U.S. Cautiously Awaits Clinton Health Program

TIMES STAFF WRITER

On Wednesday, in a speech before a joint session of Congress, President Clinton will formally ask the nation to embrace an idea spurned for more than a century: comprehensive, government-regulated medical insurance for every man, woman and child in the land.

Rich and poor, young and old, sick and well, the employed and the jobless--all will be insured if Congress accepts the President's approach. With the plan, health care could become a right, not a privilege.

Yet in recent weeks, as the broad outlines of Clinton's program have leaked out, many Americans could be pardoned for beginning to wonder what in the world is in it for them. After all, by the Administration's own admission, the plan will bring new taxes and government regulations, brigades of newly commissioned bureaucrats and unparalleled change and confusion.

For the vast majority who are now insured, Clinton's plan promises long-term medical security even for those who lose their jobs. But it could also mean higher out-of-pocket costs, the need to select a new doctor and, in effect, some rationing of health care.

For the 37 million Americans without insurance, Clinton's program offers a generous package of benefits at the going rate without regard to individuals' medical history. But young and healthy people will be called on to buy insurance whether they want it or not.

For employers whose spending for employee health insurance is out of control, the plan promises to put on the brakes. But employers that spend little or nothing for this purpose will face a new obligation to offer health insurance to all workers.

And as for the $900-billion-a-year health care industry, it faces less freedom and more regimentation.

Doctors' decisions about how to treat individual patients will be tightly hedged--first by national guidelines and the decisions of distant bureaucrats, then by considerations of cost and economics. Many insurers, unable to adapt, are likely to be forced out of business.

Nor are the alternatives to Clinton's approach free of blemishes.

The Canadian-style system favored by some liberal Democrats would bring even more government bureaucracy and control. The free-market solutions put forth by Republicans and conservative Democrats are not certain to control costs.

Under these circumstances, why is there such a rush to "reform" the present system at all? Why is Clinton determined to push his health plan at a time when his political underpinnings are already shaky? Why would Congress, itself living on borrowed time as far as most voters are concerned, consider approving one of the most far-reaching social changes of our time?

The answer is that the system is collapsing. It has been collapsing for a long time.

THE PAST: A Heavy Burden

The present system, born during World War II when companies began offering health insurance as a lure for scarce defense workers, is a product of a simpler time, a dinosaur increasingly hard-pressed to survive.

Fifty years ago the American population was younger. Scratching its way up from the Great Depression, its expectations were lower. Medical science was almost primitive by today's standards: Antibiotics and other wonder drugs did not exist; babies still died of whooping cough and diphtheria; simple pneumonia often carried away the elderly. There were no CAT scans or MRIs, no coronary bypass operations or cataract surgery, no liver transplants or hip joint replacements.

When President Franklin D. Roosevelt offered legislation that would have established compulsory national health insurance financed by a payroll tax, the plan--like many others that followed it--was ridiculed to death by the medical, political and business Establishments.

"It was viewed as a radical concept in the extreme," recalls Rep. John D. Dingell (D-Mich.), whose lawmaker father co-authored the bill. "It was called socialized medicine. . . . They called Roosevelt a traitor to his class."

Presidents Harry S. Truman, Lyndon B. Johnson, Richard Nixon and Jimmy Carter proposed changes with only mixed success. The American health care system, shaped by job-based medical insurance and the fee-for-service payment system, became politically sacred.

In recent years, however, the system has come under mounting stress. It has been battered by waste and inefficiency but even more by changes in population and pricing and by an outpouring of scientific progress that threatens to bankrupt us with blessings.

Rising health care costs affect virtually every aspect of life--forcing firms to lay off workers or curtail benefits, eroding workers' pay increases, threatening the position of U.S. industries in the global marketplace.

Meanwhile, the growing strain of caring for the poor has degraded the quality and unbalanced the budgets of public hospitals in cities all over the country.

"Health care costs have been rising at twice the rate of inflation for the last 15 years, and a growing number of Americans are losing their access to health care as a result," says health economist William Custer of the Washington-based Employee Benefits Research Institute. "That leads to greater illness and more death."

