Critics Say Flaws Riddle Health Care Reform Plan : Legislation: Clinton says he’s willing to bend, but sniping ranges from financing to timing. Some fear quest for perfection could ruin a good thing.

Even though President Clinton already has made significant concessions to critics of his health care reform plan, he has failed to silence many experts and political opponents who see fundamental flaws in the Administration’s approach.

Too much bureaucracy. Too little funding. Not enough help for low-wage workers or small businesses. These are just some of the complaints that continue to echo as Clinton’s proposal begins its journey through Congress.

The President himself bowed to these criticisms in the final draft of his 1,342-page legislation. Saying that he had no “pride of authorship,” he offered to compromise further on all issues except the basic principles: universal coverage and comprehensive benefits for all Americans.

Not all the criticism is coming from opponents of the President’s plan. Even ardent supporters do not see it as flawless.

“In this debate,” said Larry Smedley, executive director of the National Council of Senior Citizens, which favors the plan, “the perfect has too often been the enemy of the good.”

Still, there are some common themes running through much of the discussion that unites health care experts of all ideologies and party affiliations.

* Financing: There is an abiding suspicion among many analysts that the President is underestimating the costs of his plan, that his rosy forecasts of the plan’s economic consequences would not come true.

* Role of government: One of the most hotly debated issues is whether the President’s proposal would sharply increase government regulation of health care.

* Impact on small business: By forcing them to use their limited resources to purchase health insurance, the President’s plan would impose new burdens on those least able to pay. As a result, critics predict that many low-wage jobs would disappear.

* Scope and timing: “Too much, too fast” has become the rallying cry of many who believe that the U.S. economy would suffer unintended consequences because the President wants to completely reorder the nearly $1-trillion health care industry by the end of 1997. Many lawmakers are urging a slower, piecemeal approach.

While many other objections will be heard, these four are widely viewed as the fundamental issues to be debated in Congress. Like most experts, Henry J. Aaron, an economist at the Brookings Institution in Washington, said that he views these as the most crucial items on which compromises must be struck.

Questions about the proposed financing of the President’s plan already have caused the White House to scale back on some of his original commitments. To quiet critics and “prevent a blank check on the Treasury,” for example, Clinton announced two weeks ago that expenditures to subsidize small employers and low-wage workers would be strictly limited.

Yet doubts about the President’s cost and income projections persist.

“The financing is a problem,” observed William Custer, health care economist for the nonpartisan Employee Benefits Research Institute. “If you accept all their numbers, it adds up. But it is hard for many people to accept their assumptions. It’s a very comprehensive bill that’s going to make a lot of changes, and there’s large room for error.”

To fund the reform, the President relies on a complicated combination of revenues and savings.

Revenues include insurance premiums paid by all employers and workers, a 75-cent-a-pack tax increase on cigarettes and a 1% premium surcharge on large employers that decide to be self-insuring. The Administration also projects increased tax revenues from wage increases and corporate profits that otherwise would have been paid to employees as tax-exempt health benefits. Cost savings are to be gleaned from cuts in Medicare and Medicaid.

Aaron said that he thinks the Administration made an honest effort to estimate revenues and savings. But he added that the plan may not restrain rising health care costs as effectively as the President assumes.

Likewise, John Holohan, the Urban Institute’s health care guru, questioned how anyone can accurately anticipate savings to be derived from a massively complicated system that has not yet been created. “We are talking about institutions that do not exist now,” he noted.

Consumer groups are particularly worried that the plan would cost more than average Americans can afford. “What happens if their guesses on the cost of a policy are wrong?” asked Kathy Hurwit, health expert for Citizen Action, a group that advocates national health insurance.

Beyond the Administration’s short-term forecasts, questions have also been raised about the long-term financial burden the government would be undertaking by providing government-subsidized health benefits for early retirees. Many skeptics recall that the early cost estimates of Medicare proved to be far too low.

Administration officials insist that their financing estimates are based on the most conservative, carefully crafted economic assumptions. “They are credible, they are real, and we can defend them to Congress and the country,” said Leon E. Panetta, director of the White House Office of Management and Budget.

To quiet fears that Clinton’s plan would spawn a gigantic bureaucracy, the White House scaled back the regulatory powers of the proposed regional health alliances, which are to negotiate with health care providers over rates and services, and the new National Health Board, which is to regulate the new system. Still, the board would be empowered to set a national limit on health spending, and the alliances would be responsible for overseeing care for the vast majority of Americans.

Economists say that the legislation still would let government set limits on insurance premiums, set fee schedules for doctors in some instances and control prices of drugs used by Medicare recipients. “You no longer have price competition but a very highly regulated system,” observed Custer.

Defenders of the Clinton plan argue that it would be less encrusted by bureaucracy than the current system.

“We do not have a private market system now,” said Linda Lipsen, health care expert for Consumers Union, the nonprofit publisher of Consumer Reports. “The system already is highly bureaucratic. You have more bureaucracy when you have 1,500 insurance companies writing separate plans.”

Likewise, there is no denying the Republican complaint that forcing employers to pay for health insurance would have a negative effect on hiring and wages. Administration officials contend that the proposed government subsidies for low-wage workers and small businesses would mitigate this effect.

At a recent public session with Hillary Rodham Clinton in Kansas City, Mo., Rep. Jan Meyers (R-Kan.) predicted that the President’s plan would cause the loss of 1 million jobs because many employers would rather fire their workers than provide health benefits. “The uninsured will become the unemployed,” Meyers said.

Mrs. Clinton countered that, while some employers are likely to eliminate jobs to pay for health benefits, there is no other way to provide universal coverage. “There is no perfect approach,” she conceded.

Furthermore, Mrs. Clinton asserted that economic forecasters often do not recognize that jobs would be created in companies whose health care costs decline as a result of reform. For firms that currently do not provide health insurance, she estimated that the cost of reform would be less than the effect of a 50-cent-an-hour increase in the minimum wage.

Worries about financing, bureaucracy and employer mandates have contributed to concern about the scope and timing of the Clinton proposal. Although the Administration responded by delaying the implementation date to January, 1998, critics still are not satisfied.

“The Administration’s plan is massively interventionist and would transfer one-seventh of the gross national product into the hands of the federal government,” said Sen. John McCain (R-Ariz.), author of a competing proposal. “It represents an enormous social engineering project that I don’t think we’re ready for.”

Economists agree that scope and timing are crucial issues. Custer noted, for example, that fewer jobs would be lost if the plan were implemented slowly.

A mostly Republican group of House members is trying to persuade the President to approach reform piecemeal.

But a variety of experts question whether reform can realistically be achieved with small steps, especially since a partial solution would generate less saving.