Freezing of Rural Hospital, Doctor Fees Studied : Health care: President’s task force weighs plan for areas where competition is scarce, sources say. Issue of controls raises questions.

Physicians and hospitals in rural America, including vast areas of California and the West, would have their fees frozen under a price control plan being studied by President Clinton’s health care reform task force, sources said Saturday.

Such a strategy is being considered because the primary method of holding down health costs that is under study by the task force--a system of “managed competition” among health care providers--could work only in populous areas, where consumers can choose among a variety of providers.

Most rural and non-metropolitan areas, where about 40% of Americans live, lack sufficient numbers of providers to compete against one another. With competitive forces exerting little pressure, price controls may be the key to slowing the increase of health costs in those regions while “managed competition” is at work in the rest of the nation, Administration officials said.

Managed competition refers to the grouping of urban consumers into large insurance pools staffed by professionals with the expertise to shop among doctors, hospitals and other health care providers for the best quality and price. The underlying notion is that such “health insurance purchasing cooperatives” would have the economic clout to force various providers to offer competitive rates and quality.

Whether the President seeks to impose short-term price controls is still being vigorously debated with the White House Task Force of National Health Care Reform, led by First Lady Hillary Rodham Clinton. The task force is scheduled to produce a comprehensive reform agenda in May.

The medical industry generally views direct limits on fees as a heavy-handed, cumbersome method of containing health costs.

Analysts said such measures raise an array of difficult questions. For instance, said one health policy expert who advised the Clinton transition team: “Does it apply to nurses’ salaries? Or the cost of a magnetic resonance imager? Health insurance premiums?”

Medical care providers can be expected to mount a fierce campaign against any reform proposal that includes price controls. If the Administration, despite industry opposition, goes forward with plans in which a limit on fees is an integral part, it risks a potentially lengthy battle in Congress and one that could scuttle the entire health reform package.

Clinton would need congressional authorization for price controls. The law used by President Richard Nixon in the early 1970s to impose overall wage-and-price controls has expired.

Other cost-containment strategies being considered by the task force--and said to enjoy greater support at the moment than price controls--include a cap on premiums that can be charged by insurance companies and a limit on increases in drug prices, sources said.

The President’s task force, also is considering other aspects of health care delivery in rural America. Some task force members are looking at how governments in other countries, including Canada, ensure health care services for citizens in remote areas. In Canada, for instance, some citizens are transported from distant outposts to receive health care.

The Clinton task force also is studying other aspects of health care systems abroad, including those in Britain, Germany and the Netherlands, Administration sources said.

In addition, the task force is consulting with health policy experts and interest groups throughout the country, an outreach effort that seems likely to make good a senior Administration official’s boast that the reforms will result in a “uniquely American” health care system.

The Clinton Administration began its urgent search for ways to contain the cost of health spending shortly after the election when health policy transition advisers told Clinton it could take five years or more before any tangible savings could result--even after managed competition is fully in place. Managed competition is so complicated that it would likely have to be phased in gradually, region by region.

To hasten the reforms, the task force also has considered nationwide short-term price controls to buy time for managed competition to take root, although sources have said the task force is unlikely to make such a recommendation.

Clinton also was told during the transition that providing coverage to the 37 million uninsured Americans--a key pledge from his campaign--could cost up to $90 billion. Partly in response to those projections, the President in his budget proposals last week asked for $50 billion in Medicare savings over the next five years, largely by limiting the increases doctors and hospitals were scheduled to receive.

Although those projected savings would be applied to reduce the federal budget deficit rather than to change the delivery of health care, the Administration is considering an array of taxes, such as on tobacco and alcohol, to help fund health care reforms.