Nor are such problems any longer confined to the unfortunate or the improvident. As major corporations have cut their work forces and industries have undergone restructuring, the pain has spread.

That, observes Harvard University health specialist Robert Blendon, is why practical politicians in Washington and elsewhere have decided to grasp the nettle of health care reform. "Suddenly," Blendon says, "the problems of the poor are becoming the problems of the middle class, and that made the difference."

Still ahead is what will surely rank among the most intense legislative struggles of the 20th Century. But by the end of next year, Congress is likely to enact a program that--at a minimum--will guarantee health insurance to every citizen and eliminate the most costly inefficiencies in the current system.

Neither Clinton's blueprint nor any other will be adopted in its entirety. What emerges will be a compromise involving thousands of specific decisions that leave no one untouched.

The stakes are high for everyone, but for no one more than the President, who was elected on a pledge to reform health care.

Whatever emerges, the real question will be not whether it embodies everybody's idea of a perfect program but how well it balances its benefits with its unavoidable pain.

As the debate begins this week, it is important to understand the nature of the problem, the interests of those involved and the combinations of costs and benefits that come wrapped together with each contending feature and proposal.

One thing is clear: Messy and unwelcome as the process will surely be, the question is no longer whether to change the present health care system. The only remaining question is how.

For if Congress leaves the system untouched, change will be left in the hands of the private sector interests and the states.

RISING COSTS: The Heart of the Problem

Almost everyone has some quarrel with the current health care system.

Insured workers complain about rising deductibles and declining benefits. The uninsured say premiums are too high. The elderly bemoan drug prices. Business says health insurance costs are eating into profits. Doctors say insurers are intruding in the physician-patient relationship.

Yet if the complaints differ, all grow from the same nagging problem: U.S. health care costs are rising at twice the overall inflation rate.

Thirty years ago, health care absorbed no more than 5% of America's economic resources. By 1991 that figure had mounted to 13%--about twice as much as in West Germany and Japan--and economists predict that it will balloon to nearly 20% by the year 2000 unless something is done.

Every type of care is growing more costly. The Congressional Budget Office estimates that hospitals cost seven times as much as in 1961 and that physicians charge six times as much. The price of some prescription drugs has soared as much as 1000% in just the last decade.

To be sure, these expenditures have financed a phenomenal array of high-tech, life-saving breakthroughs. Doctors can now breathe life into the undeveloped lungs of a premature infant and provide new arteries to a heart attack victim.

But in general, Americans are no healthier than those in other industrialized countries that spend much less for health care. They have a shorter average life expectancy than Canadians and most Western Europeans. Many common diseases, such as high blood pressure, are not treated adequately. Many children do not get vaccinations and other basic care that would assure them a long, healthy life.

Without a doubt, much of the money spent on health care in the United States is simply wasted. Of the $817 billion that Americans invested in health care in 1992, Consumers Union estimates that $200 billion went for overpriced, useless or even harmful tests and treatments and needless administrative costs.

Economists say that U.S. health costs are out of control because spending for medical care is not governed by the same market forces that control the purchase of other commodities and services. For example:

* Doctors and hospitals do not advertise their fees.

* Private health insurance, Medicare and Medicaid have freed most Americans from the responsibility of paying medical bills out of their own pockets.

* Patients do not have the expertise to judge medical care quality.

As a result, most people do not seek the most economical care. The system offers incentives to seek as much treatment as possible, no matter the cost or need.

Some of the nation's health care spending is being fueled by forces that cannot--or should not--be curtailed.

Not only is the march of technology expensive in its own right, but it also keeps people alive longer, and they may later suffer another expensive illness. The share of the population over age 65 will reach 20% by the year 2030, and that can only intensify demand for the most expensive, life-sustaining care. Of all Medicare dollars spent on the elderly, 30% are spent in the final three months of life.

