Clinton Promises Sweeping Coverage in Health Care Plan : Medicine: Draft of measure requires insurance payments from most citizens, employers. People would use national health security card for services.

In his ambitious national health care reform plan, President Clinton promises all Americans a lifetime of affordable medical coverage under a redesigned system that requires an insurance premium payment from virtually every citizen and employer.

According to a 239-page draft of the proposed American Health Security Act, a copy of which was obtained Friday by The Times, Clinton would revamp the current health care system by eliminating various discriminatory insurance-market practices and organizing consumers into vast “alliances,” set up and supervised by each state, to shop for the best insurance plans on behalf of their members.

Clinton’s agenda leaves the states plenty of flexibility to implement their own reform measures under a national framework. But it also retains for Washington a strong role as overseer, allowing the federal government to take over for any state that fails to meet strict federal standards.

For the first time in U.S. history, the federal government will set a basic standard for health insurance, insisting that all Americans have comprehensive coverage for doctor and hospital bills, mental health care and prescription drugs. No one could be denied coverage because of a particular occupation or because of a pre-existing condition. Each person would receive a national health security card, much like an automated teller machine card, that could be used at a hospital or doctor’s office.

The President’s plan proposes a “sin tax,” on cigarettes and perhaps some alcoholic beverages to help pay for the plan. Otherwise, the primary source of money for covering 37 million now-uninsured Americans is company- and worker-paid premiums and projected savings, primarily from caps on the growth of the government’s Medicaid and Medicare programs--savings that some liberals in Congress and many economists say may not be realistic.

The Clinton plan goes a long way toward achieving universal coverage by requiring all employers and workers to contribute toward health insurance premiums. Businesses would pay a levy ranging from 3.5% to 7.9% of payroll, and employees would pay as much as 1.9% of their paychecks in premiums.

Contributions would be required from a large number of the uninsured, 85% of whom are employed, First Lady Hillary Rodham Clinton noted in a speech Friday.

Subsidies would be provided for low-wage earners and small businesses with fewer than 50 employees, and the government would pay for coverage of the indigent and the unemployed.

Under Clinton’s plan, illegal immigrant workers would not be guaranteed coverage, but they and their employers would be required by law to contribute health insurance premiums. Such a provision would entitle the illegal immigrants to join the consumer alliances and choose from an array of health plans. The insurance-purchasing alliances are prohibited from reporting such workers to the Immigration and Naturalization Service.

“If they work for an employer, they and their employer have to pay,” said Kevin Anderson, a White House spokesman on health care issues.

“It’s just like Social Security. There are plenty of undocumented workers paying Social Security taxes. But if they lose their jobs, health care coverage is not guaranteed them,” he said.

A major change consumers would experience by Jan. 1, 1995--if Clinton has his way--is the arrival of a uniform insurance claim form: one for institutions, another for doctors and other non-institutional providers, one for dental services and one for prescription drugs. Now, virtually every one of the nation’s 1,500 insurers uses a different form.

“This system is an American solution to an American problem,” Hillary Clinton said Friday as she made a spirited pitch for the plan in a morning speech to state legislative leaders meeting in Washington.

“This is a moment in history which we have to seize in order to take care of ourselves,” she said.

In seeking to restructure one-seventh of the U.S. economy, Clinton’s plan would affect the way virtually every American receives and pays for health care.

The plan aims to achieve savings by encouraging the vast majority of Americans to move from traditional fee-for-service care to health care networks, which attempt to control costs through strict limits on payments to doctors and hospitals. Typically, they require approval from a “gatekeeper” doctor before a person can consult a specialist.

Clinton’s planners hope that tough measures can control the soaring growth in health care costs, which have been expanding at a rate of 10% a year, far faster than the nation’s overall economic growth. The goal is to bring the inflation rate in health care down to a manageable 4%.

White House aides cautioned Friday that elements in the President’s draft plan are subject to change between now and Sept. 22, when he is scheduled to unveil his proposals in a speech to a joint session of Congress. Some elements of the draft have already been changed as a result of the Administration’s consultations with members of Congress and various interest groups, according to one White House source.

Another Administration official said Friday that the draft is likely to undergo two more “iterations” before Clinton’s speech, although a senior White House health policy analyst said any major revisions at this point are “unlikely.”

In any case, the President’s final proposals are sure to be changed--perhaps significantly--as they work their way through Congress, a fact that Hillary Clinton acknowledged Friday.

