For California, an Unhealthy Plan : Relying on Medicare and Medicaid savings has dire implications for states with many on public assistance.

President Clinton’s health-care reform bill promises to revolutionize access to care for millions of uninsured and underinsured Americans. But the voluminous Health Security Act falls short of Clinton’s promise of simple guidelines for health-care reform. It would take a task force of lawyers, insurance agents and management experts to explain the three major sections of the act.

Even without this cadre of experts, the weakness of this legislation is obvious. There is no solid financing mechanism to provide the array of health benefits. The enriched benefit package goes far beyond the benefits of most middle-class Americans who have insurance. The current employer-employee partnership of cost-sharing remains, but the bill requires coverage of all Americans. So where do the dollars for those millions who are uninsured and underinsured come from? Much of it is planned from Medicaid and Medicare cost savings. As reasonable as this may sound, it is hardly practical, given the current low rates of reimbursement, which often do not even cover costs. It also has dire implications for states such as California with large numbers of Medi-Cal (Medicaid) enrollees. If Medi-Cal rates of reimbursement are reduced or do not keep up with inflation, the cost-savings strategy from Medi-Cal could create enormous pressure not only on our state budget, but also on counties such as Los Angeles with large numbers of Medi-Cal enrollees.

Although there are additional funds generated from “sin” taxes on alcohol and cigarettes and a 1% tax on private-sector purchasing pools, or health alliances, these are decreasing sources of revenue. The latter tax should induce most companies to enroll their employees in regional alliances. The net winners would not be consumers, but large corporations that can shift their rising costs of health care to the federal government.

Another major problem in the Clinton proposal is that consumer choices of providers will be curtailed. With the concentration of buying power through the health alliances, there will be a greater concentration of providers. This is because providers will have to assume all the risk of caring for their patients. Now, both providers and insurers share risk for health outcomes. But health alliances will assume no risk, forcing providers into larger delivery systems--mega-HMOs. Over time, traditional fee-for-service providers will be eliminated. The net effect will be a decrease in consumer choice.

And, while the bill authorizes money to speed the coordination of community-based health systems into established health plans, it does not guarantee appropriation of funds. What if Congress decides to pass the law but not provide money for linking our public hospitals and county and community clinics? For Los Angeles, this could undermine a public-health safety net that could not be duplicated in the private sector. Emergency care must still be provided at the county level for all, and this requires adequate support both from the federal and state governments.

These major financing pitfalls, combined with the implications for consumer choice, have shifted significant support away from the bill. Even Sen. Dianne Feinstein (D-Calif.), who is co-sponsoring it, has been at best lukewarm with her endorsement.

Meanwhile, the most popular of the competing plans is the Chafee/Thomas bill, which relies on the current system with no employer mandate. This proposal is leaner in health benefits and allows for restriction of benefits if funding is not available. There are no restrictions based on citizenship or specific limits on co-payments, deductibles or out-of-pocket costs. As in the Clinton proposal, financing relies on the Medicare and Medicaid cost savings as well as caps on tax deductibility of employer-provided health benefits. A more fundamental problem of this bill is that it does not guarantee universal coverage.

Other challenges to the overwritten and underfunded Clinton proposal are springing up. If Clinton is to seriously push forward, he must begin to pare down his bloated benefits package, provide choice of providers to the middle class and develop real means of funding for states like California. Clinton’s package will falter if it does not answer these issues soon. Few can quibble with the need for universal and affordable health care, but we must provide a solid financial base for equitable reform.