In addition, the medical system is being asked to bear the cost of many intractable community problems: AIDS, homelessness and street violence. It is estimated that the treatment of shooting victims, most of them uninsured, costs hospital emergency rooms an average of $12,000 each.

But some inflationary trends in medical spending are not beyond fixing.

While technology saves lives, it is also overused. When doctors and hospitals acquire expensive, high-tech equipment, they pay for it by finding as many patients as possible to use it.

In many cities, for example, there are now too many magnetic resonance imaging scans, or MRIs, the expensive machines that produce detailed pictures of organs inside the body. Harvard internist Steffie Woolhandler says it is not unusual for doctors to order a $1,000 MRI scan for a sprained knee.

"Technology, we can afford," Woolhandler says. "What we cannot afford is using an MRI machine on everyone who comes through the door because the doctor is trying to pay off the mortgage."

Unrestrained spending has also been fueled by overspecialization. By their own admission, doctors consult specialists and order tests simply to avoid being accused of malpractice if something goes wrong. Medical consumers compound the problem: Confronted by an ailment, many turn immediately to an expensive specialist.

Nor can profiteering be ruled out as a source of the problem. A study by Families USA, a consumer lobbying organization, found that the price tag on the top 20 prescription drugs jumped 82% between 1985 and 1991, almost four times as fast as the general inflation rate.

The government has been responsible for adding to the cost of privately funded care. Recent cuts in Medicare and Medicaid have left those programs unable to cover the full cost of treating eligible patients. To make up the difference, doctors and hospitals raise fees charged to other patients, a practice known as "cost-shifting."

And because both the government and private insurers resist paying the increased costs, billing procedures for doctors and hospitals have become incredibly complex--and expensive. Billing departments in some big public hospitals now employ as many as 300 people, whose job it is to penetrate the intricate labyrinth of public and private insurance requirements.

CONSEQUENCES: Nobody Escapes the Impact

By now, it is a well-worn statistic: When you buy an American car, an average of $1,100 of the cost can be attributed to health insurance premiums paid by the auto companies for their workers and pensioners.

Skyrocketing health care costs threaten American competitiveness in the world market. Many American corporations wonder how they can compete with Japanese and German firms that pay so much less for health insurance.

But corporations are not the only losers. U.S. workers are the ones who ultimately pay for soaring health care costs, which have stymied wage growth in recent years.

Employer spending on health benefits has far outpaced the increase in wages and other benefits. The average annual health insurance premium rose from $1,645 in 1984 to $3,968 last year, up 141%. During the same period, the average annual wage rose from $18,350 to about $25,000, or 35%.

Workers have also been called upon to endure other unpleasant consequences of rising health care costs--including higher deductibles and co-payments, diminishing benefits and, in the worst cases, lost jobs or termination of health insurance.

The uninsured are typically haunted by the fear of costly illness. Routine ailments go largely untreated. When they get seriously ill, they must seek the crowded emergency rooms of public hospitals.

In the 1980s, loss of health benefits became the leading cause of personal bankruptcy. And since the uninsured usually cannot afford the high costs of emergency treatment, the nation's hospitals saw their bad debts rise from $6.5 billion in 1980 to $13.4 billion in 1991.

Employers often choose to slash their health care costs at the expense of their workers. The Congressional Budget Office notes that many firms have shifted janitors, gardeners and cafeteria workers from their payrolls to the status of independent contractors, where they usually receive no health benefits.

It is primarily low-wage workers who are forced to get along without insurance. In 1991, more than 60% of the uninsured were in families headed by a full-time worker. Although poor, they were not poor enough to qualify for Medicaid.

A growing number of Americans tell horror stories about losing their health insurance: cancer victims whose policies were canceled as soon as their illness was diagnosed; divorced women whose coverage ended the day their husband walked out; small business owners whose insurance rates became unaffordable after one employee suffered a catastrophic illness.

Retirees are particularly vulnerable. In 1988, health benefits for retirees imposed a liability of as much as $145 billion on American business--a cost that threatens the future of some companies. Many pensioners have had their coverage cut. Others, such as those who once worked for Unisys Corp., have had it canceled.

