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CLINTON'S HEALTH-CARE SELL-A-THON
Chief executives of America, beware! Right this minute, there's probably a member of the Clinton Administration--if not an actual Clinton--stalking you. On May 7, Hillary Rodham Clinton pursued corporate chiefs into their own territory, traveling to Williamsburg, Va., for what she termed "extremely productive" talks on health-care reform with the Business Council. Five days later, the First Lady met with the National Leadership Coalition on Health Care Reform, a group of big companies and unions, to push the plan. Her husband, meanwhile, hit the road on May 10 and 11 with speeches in Cleveland and Chicago aimed partly at winning supporters for the plan.
The Clintons' goal: to have as many CEOs as possible ready to salute when the White House unveils its blueprint for a health-care system in mid-June. The Clintonites need key corporate endorsements if their plan is to have any chance of clearing a wary Congress. So, in addition to the high-level sales pitches, the White House is dangling proposals that it hopes will tempt business to overlook the new health system's price tag of $100 billion or so a year. Among the supposed lures: a "payroll premium" that converts rapidly rising health-insurance premiums into a specified tax based on payroll, and the promise of big savings from cost controls, administrative streamlining, and merging workers' compensation medical costs with the health overhaul (table, page 3228).
So far, business isn't sold. Most employers want to see basic reforms that will make insurance affordable and slow the skyrocketing cost of medicine. But recent leaks from the health-reform task force suggest that the Administration has much bigger plans: phasing out Medicare, authorizing states to set up Canadian-style health plans, and creating an expensive program for long-term care. "We're very conscious that the reforms we're putting in place will last for generations," White House health-policy chief Ira C. Magaziner told a May 11 meeting of consumer groups.
Talk that big makes business leaders squirm. They fear that Corporate America will be stuck with the bill for a program over which it has little control. "Everyone agrees that there need to be changes," says Edmund T. Pratt Jr., former CEO of Pfizer Inc. "The thing that worries most business people is that [the Administration] will try to do too much too fast. The risk is serious."
FIRST SHOT. Hillary Clinton's Business Council visit was the opening salvo in a major White House campaign to overcome such fears. The pitch will be straightforward, says aide Alexis M. Herman: "In order to ensure a sound economy, you've got to do something about health care." In coming weeks, White House officials plan to use the line in meetings with leaders from the Business Roundtable, the U.S. Chamber of Commerce, and the National Association of Manufacturers, and with owners of dozens of small companies. Chief of Staff Thomas F. "Mack" McLarty III and National Economic Council head Robert E. Rubin, both former executives, will play a key role in the corporate sell-a-thon.
Among their first prospects: The Big Three auto makers, which want to unload worker and retiree health costs that now total nearly 20% of their payroll. An endorsement from Ford Motor Co.'s Harold "Red" Poling, for example, could help convince the public that what's good for Ford is good for America.
The problem: A plan that appeals to Detroit won't necessarily sway executives in Silicon Valley or other regions where companies employ younger, healthier workers with lower health costs. Those kinds of companies would be hard hit by the proposal to replace employer-paid premiums for health insurance with a 10% payroll tax, for instance. Magaziner is peddling the pay
roll tax, which would require companies to pay 7% or 8% and their workers to pick up the balance, as a way to make employers' expenses more predictable. "He says to us, `If we guarantee that your costs never rise above X, will you sign on?"' says Ellen L. Goldstein, health-policy director for the Association of Private Pension & Welfare Plans.
CRAPSHOOT. That's fine for old-line manufacturers, such as U.S. auto makers and Big Steel. The payroll tax "would help employers know what their costs would be," says Richard F. O'Brien, General Motors Corp.'s vice-president of corporate personnel. But it's a problem for younger companies. Convex Computer Corp. in Richardson, Tex., fears the tax would add millions to its health tab and reduce its ability to manage costs. Once a tax is passed, warns John P. O'Loughlin, a Convex vice-president, "the government can just arbitrarily increase the tax rate year by year."Switching to a payroll-based health system would also create massive numbers of winners and losers, almost at random. Overall, a 7% employer-paid payroll tax would raise business health costs by $48.1 billion, reports Lewin-VHI Inc., a Fairfax (Va.) health economics consultant. But over half of the 1.7 million companies that now insure employees would see their health bills rise or fall by $1,000 per worker or more: 21.9% of the companies would pay large hikes, while 35.6% would enjoy similar cuts.
For many companies, promises of lower costs are offset by fears that they will lose control over benefits. The new health plan will sharply limit "self-insurance," the system that now covers 70 million Americans, in which employers design their own benefits and pay their own claims. And a flat national payroll tax-rate would remove any incentive for companies to continue their local efforts to curb spending. Making matters worse, states are likely to be handed the reins over much of the new health system. That could force multistate employers to conform to a host of new rules.
RELIEF. That fear of lost control haunts another key Clinton proposal: merging workers' compensation with health insurance. The task force argues it can save a big chunk of the $30 billion spent on workers' comp medical care--as well as much of the $13 billion in auto insurance medical payments--through "24-hour insurance" that treats all injuries within the new health-care system. With workers' comp costs rising faster than health-care expenses, many companies want relief: "If we could eliminate our workers' comp taxes related to health care, that would represent a significant savings for us," says a senior executive at Aluminum Co. of America.
But insurers and employer groups say the proposed merger raises a host of problems. Employers would have little say over how injured workers are treated. And cost-conscious health providers might opt for less intensive treatments that save costs but prolong the time that wages are paid to laid-up workers.
Even so, President Clinton is hoping for the same fast start he got on his economic program, which soared on the enthusiastic initial support of business. But that plan sputtered when CEOs started taking a closer look at its tax burdens. On health, business leaders are reading the fine print before they sign. Clinton desperately wants a phalanx of CEOs to rally around him in the Rose Garden when he rolls out health-care reform. But if his plan is as cosmic--and expensive--as business fears, his invitations may be returned unopened.Mike McNamee, with Susan B. Garland, in Washington, Judith H. Dobrzynski in Williamsburg, Va., and Wendy Zellner in Dallas