Eliminating Free Riders Is Key to Clinton Health Plan : Reform: Small businesses and the healthy who feel no need for doctors or insurance are among the major targets.

Underlying the voluminous document that describes the Clinton Administration’s health care reform proposal is a single and powerful battle cry--”no more free lunch.”

In the view of Administration planners, eliminating free riders is key to reforming the nation’s health care system to bring its costs under control and eliminate unfairness. The targets are small businesses that do not provide health insurance; healthy individuals who believe they do not need insurance and doctors, and specialty clinics and insurance companies that have found small but profitable niches in odd corners of the system.

Not surprisingly, those groups have already declared war on the plan, vowing to fight efforts to force them into a unified system.

The battle involves billions of dollars. But it also involves a fundamental difference of outlook.

On one side stand Administration officials who believe that their system will increase fairness and efficiency. On the other stand individuals who believe that their choice not to pay for insurance or to conduct their businesses without government mandates are a matter of fundamental freedom.

That difference portends a bitter clash of principles as the health care plan moves through Congress over the next several months.

President Clinton and First Lady Hillary Rodham Clinton, who led the task force that developed the plan, make their position clear in virtually every speech either of them give on health care. One of the central problems with the current system is that it “doesn’t stress or even require responsibility from all of its citizens,” Mrs. Clinton said in a speech Friday at George Washington University.

“Right now we have a lot of free riders,” she said. “You can walk down the main street in any town in any of your states and you can go to the business that is providing insurance in whatever degree it’s providing it and next door the one that isn’t.

“But when the employees of the second store get sick, the ambulance comes for them, the hospital takes them in, the doctor comes to their bedside, the nurse provides the therapy that’s required and then they walk out of the hospital. And maybe they can pay something and maybe they leave a big bill that they get sued over.

“But the bottom line is that there’s more uncompensated care in that hospital which then gets shifted to the rest of us who pay and then gets picked up by the public sector in some way as well.

“It’s just fundamentally unfair that some businesses have borne the burden for the health care system and others haven’t,” she concluded.

To address the inequities, the American Health Security Act that President Clinton plans to unveil on Sept. 22 would require all businesses to provide insurance for their workers. Self-employed persons would also be required to purchase insurance for themselves.

Small businesses and low-wage individuals would receive government subsidies to make insurance more affordable and the government would, by law, make changes in the way insurance is sold in an effort to lower the cost of insurance to small companies. But there is no question that companies that currently pay nothing for insurance would, under Clinton’s plan, have to pay something.

Not surprisingly, organizations representing small businesses have become the center of opposition to Clinton’s plan. Leaders of groups such as the National Federation of Independent Businesses argue that the plan would destroy jobs by raising the cost of doing business.

The Administration has tried to defuse that opposition by proposing subsidy plans that would make insurance less expensive for small businesses. But so far, the small business groups have not budged, and spokesmen for those groups have made clear that while the amount of extra cost is important, so, too, is the principle of what Clinton is proposing.

Businesses simply do not want the government telling them what they must do, representatives of business groups say.

An alternative plan advocated by some moderate Republicans, particularly in the Senate, would take a somewhat different approach, putting no mandate on business, but requiring all individuals to purchase insurance to cover themselves if their employer chooses not to do so.

That plan gathers more business support but has also come in for attack from conservatives who argue that it infringes on individual freedom just as much as Clinton’s plan would do.

Indeed, among the 37 million Americans who currently have no insurance, many are healthy people who have decided to go without insurance because they do not think they need it.

From an individual standpoint, that decision may well make economic sense. A healthy, young, single person without children has relatively little likelihood of developing a serious illness and can, perhaps, afford the risk that--if a sudden illness strikes--he or she would find a way to pay for the needed care.

Under Clinton’s plan, those people no longer would have the option of saving the cost of insurance and spending the money on something else.

There are two other groups that many in the Administration see as “free riders.” They are medical specialists who provide only high-priced care, such as cosmetic surgeons or doctors who restrict their practices only to residents of wealthy areas, without contributing toward the primary health care needs of most Americans, and insurers that specialize in providing coverage only to healthy people--”cherry picking” in the jargon of the trade.

The Administration’s plan would address the specialists by expanding payments to doctors who offer primary and preventive health care and by imposing an overall cap on medical expenses, effectively limiting payments for specialty care.

The reform package also would curtail “cherry picking,” forcing insurers essentially to take all comers at the same, broadly applied “community rate” rather than charge different rates for different types of people.

Those proposed changes already have become the center of controversy even before the plan has been formally introduced.

While some large insurance companies, which likely would prosper under the new system, have been amenable to it, smaller companies that would lose business--or perhaps go out of business--have begun organizing against it. One insurance company group has begun airing television advertisements warning that the Clinton plan would restrict individuals’ choice of insurance.