Clinton Aides Say His Health Plan Cuts Costs Too Slowly : Reform: They are said to be urging a shift from managed competition to controversial standards board to curb spending.

With runaway health care costs reaching new heights, President-elect Bill Clinton’s top advisers are telling him that managed competition, the centerpiece of his reform plan, will not slow national health spending appreciably for three to five years, sources said Wednesday.

As a result, Clinton’s health care advisers are urging him to begin immediately the even more daunting task of creating a national board to impose limits on health care spending.

The apparent change of heart threatens to delay the unveiling of Clinton’s health care reform package, which the President-elect had promised in the first 100 days of his Administration. Nevertheless, a top transition health care official insisted Wednesday that the incoming Administration still has December in mind as a target date for the signing of legislation to overhaul the nation’s health care system.

Originally, Clinton had hoped first to implement the less controversial but still sweeping plan known as managed competition. Such a system relies on a mixture of government regulations and free market incentives to nudge employers and individuals into large purchasing networks. It then requires those networks to compete both on price and the quality of service they offer. The hope is the competition will result in lower prices while keeping quality high. Had that approach alone seemed likely to extend coverage to more people while still reining in the cost of health care--which reached $838.5 billion last year--Clinton might have been able to delay or avoid creating a national budget-setting board, sources said.

But with the transition team’s projections of three to five years before costs can be stemmed under managed competition, there is little choice but to press on with the “budgeting mechanism,” one top transition health care adviser said Wednesday.

Clinton talked throughout the campaign of creating a “health standards board” to establish annual health budgets and it is that notion which remains the single most controversial point in his health care reform agenda.

Most physicians and hospitals vigorously oppose such a board, fearing that regulation would lower their income. Analysts also fear that attempts to create such a board would generate so much resistance that all attempts at health care reform, including managed competition, would be derailed.

“Managed competition and price controls are incompatible,” said Dr. Paul Ellwood, a physician based in Jackson, Wyo., who is known as the father of the managed competition concept.

“Global budgeting will generate substantial opposition and delay any changes at all,” he said in a telephone interview Wednesday. “It will destroy the whole spirit of collaboration.”

The notion of controlling prices contradicts the notion of fostering competition, Ellwood contends. But perhaps more important is the political problems price controls pose and the likelihood that trying to impose them will jeopardize all health care reform, he believes.

Ellwood also took issue with the transition team’s view that managed competition would take three to five years before having a significant impact on rising health care costs.

“We can begin seeing savings as a result of managed competition prior to any passage of legislation,” Ellwood said. “What needs to happen is for the President-elect to simply signal his intention to lead the health system in this direction and . . . the system will quickly move toward accountable health plans all over the country.”

He termed “fallacious” the transition team’s assumption that managed competition and price controls are compatible.

“They also are making the assumption that price controls are quicker and more decisive,” he said. “We’ve had price controls on Medicare from the outset and Medicare has not been very successful in controlling costs.”

One of Clinton’s top health care advisers declined Wednesday to be drawn into that debate, stating simply that “there is only one health care czar: Bill Clinton. He will decide.”

The official, who asked not to be identified, nevertheless said confidently that Clinton’s final legislative package will prohibit insurers from refusing to cover those with pre-existing ailments, require insurers to set rates based on the actuarial data of an entire community and provide for research that will result in the development of treatment standards, which can be used by physicians as a defense against frivolous malpractice lawsuits.

He said that Clinton also is considering:

--Establishing a uniform package of benefits to be provided by “accountable health plans,” similar to health maintenance organizations, that would compete in the open market.

--Requiring employers to provide full-time workers with the core coverage under accountable plans. Employers may provde additional benefits but their tax deductions for employee health care would be limited to the cost of the least expensive accountable health plan in their areas.

--Allowing small businesses and uninsured persons to buy insurance through regional “health insurance purchasing cooperatives” that would arrange for them to get coverage through competing accountable plans while at the same time monitoring the price and quality of such plans.

“It will address the fundamental flaws in our health care system,” the adviser said of the Clinton reform agenda.

A number of other issues remain undecided, including whether to tax health benefits and to what extent small businesses will be given tax credits as a government incentive to offer workers health insurance coverage, the transition adviser said.