A funny thing happened to the Clinton health-care reform plan on its way to Congress. The more conservative economic advisers in the Administration, wary of the weak economy, were able to knock out the heavy taxes that were originally proposed to finance the program. But Treasury Secretary Lloyd Bentsen, National Economic Council Chief Robert E. Rubin, and Chairwoman of the Council of Economic Advisers Laura D'Andrea Tyson couldn't face down the more liberal members of the Administration and failed to whittle the hefty benefits package down to size. So the most sweeping health-care reform plan ever seen in this country is heading down Pennsylvania Avenue to Congress basically on a wing and a prayer that somehow billions will be squeezed out of the current medical system and be used to pay for everything. Right now, the health reforms do not pay for themselves.
But that could be O.K. The health-care reform plan is going to get a lot better as it meanders through the halls of the Senate and the House. The hope is that it gets good enough to be practical and work without burdening business with heavy new mandates or the economy with crushing taxes.
Just remember the deficit-cutting budget bill's long journey. When first proposed by Clinton, it was very heavy on tax increases and pretty light on spending cuts. By the time it emerged from the political process in Congress, there was a one-to-one ratio of spending cuts to tax hikes. True, it wasn't two-to-one, as it should have been. Yet the budget package is much better for getting "washed" through Congress. Let's hope the health-care bill gets a rigorous sudsing, too.
The regulatory, bureaucratic bent of the current package should be the first to go. The Clinton plan for controlling costs is heavy on "managed" and light on "competition." There is simply too much reliance on price controls disguised as "premium caps," which would limit rises in insurance premiums. In effect, these caps become price ceilings imposed on doctors and hospitals by insurers. Despite loud denials by the Clinton Administration, the caps are really a way to get the insurance companies to enforce price controls without direct government intervention. Unfortunately, history has shown that price controls don't work.
A better way to control costs is to give the markets room to operate. A big dose of competition would go a long way toward providing incentives to save money. Right now, the Clinton program envisages the creation of new regional health plans that would compete to offer high-quality care at the lowest possible premium.
The fine print, however, shows that each health alliance is expected to represent up to 70% of all consumers in each region. These alliances will be quasi-governmental bureaucracies that will use their purchasing clout to force down insurance premiums. The insurers would then lean on doctors and hospitals to control costs. But where is the competition?
Given the enormous size of the regional health alliances, a near monopoly of one buyer dealing with one or two insurance companies is entirely possible. Permitting a larger number of smaller health-care purchasers, each pushing for ways to control costs, would make for much greater regional competition, and lower costs. In a state such as Connecticut, there might be dozens of groups pushing insurers for innovative plans, instead of one giant bureaucracy.
One way to make that work would be to increase the number of companies buying their own health care. Under the current plan, only the 1,000 largest U.S. corporations would be allowed to run their own benefit programs and buy their care in the market. Conservative Democrats and Republicans are arguing for alternatives that would give a lot more companies that option, increasing the number of health-care buyers and boosting competition. It's a good idea.
One-seventh of the American economy is going to be affected by this amazingly complex bill after it courses through Washington. Let's hope it gets much better.