“None of this comes without controversy; none of this will be easy,” she said.

“We do not believe that we have all the answers. . . . If there are better, more efficient, less costly, quality-driven ways of doing any of this that we haven’t thought about or overlooked, we are open to that.”

The Administration has established an ambitious timetable that seems to assume congressional enactment of the plan in 1994; the draft sets a Jan. 1, 1997, deadline by which all states must have their plans approved by a newly created National Health Board--with universal coverage by the end of 1997.

But given the degree of state flexibility under the Clinton plan, congressional passage would merely shift the focus from Capitol Hill to Sacramento and every other state capital, which would decide how the plan would be implemented in their jurisdictions.

Here are the major elements of the plan:

Coverage and Financing: All businesses would be required to offer health insurance coverage to their workers. The firms would pay 80% of the average-priced plan offered by the local health alliance and workers would pay 20%.

For example, if the average cost in Los Angeles for a comprehensive plan were $2,000 a year, the company would pay $1,600 and the worker $400.

If a worker were to choose a more expensive plan--perhaps one costing $2,400 because it offered added benefits, the company would still be responsible for $1,600, while the worker would pay $800.

The money now paid directly to private insurance companies would go instead to the health alliances, local groups with the power to set standards and rules for all health plans. The alliances would distribute the funds among providers it has approved for the local area. These might include nonprofit organizations such as Blue Cross and Blue Shield, insurance companies and health maintenance organizations.

Choice of Physician: Once a year, the alliance would mail a directory to all local residents offering a choice of certified health plans offered by approved providers. A much more costly traditional fee-for-service plan would also be available, offering a much larger selection of doctors and hospitals. Under fee-for-service, there would be an out-of-pocket limit of $1,500 for an insured individual.

A person would select a plan for the year and receive all medical care exclusively through that organization’s network of doctors and hospitals. A person would be permitted to obtain care outside the network but would have to pay the full bill.

Cost to Business and Workers: No company would be required to spend more than 7.9% of its payroll for health coverage. Firms with fewer than 50 workers and low wages would pay a lesser amount on a scale starting at 3.5%.

An individual would have to spend no more than 1.9% of his or her income for health insurance. For low-wage workers, this means that the government would subsidize the cost of health insurance.

Workers could pay their share of insurance costs either through payroll deductions or by sending checks directly to their regional health alliances.

A person who loses a job would still be covered by a health plan and would resume regular premium payments after returning to work. A self-employed person would pay both the employer and worker’s premium but, unlike other workers, would be permitted to deduct all premium costs from his income taxes.

The health insurance payments companies and individuals make now vary dramatically, depending on benefits. Many large companies now pay between 10% and 14% of payroll costs for employee medical insurance. The automobile industry, with large numbers of older workers, pays as much as 18% of payroll for health costs.

Staying Independent: Some big organizations would be permitted to retain their own health care systems. Joint industry-union health organizations, such as those common in the construction trades, would not be required to join an alliance if they have more than 5,000 members.

Corporations with more than 5,000 workers could also continue to operate their own health insurance systems. But a firm’s insurance program would have to offer at least the same benefits as the standard national package.

However, since each state can create its own health care system, the big, national employers would face a daunting variety of rules and regulations. Companies that now have a uniform system would be forced to rearrange their benefits and costs to meet each state’s requirements.

Medicare and Medicaid: Medicare, the health system for Americans over age 65 and disabled people of all ages would remain officially independent and largely untouched in the early years of health reform.

Beneficiaries would continue to be free to choose any doctor.

Senior-citizen groups and their supporters in Congress are apprehensive, however. They fear that the projected cost savings from Medicare, achieved by slowing the growth of payments to doctors and hospitals, would discourage the health providers from accepting Medicare patients.

The Administration hopes to save $124 billion from projected future spending by imposing a cap to restrict total spending eventually to the general rate of inflation in the economy.

Medicaid--the state-federal program for the poor, called Medi-Cal in California--would be folded into the health alliances. Poor people enrolled in Medicaid would join other Americans of all economic classes in the regular insurance plans. Planners hope for $114 billion in savings through a cap on future outlays.

Long-term Care and Drugs: The basic package of benefits would include two items available to everyone but particularly welcomed by the elderly. Money would be available for those who need help in any three of five basic activities of daily living: eating, dressing, bathing, getting in and out of bed and using the toilet. The benefit would pay for the cost of having someone come to the home of these disabled people, or the expense of sending them to adult day care.

