THE HEALTH PLAN IS A BRILLIANT POLITICAL DOCUMENT, BUT TAKE ANOTHER LOOK AT THE NUMBERS
RICH THOMAS
As a political document, Clinton’s health plan is brilliant. It includes bribes to pay off some of the most powerful interest groups that could attack health reform in Congress. For labor, there are generous subsidies for health insurance to cover early retirement under union contracts. For veterans, there’s $2 billion to patch up a health system that probably ought to be junked. For seniors, there are brand-new Medicare benefits: long-term home care and drug coverage. The administration even persuaded the nation’s top lobbyist for the elderly, John Rother of the American Association of Retired Persons, to lead a consumer coalition in favor of the Clinton plan.
As a financial document, however, Clinton’s plan is unconvincing. “A fantasy,” was the blunt description given by Sen. Daniel Patrick Moynihan, the Democratic chairman of the Senate Finance Committee who will have to help shepherd the bill through Congress. Clinton’s own economic advisers tend to share Moynihan’s skepticism, although not in public. “How do you stage a shoot-out with the president’s wife?” shrugged one administration aide. Last week, prodded by the First Lady Treasury Secretary Lloyd Bentsen, budget director Leon Panetta and chief economic adviser Bob Rubin docilely shuffled out to endorse health reform. Privately, an aide to one described the financing of the plan as “a walk in space.”
Clinton’s political dilemma was how to expand health coverage to 37 million Americans without raising the kinds of taxes that would win him early retirement in 1996. Sin taxes seemed like fair game, but the White House buckled under pressure from the beer, wine and spirits lobby. (Just to keep the pressure on, Anheuser-Busch is outfitting its trucks with placards urging Bud drinkers to dial 1-800-BEER-TAX.) Cigarettes will go up by 70 to 80 cents a pack, bringing in some $70 billion over five years, and at the last minute, Clinton threw in a 1 percent tax on corporations that opt out of the health plan, picking up an additional $35 billion or so. But that still left the administration at least $300 billion short of what it needs to pay for health reform and still reduce the federal deficit.
Where to turn? Clinton reached deep into the voodoo bag of his predecessor Ronald Reagan, and came up with that old favorite, cutting waste, fraud and abuse. Specifically, Clinton claims that $285 billion can be slashed from Medicare, Medicaid and federal employee health benefits. No one denies the need to contain the costs of these benefit programs for the elderly, the poor and the bureaucrats. They’ve been growing at three or four times the rate of inflation. But Congress has been trying to nick Medicare and Medicaid for the past decade, mostly by cutting fees to doctors and hospitals. The projected savings never pan out: new technology, new procedures and more patients just keep driving up costs. There is little evidence that Congress will have better luck now, especially at a time when Clinton’s reforms aim to increase coverage to the 37 million uninsured. “The industry is asked to get smaller while it is forced to grow bigger,” says Mark Hamilton of the accounting firm KPMG Peat Marwick.
The only way Congress might fully reach Clinton’s targets for cutbacks is by taking steps that Clinton doesn’t even want to mention: cutting all health-worker salaries, closing hospitals, rationing medical care, limiting malpractice and other lawsuits, and sharply scaling back medical research. “Given the failed history of cost control,” says Susan Tanaka, a health expert at the Committee for a Responsible Federal Budget, “we absolutely ought to see concrete results from the administration’s cost proposals before–not after–we spend the money.”
Some of the projected costs of Clinton’s plan seem as unrealistic as the anticipated savings. Health-care experts are doubtful that the average premium suggested by Clinton–$1,800 for an individual, $4,200 for a family–will actually cover the generous benefit plan. Private plans that offer roughly the same benefits cost hundreds of dollars more, says Roland McDevitt of The Wyatt Co., a benefits firm. The administration may have low-balled by half long-term home care offered to appease the elderly. Three fifths of all nursing for the elderly and disabled is now provided in the home for free by family or neighbors. “Studies prove that when the government starts to pay professionals to do these things, all of these other folks understandably want to get paid too,” says Gail Wilensky, head of the Health Care Financing Administration under George Bush. “This can easily cost $50 billion a year, not the $28 billion that the Clintons budget.”
Clinton predicts that health-care reform will be good for the economy, saving employers billions that they will want to plow back into wages and jobs. This supply-side windfall would net the government $51 billion in new tax revenue. That is, if it comes true. Even Clinton’s own advisers are doubtful. Laura Tyson, the chairman of the president’s Council of Economic Advisers, concluded last week that the impact on the economy will be a wash–and she promptly canceled a briefing with reporters to avoid throwing cold water on Clinton’s numbers. The small-business lobby is in revolt, claiming that new “mandates” requiring even the smallest employers to insure their workers will cost millions of jobs. Clinton tried to allay their fears, offering a huge federal subsidy for low-income workers. Even so, the remaining expense to business could come to $20 billion to $25 billion, still enough, says June O’Neill, an economist at Baruch College, to “price several hundred thousand low-wage workers out of the market.”
The best economic argument that Clinton has going for him is that to do nothing would be much worse. With health-care costs now chewing up 14 percent of GDP, heading for 20 percent by the turn of the century wages and growth are stifled. Almost every economist agrees that something has to be done to reform the health-care system, and the president’s plan at least initiates the debate. Clinton is right that the health-care system is full of waste and inefficiency. But to bring health-care costs under control will require more than slashing paperwork. It will call for real sacrifice -either higher taxes or fewer benefits–and that will demand a level of political courage the president, his wife and the Congress have yet to show.
President Clinton says he can pay the $441 billion tab for his health-care plan through cost-cutting and marginal tax increases. Critics say he is unrealistically optimistic.
BILLIONS IN Cigarette tax $70 1% Corporate Tax 35 Medicare cuts 124 Medicaid cuts 114 Benefit cuts to federal workers, military and veterans 47 Tax windfall 51 BILLIONS OUT Subsidies to provide coverage of low-income workers $169 Long-term care 80 Drugs for the elderly 72 Expand public clinics 29 Reduce federal budget deficit 91
SOURCE: WHITE HOUSE DOCUMENTS (BLUMRICH–NEWSWEEK)
