Clinton Is Pulled in 2 Directions on Health Plan

As the tough decisions draw near on President Clinton’s health care reform plan, the Administration is struggling with a wide split between its economic policy and health policy advisers over the cost of the plan to taxpayers and businesses.

The division puts Clinton in a tough spot at a point late in the reform planning schedule. Ira Magaziner, manager of the White House Task Force on National Health Care Reform, said as recently as Thursday that the President was to have made most of the fundamental decisions by Monday. But given the strong differences of opinion within the Administration, it is unclear whether he can act that soon.

“There has been tremendous tension between the economic contingent and the rest of the health care team,” a senior task force consultant said Friday.

Economic officials are worried about the cost to businesses and individual taxpayers of guaranteeing a minimum level of coverage to all Americans, including an estimated 37 million who have no insurance and about 22 million more who are considered to have inadequate insurance.

Those advisers also have concerns about the timing of various elements of the plan. Costs will be higher if more of the reforms are put in place immediately, rather than phased in over a number of years.

Health policy experts, led by First Lady Hillary Rodham Clinton, who chairs the White House task force, are pushing for a broad plan that is likely to require new payroll taxes on businesses and workers. It also would draw from additional revenue sources, including new “sin taxes” on alcohol and tobacco products, to raise the estimated $30 billion to $90 billion needed to finance the proposal.

To some extent, the competition between viewpoints was designed into the deliberations. Magaziner has said the process was structured to give health planners freedom to consider options in an environment relatively free of economic considerations.

Once this work was completed, the plan was to be opened up to “contrarian viewpoints,” Magaziner said, with other advisers, including economic experts, invited to ask tough questions about the assumptions, analyses and recommendations of the task force. The deliberations entered that testing phase earlier this month.

Clinton’s economic officials, including Leon E. Panetta, director of the Office of Management and Budget, and his deputy, Alice Rivlin, were described as intensely skeptical, although some officials say they have softened their opposition to a degree as they have learned more about the plan.

In a recent interview, Robert E. Rubin, chairman of the National Economic Council, said relations between the health and economic teams are better because the economic advisers no longer feel left out of the process.

At the moment, the gap between the two groups appears to focus on the degree of out-of-pocket expenses that consumers would pay. Economic advisers favor forcing consumers to pay a higher share of their own expenses, which would lower the amount of new taxes required.

Health advisers, however, are pushing for higher taxes and lower direct payments by consumers. Such an approach would be of greater aid to poorer people who have less ability to pay for medical services.

The expectation was for Clinton to make some fundamental decisions in the coming days, so that the health planners can go back and put the finishing touches on the reform agenda and finalize the language in the form of a legislative proposal for Congress. The final plan is to go to Congress in mid- to late June.

The biggest undecided question is how to finance these reforms. The most likely financing mechanism is a new mandatory payroll tax of 7% for companies and 2% to 3% for workers. A second option is to require all businesses to provide health insurance for their workers, paying perhaps 75% of the premiums, with employees paying the rest.

In either case, smaller firms are likely to receive assistance, perhaps in the form of subsidies as well as a longer phase-in period.

In addition, a “sin tax” on cigarettes is all but ensured, as is a “luxury tax” on such health benefits as cosmetic surgery that go beyond the elements in a standard benefits package.