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Clinton's health plan is still alive


IS THE Clinton health reform dead? In barely a week, leading business groups have announced their formal opposition, and the Congressional Budget Office (CBO) has challenged Mr. Clinton's budgetary assumptions.

But despite these setbacks the odds are that Congress will still pass health reform this year, if Mr. Clinton doesn't lose his nerve.

CBO's projection that the Clinton program would widen deficits for a few years is a momentary setback, but the headline is far worse than the fine print. Indeed, CBO concludes that over the long term the Clinton plan would save money and that without it deficits will keep escalating.

Second, don't overestimate the significance of the business defections; big business support was never in the cards. Given that the Clinton bill mandates a payroll charge -- a tax -- up to 7.9 percent to finance universal coverage, it was wishful to think that the Business Roundtable, the U.S. Chamber of Commerce or the National Association of Manufacturers would ever back the Clinton bill as written.

The Business Roundtable's support for the rival Cooper bill is a political embarrassment to Mr. Clinton. But it at least portends an eventual bargain, since Mr. Cooper's framework is a stripped-down version of Mr. Clinton's bill rather than a totally different approach.

Third, the formal opposition of the business lobbies at last frees the White House to stop playing an inside game of premature compromise with special interests, and to start rallying public support in the country. Hillary Rodham Clinton does so very effectively every time she hits the road.

And what better adversaries than big business and the insurance lobby? Big business is continuing to shift the financial risk of illness to its employees. And the insurance lobby, in its ads, keeps dishonestly comparing the Clinton plan to an imaginary nirvana of security and choice rather than to the precarious mess that now exists. It's good politics to champion the citizenry against the interests.

In hindsight, the Clinton administration made serious -- but perhaps not fatal -- tactical mistakes. Officials thought they could cut a deal with business, by preserving a role for large private insurance companies as sponsors of health plans and by promising large businesses cost savings. They also thought that by calling the employer mandate to pay for health care a "charge" rather than a "tax" they could sidestep the reality that government was offering citizens a (popular) new entitlement.

Administration strategists were particularly disappointed when the Business Roundtable and NAM opposed their plan, since it promises most large companies big savings over their present health premiums. But the Clintons underestimated business' ideological opposition to any new entitlement, new payroll charge, or new regulation, no matter how deftly packaged.

The Clintons also committed the tactical error of making a tolerable middle ground their initial bargaining position. The Clinton bill is a defensible compromise between a "single-payer" system with universal coverage without insurance middlemen and doing nothing.

The Clinton approach mandates universal coverage and caps costs, but does so by building on the private health system. This is just the sort of middle ground that might emerge after a long left-right battle over the shape of health reform.

But the Clintons started with the middle position as if it were a final deal. And rather than embracing it, business groups and conservative legislators predictably began working to water it down.

Mr. Clinton and his advisers naively proceeded almost as one would in a parliamentary system, where the Cabinet calls in experts, debates details internally, and then unveils a final consensus plan which a working majority in parliament dutifully enacts. But that is not how the American system operates.

In our system the administration proposal is only the starting point, especially when a president has a weak legislative majority. There are today just 56 Democratic senators, several of them to Mr. Clinton's right. When Social Security was enacted, President Roosevelt had 69 Senate Democrats. When LBJ sponsored Medicare, there were 67.

Nonetheless, one can imagine a tolerable compromise of a compromise: Mr. Clinton could take Mr. Cooper's proposed limit on the tax deductibility of premiums and his smaller role for regulation. Cooper could accept Clinton's insistence that decent coverage be universal.

If Mr. Clinton compromises much beyond that, the basic coverage will become threadbare, the health system will stay fragmented and the cost-savings will disappear. Mr. Clinton would then lose the ambivalent support of the insured middle class and the 100 or so congressional sponsors of a single-payer plan, who are necessary to his legislative coalition.

Noting Mr. Clinton's blunders is not merely hindsight. Single-payer advocates were warning a year ago that Mr. Clinton's hybrid approach was vulnerable to precisely these political pitfalls.

Given his goals for universal coverage, Mr. Clinton would have been wiser to begin with a single-payer plan, fight hard, and to discuss compromise only in the end game. Still, if something close to Mr. Clinton's plan can be salvaged it will be an improvement on what now exists; it might even pave the way for real reform.

Robert Kuttner writes a column on economic matters.

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