A healthy health budget


PRESIDENT Clinton has achieved step one of national health reform: raise awareness, frame the debate and stimulate widespread action.

With an extraordinary eight-month round of planning and politicking, the president and first lady have highlighted the need for universal coverage and identified many underlying failures of the nation's approach to health care and health insurance.

They have helped all Americans to recognize that health care simply costs too much. And their campaign has accelerated the competition to provide less expensive health care; inflation in the private health sector has declined, and many employers are actually getting annual premium increases at or below the Consumer Price Index.

But now comes step two: persuading Congress to adopt specific policies to overhaul the system. Here the president is encountering considerable difficulty.

First, the complexity of our health-care system (and of Mr. Clinton's 1,342-page reform proposal) is beyond the understanding of consumers, policy makers and even health experts.

In the intricacies of his proposal may lie mechanisms that can achieve national goals, but even those of us who have spent our careers pursuing health-care reform cannot fully comprehend it. Second, the president has proposed a financing plan that cannot overcome critical political and economic constraints.

The plan attempts the impossible: to make Medicare and Medicaid as comprehensive as good private insurance plans, and to provide comprehensive insurance to everyone else without (a) appearing to raise taxes or (b) cutting the ubiquitous tax-free benefits available to powerful constituencies like organized labor. And for obvious political reasons, this untenable economic formula must appear to be in place by 1996.

These perceived political and fiscal constraints have produced an intricate regulatory proposal that minimizes the responsibility consumers and providers to constrain costs, and continues to rely on cost shifts from Medicare, Medicaid and small employers to larger employers and some individuals.

The White House assumes that it can quickly reduce (but not eliminate) the growing deficits in the Medicare program and then label these reductions as "savings" to be applied to a new set of universal entitlements: a generous package of health benefits for every American that "can never be taken away."

And it assumes that insurance premiums can be quickly and successfully capped, and that state and federal treasuries will .. not be called upon to make up overruns in the costs of benefits.

As administration officials try to explain the plan's evolving details and assumptions, they seem to stimulate public cynicism and confusion.

These concerns have shifted the political power of health-care reform toward the center. A bipartisan moderate coalition has formed in Congress that shares the Clintons' hopes for universal coverage and a health-care system whose costs are under control. And a bill sponsored by Rep. Jim Cooper of Tennessee and Sen. John B. Breaux of Louisiana, both Democrats, focuses on the nature of the organizations that deliver medical care. It would put pressure on doctors and hospitals to deliver good care at low cost, and put pressure on employers and consumers to spend their money sensibly.

Beyond that, congressional moderates and the Clinton administration should join forces to devise a "balanced health-security budget."

Such a budget is needed to overcome the public skepticism about the prospect of cutting government programs. Revenues and benefits must be in balance.

Lawmakers must agree either to generate enough money to pay for desired health benefits (through proven savings or new revenue) or to limit the scope of universally guaranteed benefits. This balance can be achieved through a health policy that adheres to a few simple strategies:

* Make sure that guaranteed health coverage grows no faster than revenue. For example, if we are to rely on employer-financed health benefits, obligatory entitlements cannot grow faster than wages and employment. If employment shrinks, benefits must decline or taxes must go up.

* Institute an apolitical process for continuously matching revenues to health needs. The legitimacy of such a system hinges on a general commitment to improving our knowledge of which health services really benefit the public, through continuous monitoring of patient outcomes and public attitudes.

* Enforce cost-conscious behavior by everyone. Providers, insurers, employers and consumers need to be rewarded for containing costs and maintaining personal health. Health reform needs to put everyone on the same team by limiting tax exclusions, encouraging use of efficient health providers, emphasizing prevention and reducing incentives for expensive, high-tech care that may not work.

* Get Medicare and Medicaid under control, using the same methods as the private sector, before imposing new financial obligations on them. Federal policy could provide new comprehensive drug benefits only to those Medicare recipients who choose to receive benefits through the economical health plans offered to other Americans.

* Accelerate cost-cutting reforms in the private sector. Some states are already setting up cooperatives to buy health benefits for consumers, and at least 30 voluntary private cooperatives are now in place.

* Finally, make sure that the uninsured and underinsured are covered before requiring every other American to have identical health insurance coverage. We should improve the delivery system and make sure that everyone has adequate coverage in a reformed insurance environment before we consider implementing comprehensive employer or individual mandates.

Congress should not waste time debating the White House plan's innumerable and fluid details. Instead, the administration and congressional moderates should quickly move beyond the current proposal and assemble a package that can be passed with the support of both parties.

Paul M. Ellwood, a physician and health economist, is president of the Jackson Hole Group, which devised the "managed competition" approach to health care.

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