The impact of rising health care costs on government and taxes also cannot be overlooked. In fact, the growth in the cost of federal health programs is a primary reason that the federal deficit is projected to swell to $500 billion by the year 2002.

State governments have the same problem. "Every state government in America is being financially crushed by the rising costs of providing health care," says Tennessee Gov. Ned McWherter.

No wonder so many Americans feel insecure about the future of health care. No one has escaped the impact of this crisis.

RESPONSES: Can Medicine Heal Itself?

Even before Clinton decided to intervene, the U.S. health care system was trying to heal itself.

In an effort to control costs, many corporations are turning away from old-fashioned indemnity health insurance plans and open-ended reimbursement to a more cost-effective approach known as "managed care." As a result, the archetype of American medicine--the solo-practitioner doctor--is now an increasingly endangered species.

Likewise, leading pharmaceutical companies are voluntarily working to curb drug prices. And legislatures in many states are drafting laws to make health care systems more efficient, reduce costs and to provide affordable insurance.

Already there are signs that these voluntary efforts could trim a few percentage points off the annual inflation rate for health care, even without a massive overhaul ordered by Congress. For the first time in 20 years, medical inflation so far this year is running at an annual rate of less than 6%.

But most health care experts say these innovations alone cannot produce the enormous long-term savings needed.

Uwe E. Reinhardt, a political economist at Princeton University, says the industry is on the right path, but legislation is needed to hasten progress toward a more cost-conscious medical system. "It's like kicking a ball that's already moving in a certain direction," he says. "It will move faster."

Although managed care plans are common in California, the health maintenance organizations--or HMOs--that run them are still viewed with suspicion in many parts of the nation. As consumers are discovering, the plans differ widely. Some require patients to get care at a single facility where cost controls are strict; some are nothing more than networks of independent doctors who offer a discount to plan members.

Like employers and others directly affected by high health care costs, many governors have also grown weary waiting for Washington to reform the system and have taken it into their own hands. So far this year, 40 legislatures have considered reform proposals, and Florida, Maryland, Washington, Oregon, New York, New Jersey and Vermont have enacted significant modifications.

When Clinton's health care advisers undertook the task of reform, they sought to devise a plan that would capitalize on these changes in state laws and on trends in the industry itself. In fact, it appears the President is counting on savings derived from these steps to help him pay for a comprehensive reform.

ALTERNATIVES: No Quick Fix

No one doubts that the United States has the resources to provide everyone with good health care. As Princeton sociologist Paul Starr wrote: "The more than 13% of GNP we spend on health care should be more than enough to provide universal coverage and high-quality care."

But because the health care industry is so big and inflationary forces are so deeply ingrained, there are no simple solutions that will accomplish the twin goals of lower costs and coverage for all.

For years, liberal Democrats have argued that the only sure solution is to put the health insurance system directly in the hands of the government.

Their model is the Canadian system, known as "single payer" because the government reimburses all physicians for treating patients. While a Canadian-style system would provide Americans with access to doctors of their choice, its critics note that Canada strictly rations the availability of many popular high-tech procedures, such as MRIs.

On the other ideological extreme, conservative Republicans favor a free-market approach. Like ex-President George Bush, many GOP members advocate providing lower-income families with tax breaks for the purchase of health insurance.

Republicans argue that since the United States has an excellent medical system, the government should only tinker with the funding mechanism, not reinvent it. While their proposal goes a long way toward guaranteeing care for all, it would do little to curb costs directly.

The political middle ground is littered with many other alternatives.

A few years ago, most serious Democratic proposals sought to tear down the web of regulation and practice that makes health insurance unavailable or unaffordable for employees of small companies or high-risk groups. Insurance industry opposition smothered these plans.

Another once-popular Democratic idea, known as "pay or play," would have required all employers either to provide health insurance coverage for their workers or to pay into a federal fund that would insure all other people. Small employers helped to defeat it.

