Every intricate policy decision, major and minor, stops at the president’s desk. One key decision will be how to finance health-care reform, and last week various administration officials confirmed, denied, confirmed and then denied that they were considering a value-added tax, a form of national sales tax (page 46). The unfortunate tax-time discussion of new taxes began when Secretary of Health and Human Services Donna Shalala said that VAT was still on the table, a statement that annoyed staffers at the White House, who saw it as another example of Shalala’s political ham-handedness. Their irritation with Shalala grows in part out of a rift that has developed on the health-care task force between market-oriented reformers like business consultant Ira Magaziner and those, like Shalala, stressing federal regulation. To make matters more interesting, Shalala’s key allies include leaders of the Children’s Defense Fund, with its close ties to Hillary Rodham Clinton, who heads the task force. Bill Clinton, on the other hand, has in the past emphasized the market-oriented approaches of Magaziner. In other words, we may be in for a monumental domestic squabble at 1600 Pennsylvania Avenue.
Not every issue divides neatly into the Bill, Hillary, Ira and Donna camps. There is agreement over several key principles: a basic benefits package should be available to everyone, health benefits should be portable when an employee switches jobs, no one should be denied benefits because of an existing illness, citizens should be able to choose their doctors, and the government must take a much more active role in controlling health-care costs. The remaining issues facing Clinton are daunting:
Shalala, the Children’s Defense Fund and former campaign health adviser Judith Feder are arguing for an extremely generous basic package of benefits. While those who stress cost control, like Magaziner, agree that there should be a hefty benefits package, a few big items make them queasy: open-ended coverage of mental health and long-term care. Tipper Gore, the vice president’s wife, advises the working group on mental health, which wants to cover not only serious psychological disorders but many private psychotherapy sessions as well. Clinton will decide whether to require therapy patients to allay more of the cost as treatment stretches on.
Long-term care for the elderly and the disabled is even dicier. Clinton has pledged to include long-term care, but a package including mental-health and long-term care would more than double costs, task-force sources say. Such costs would force far steeper taxes-perhaps even the controversial VAT–a strong political negative, but would win the potent support of senior citizens, a strong political positive.
The regulatory-minded want to contain health-care costs through tough government measures: caps on doctors’ fees, drug prices and insurance premiums, even direct price controls on medical services. Their argument is that the health-care free market has proven it doesn’t work, so only massive intervention will. The “managed competition” advocated by Magaziner assumes the market can restrain costs if it is organized in certain ways by the government. So its supporters stress giving consumers extra power to discipline the market by forming purchasing cooperatives. While there is disagreement over how much intervention is needed, few senior administration officials argue that the government’s role shouldn’t be dramatically increased. In fact, the health industry has complained that the 511 people on the health-care working groups advising Clinton are stacked with bureaucrats and congressional staff instead of those working in hospitals or insurance companies.
Timing, as the old joke goes, is everything. Clinton’s problem is that whatever savings are wrung out of the system won’t show for several years, after, say, November 1996. But the costs to the government will materialize right away. If he wants a generous benefits package in place by Election Day he will have to impose a huge tax hike by then, too. So the more cautious approach favors a very gradual phase-in of coverage over a period of years. The more liberal camp says that most benefits should take effect right away. A possible compromise: enact broad coverage for kids immediately and delay it for others.
The folks at HHS want much of the authority over health care to reside in HHS. Representatives of state governors detailed to the task force mock the “Fedheads” for their propensity to propose federal involvement in everything, including where doctors and nurses should be sent throughout the country. Clinton himself has in the past championed state flexibility. The federal government could, for instance, set general medical budgets for states but let the states decide how to go about cutting costs.
The task-force working groups themselves have not figured out how to make these various trade-offs. What they will do is provide a ton of paper-options with price tags, pros and cons-to be dumped on the president’s desk. All Bill Clinton has to do is figure it out, and sell it.
Reform won’t yield immediate savings, so an interim delay in spending is needed. Options: an industry-wide price freeze; Medicare-style reimbursement for procedures, or a cap on insurance premiums.
Americans worry about choosing their doctors more than any other feature of reform. Patients may pay more for doctors outside their HMO.
A major tax on health benefits was ruled out, leaving “sin” taxes, VAT and tax on providers on the table. But these alone won’t match costs.
