Phase-In Planned for Health Reform : Policy: White House talks of five- to seven-year delay in attempt to assuage fears over undue burden on businesses. President opens campaign before governors.

As President Clinton launched his campaign for health care reform Monday, the White House attempted to assuage fears that it would unduly burden businesses by disclosing that it will propose phasing in the reforms over five to seven years.

In an address to the National Governors’ Assn., Clinton said that the nation no longer can side-step the health care issue and promised that his solution will not crush American business. While his program would require all businesses to help pay for their employees’ insurance, he said, savings produced by his reforms would more than make up for the new costs.

“We can make this work,” he said, as he inaugurated the second major legislative campaign of his presidency.

The 44-minute speech began a sales campaign that will increase steadily in intensity until mid-September, when the Administration plans a formal unveiling of its legislative proposal. It is unlikely that Congress will produce reform legislation until sometime next year, however.

In contrast to the bobbled early effort to sell its budget plan, the Administration hopes to sell the health care program on its terms--as a reform that not only will benefit the sick and uninsured but offer greater security to Americans who are now satisfied with their health care but live under the threat of losing their insurance coverage.

The broad outlines of the Administration’s program are clear. It would establish huge insurance purchasing cooperatives--”health alliances”--that would combine the bargaining power of individuals and small businesses, enabling them to acquire the lowest-cost health plans from health care providers.

The program also would create a package of guaranteed benefits for all Americans and would require employers to pay most of the costs.

Because the requirements on business have become the focus of attacks from Republicans and some business leaders, Clinton and his aides felt compelled Monday to make a special effort to counter them. Talk of the lengthy phase-in period, hinted at earlier by the Administration, was part of that strategy.

In addition, Ira Magaziner, a senior health policy adviser, told reporters that the Administration will propose partial subsidies to help smaller businesses pay their share of the minimum health benefits package for their employees. While the nation’s larger employers could be required to pay as much as 7% of their payroll to support a national guaranteed health package, businesses with four or fewer employees might be required to pay a maximum 3.5% of payroll.

Funds to pay for such subsidies--which could amount to about $30 billion to $40 billion--would be collected over several years through savings on the Medicare and Medicaid programs and other efficiencies and placed in a “national subsidy pool,” Magaziner said.

He said that the program may also call for taxes on cigarettes or alcohol, or both, to pay for increased long-term care benefits. Clinton has not yet decided on such taxes, which could raise revenues “in the high single digits or low double digits” of billions, Magaziner said.

In a development that is likely to relieve large public hospitals, Magaziner also disclosed that the Administration has decided not to press for a tax on health care providers to offset the savings they would realize under the reform program.

He asserted that most of the cost of the new national insurance package would be covered not by another major tax but from savings. Some of those savings would be realized through reforms that would prevent insurance companies from charging higher premiums to small companies. The Administration also believes that it can save money by including workers compensation in the new system and by reducing paper work, through--among other things--the creation of a universal insurance form.

In his remarks, Clinton acknowledged that, if the government were to impose additional insurance costs on businesses and undertake no other reforms, business growth would be crippled. But with insurance reform, a gradual phasing in of requirements and a cap on small businesses premiums, businesses’ health-care related costs will fall, he asserted.

They will save money, and “that is more money they’re going to have to invest in creating jobs in the private sector,” he said.

According to Magaziner: “The key . . . is the fact that you are getting growth of costs under control. . . . The vast majority of companies are going to save a ton of money.”

He also said that the Administration intends to keep in reserve--as a “backstop”--the proposal to set health spending in case other steps do not effectively slow the rise of health care costs.

In his address, Clinton explained why employers will have to underwrite a guaranteed minimum insurance coverage for workers.

One alternative, a single-payer plan, would “require us to replace over $500 billion in private insurance premiums with nearly that much in new taxes. I don’t think that’s a practical option,” Clinton said.

A second option, requiring all individuals to buy insurance, would encourage employers to drop their current health care plans, he said. And continuing the current arrangement means continuing to impose invisible costs on government and employers to pay for the uninsured, he said.

“That leaves the fourth alternative, which is to build on the system we now have,” Clinton said.

Clinton, a former president of the National Governors’ Assn., sought to reassure the governors that he plans to cooperate with them and to allow them--to the extent possible--to continue health care reforms that they may have begun already.

He favorably compared the governors’ efforts to employ a consensus-building, problem-solving style to the partisan cross-fire he has found in Washington.

“Back East, where I work, consensus is often turned into cave-in. People who try to work together and listen to one another are accused of being weak, instead of strong,” Clinton said. “And the people that really score are the people that lay one good lick on you in the newspaper every day, instead of the people that get up and go to work.”

Among the governors, reaction to his speech was divided largely along partisan lines.

Gov. Pete Wilson, a Republican, called the address “a good speech, a good definition of the problem.” But he contended that Clinton had left some questions unanswered, and said that requiring employers to make a contribution to health care for their employees “is a very definite peril” to small business.

South Carolina Gov. Carroll A. Campbell Jr., the incoming president of the governor’s group and an expected 1996 Republican presidential candidate, said that he also wanted more details on how the program would be paid for.

“I’ve not seen a clear financing mechanism,” he said. “We need to know how to pay for this.”

Gov. David Walters, an Oklahoma Democrat, called the plan “nearly brilliant” and said Clinton had been eloquent in laying out the reasons the country needs to offer a basic health plan to all Americans.