The prescription-drug benefit calls for an individual to pay the first $250 a year, and then 20% of additional costs.

National Health Board: A powerful seven-member, full-time board would be named by the President to set national standards and oversee state implementation of the plan.

The board would set budgets for consumer alliances and then allocate funds to them, with allowances for regional variations in the cost of living. The board also could propose to Congress “appropriate adjustments” to the nationally guaranteed health package.

The board would have to approve the implementation plans submitted by each state.

Board members would be forbidden from having a financial interest in or any connection to a health care plan, a health care provider, an insurance firm, a drug company or a medical equipment maker.

State Responsibilities: States would certify networks of doctors, hospitals and other providers, which then could bid for customers in the alliances.

Similarly, states would be responsible for the creation and governance of the consumer alliances, including setting up mechanisms for selecting board members and various advisory boards. States also would administer the premium subsidies for low-income peoples, families and small businesses.

States would be forbidden from setting geographic boundaries that concentrate racial or ethnic minorities or socioeconomic groups. An alliance could not cross state lines, but two or more contiguous states would be permitted to coordinate their alliances, such as by creating joint operating rules and negotiating fee schedules.

Any state could create a “single-payer” system in which the government or its designated agent would make all payments to health care providers without intermediaries.

Health Alliances: Each year, alliances would conduct 10-day “open enrollment” periods during which consumers could choose from among various health plans in the alliance. Consumers would receive “easily understood, useful information” about each of the plans in the alliance, including a “quality performance report” containing such information as cost of premiums, out-of-pocket costs and any restrictions on access to providers and services.

Each alliance would be required to have at least one fee-for-service plan, in which members have the option of consulting any provider.

Information about the financial operations of the alliances would have to be submitted to Labor Department audits.

Rural Areas: Financial incentives would be made available for physicians who practice in underserved areas, including tax credits and special allowances for purchase of medical equipment.

Workers’ Compensation and Auto Insurance: The medical parts of workers’ compensation and automobile insurance would be absorbed into the new health care system.

Medical Education: The federal government would require that at least 50% of medical school graduates be trained in primary care, allowing the goal to be met gradually over five years. The Department of Health and Human Services would oversee the transition by allocating training slots among residency training programs throughout the country.

Guaranteed Benefit Highlights

Here are highlights of President Clinton’s “guaranteed national benefit package” under his health care proposal:

* Hospital services: In-patient bed and board, routine care, laboratory, diagnostic and radiology services and specificed professional services; outpatient services.

* Emergency room: 24-hour-a-day emergency services.

* Doctors and other health professionals: Medical and surgical services, including consultations, delivered by a qualified health professional in hospitals, homes, offices, or institutions.

* Clinical preventive services: Regular physical examinations, along with a series of immunizations and tests, ranging from diphtheria, polio and measles shots for infants to annual flu shots for people 65 and over, along with periodic mammograms and cholesterol checks.

* Mental health and substance abuse: Initially, a limit of 30 visits per year for outpatient psychotherapy, with no limit for counseling on substance abuse. In-patient and residential treatment for up to 30 days for each episode, with a 60-day yearly limit, with a 90-day annual limit by 1998.

* Extended care: In-patient services in a skilled nursing or rehabilitation facility, limited to those recovering from an acute illness or injury who otherwise would be hospitalized, with a maximum of 100 days in each calendar year.

* Outpatient laboratory and diagnostic services: Prescribed laboratory and radiology services for people not in a hospital.

* Outpatient prescription drugs: Drugs, biological products and insulin that are prescribed for use by outpatients, with reasonable rules for refills and amounts to be dispensed.

* Vision and hearing care: Routine eye exams once every two years for adults, diagnosis and treatment for defects in vision, as well as routine hearing tests, with eyeglasses and contact lenses provided for children under 18.

* Preventive dental services for children: For children under 18, treatment for prevention of dental disease and injury, maintenance of dental health and emergency treatment for injuries.

* Exclusions: The package would not provide services that are not medically necessary or appropriate, private duty nursing, cosmetic orthodontia and other cosmetic surgery, hearing aids, eyeglasses and contact lenses for adults, in vitro fertilization services, sex-change surgery and related services, private rooms, custodial car, personal comfort services and supplies.