctor's choice of treatment. It provides equal access to care for all citizens. Most important, it works.

President Clinton says such a program would be impossible in the United States because a single-payer plan would require $500 billion in new taxes. But he surely knows that the same $500 billion now goes to insurance companies to pay premiums. Indeed, as the U.S. Government Accounting Office reported two years ago, a single-payer system could save enough in administrative costs to pay for universal coverage without any increase in overall cost. The $500 billion now paid for insurance premiums would be enough to pay for all of the country's medical needs.

Under Mr. Clinton's plan, only a few industry giants, such as Aetna and Prudential, would be able to assemble the extensive networks needed to negotiate prices for giant pools of citizens. That's why the Health Insurance Association of America (the organization of 1,500 smaller companies) opposes the plan. And it's why a Prudential executive describes managed competition as "the best-case scenario for reform -- preferable even to the status quo."

Small wonder. If the administration proposal is adopted, five insurance company giants will own one-seventh of the American economy. Mr. Clinton, of course, knows this, but he demagogically attacks the "special interests" in the insurance industry as if he were actually challenging the giants.

That's not all. By 1995, the plan would give nearly $300 billion a year to the big five insurers in the form of new customers: Medicaid enrollees and the currently uninsured. And with Medicaid's administrative overhead running at less than one-third the level of private insurers, health costs are bound to rise -- not drop.

Mr. Clinton would also set up a new layer of bureaucracy -- called health alliances -- which would function as middlemen between small business and individuals and insurers. These alliances would negotiate and monitor quality of care and risk-selection. They would set fees, collect premiums from millions of employers and hundreds of millions of individuals, and verify eligibility for subsidies available to the 45.6 million people whose incomes are at or below 150 percent of poverty. All of this will cost additional billions of dollars.

In short, because Mr. Clinton's plan will greatly increase administrative costs, it will not be able to provide universal coverage. White House lieutenants are already talking about delaying coverage of the uninsured.

All of these problems follow from the president's refusal to consider a single-payer system. Thus, an effort that started out to help solve our health-care crisis may well end up so discrediting government that it will make real reform impossible for decades to come.

James Weinstein edits the Chicago-based news magazine In These Times, in which this piece originally appeared.

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