During last year's presidential campaign, Clinton borrowed from the so-called managed competition model favored by conservative Democrats. Built around managed care, managed competition relies on nonprofit, regional agencies to act as clearinghouses for uninsured individuals seeking health insurance at the lowest group rates. As President, Clinton added elements of government control that go far beyond the original concept.

Clinton begins with an "employer mandate," or a requirement that all employers pay at least 80% of the average health insurance premium for their workers. He also outlines a generous standard benefit package, including vision care, hearing tests and preventive dentistry for children.

While his plan gives states considerable flexibility to design their own systems, it would set up so-called "health purchasing alliances" through which most people would buy insurance. Each alliance would offer a choice of private health care plans.

A seven-member National Health Board would set budgets for the regional alliances, and the total of those budgets would be the maximum national spending for care. To further control costs, insurance premium increases would be strictly limited.

Offering security and good benefits, the Clinton plan has potential voter appeal. Yet because it seeks to strike a political balance between the big government and free-market solutions, it may fail to satisfy any of the entrenched viewpoints in Congress.

THE POLITICS: Read My Lips

It figures to be Clinton's greatest political test.

Republicans have already attacked key elements of the President's plan. Top Democrats are nervous about the political risks. While all sides express some willingness to compromise, no one wants to retreat too far from long-held positions.

In addition, powerful interest groups, such as the American Medical Assn., the American Hospital Assn. and the American Assn. of Retired Persons, will try to block anything that might endanger what they have come to expect.

Clinton must also overcome a pervasive voter fear of higher taxes and skepticism about government's ability to do anything right.

His advisers recognize that his political fortunes may hinge on piecing together a consensus. Stanley Greenberg, the President's pollster, says health care reform is to Clinton what "read my lips--no new taxes" was to Bush: a commitment that can be broken only at grave political risk.

But lacking the unqualified backing of Democrats, Clinton cannot enact health care reform without the help of Republicans. In the House, at least 89 Democrats are wedded to the idea of a single-payer system. In the Senate, there are not enough Democrats to block a GOP filibuster.

Some Republicans say they are willing to compromise. Sen. John H. Chafee of Rhode Island, the leading Republican on health care issues, has described Clinton's plan as "a good basis on which to proceed."

But for their support, Republicans--as well as many Democrats--are demanding concessions that would destroy the plan's already fragile financing.

Clinton banks on a number of highly controversial sources of revenue, including savings from Medicare cuts, mandated payments by all employers and workers, higher taxes on cigarettes and liquor and the elimination of the tax deduction for employer-provided health benefits beyond the standard package.

Republicans strongly oppose limiting health care spending and requiring all employers to pay toward their workers' health insurance. The National Federation of Independent Business, representing small business, claims that these two measures would put more than 7.5 million jobs at risk. Many liberal Democrats, as well as the AARP, are upset about cuts in Medicare funding. The insurance industry has declared war on the idea of premium caps, and the tobacco industry will fight higher cigarette taxes.

To cut through the thicket of competing interests, Clinton is depending on a favorable reaction from the general public. Harvard's Blendon, who has studied public attitudes toward health care, predicts that the President's plan will be popular, at least initially.

"He's opening up the debate with what Americans want to hear sitting in their living rooms," Blendon said. "The average American is going to say, 'Gee, look at this list of benefits.' "

But Blendon also recognizes the apparent lack of adequate funding and opposition to many of the funding sources may eventually sour many first impressions.

Clinton is also depending for support on big companies, such as the auto makers, who bear the biggest expense under today's system; labor unions, whose wage increases have been eroded by inflationary health care costs, and some consumer groups, whose members suffer from existing inequities.

The President's lieutenants have created a "war room" in the Old Executive Office Building next to the White House, where they will coordinate their communications strategy much as they did in Clinton's successful presidential campaign. The room is known as the "intensive care unit."

Hillary Rodham Clinton, who oversaw the development of the plan for her husband, will make appearances all over the country to appeal for support. The Democratic National Committee is running its own campaign.

CONCLUSION: The Trade-Offs

Left largely to its own devices, the U.S. health care system is lurching through a period of substantial change. Gone already are many of the traditional notions about health care, such as the lifetime bond between patient and family doctor.

But are Americans prepared to embrace a streamlined, 21st-Century medical system that weighs their personal health against the costs to society? At its most basic level, that's what the coming national debate over health reform will be all about.

For some, the outcome could literally be a matter of life and death. Some people could live longer because of access to better care while cost restraints could deny vital supports to others.

For some, the consequences will be mainly economic. Some consumers will lose health care benefits while others gain them. Some workers will lose jobs while others are hired. Some doctors will earn more money while most earn less.

While trimming health care costs would be a boon to U.S. industry, economists predict it could also mean slower growth, fewer jobs and smaller profit margins in the short term.

In the first two years, it is estimated that comprehensive health care reform could shave between 0.2 and 0.5 percentage points from the nation's economic growth rate and cost as many as 750,000 existing or potential jobs.

Incomes in the health care industry will start to slide, and there will probably be fewer $300,000-a-year doctors.

But demand for health care will increase once 37 million uninsured people are given better access to doctors and hospitals. That could ultimately boost health care employment, particularly for lower-wage workers, such as nurses and technicians.

Seldom does Washington undertake a task with such conflicting and far-reaching consequences. Congress will be called upon to balance fairness with necessity, individual rights with national needs, special interests with the common good. The outcome will not only be a measure of Clinton's presidency, but it will also test the fortitude of a Congress that has been accused of shrinking from politically risky decisions.

As the debate commences, the news media will be engulfed in conflicting rhetoric about change. Yet the real issue is not change versus the status quo. American health care is already changing. The question is whether the government will set the course.

The Uninsured

Nearly a third of L.A. County residents under age 65 have no health insurance. They stand to benefit hugely from President Clinton's plan, which is expected to provide health insurance to all Americans. Here is a profile of who the uninsured are locally and across the nation:

HOW MANY ARE UNINSURED

Insured Uninsured NATION 83% 17% CALIFORNIA 78% 22% L.A. COUNTY 70% 30% ORANGE COUNTY 80% 20%

Nationwide, more than 36 million people, or 16.6% of the non-elderly population, are without insurance. (In millions) 1988: 33.7 1989: 34.4 1990: 35.8 1991: 36.2 Source: Employee Benefit Research Institute

ACROSS THE NATION

10% come from families earning more than $50,000 a year More than $50,000: 10% $20,000 to $50,000 income: 35% Less than $20,000 income: 55% Fewer than 1 in 5 are unemployed Employed or children: 83% Unemployed adults: 17% More than 2 in 5 are minorities Anglo: 58% Latino: 19% Black: 18% Other: 5% Nearly half work for small firms or are self-employed Work for firms employing fewer than 25: 35% 25-99 workers: 16% 100-999 workers: 15% 1,000 or more: 21% Self employed: 13% A majority are males Male: 56% Female: 44% Vast majority live in or near cities Urban: 78% Rural: 22% Sources: Employee Benefits Research Institute, March, 1992, figures; Associated Press

FULL-TIME VS. PART-TIME

Of those workers who are uninsured, ages 18 to 64, 51% in Los Angeles County work full time all year. L.A. County uninsured workers Full-time, all year: 51% Full-time, part year: 26% Part-time: 23% California uninsured workers Full-time, all year: 45% Full-time, part year: 29% Part-time: 26% Definitions: Full-time, all year: Works more than 35 hours per week and more than 50 weeks per year. Full-time, part year: Works more than 35 hours per week but less than 50 weeks per year. Part-time: Works less than 35 hours per week. *

HOSPITAL COSTS

Hospitals' real costs for uncompensated care (In billions of dollars): '91: $13.4 Source: Congressional Budget Office calculations based on data from American Hospital Assn.

Times staff writers David Lauter and Karen Tumulty contributed to this story.

* RELATED STORY: In Business

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