Budget Office Report Crucial for Health Plan

Is President Clinton’s health care reform plan a sophisticated effort to harness the power of the free market to finance universal coverage? Or is it simply a big dose of Big Government?

The verdict rendered by Congress and the American people could determine whether the Clinton plan lives or dies. And on Tuesday, in what many observers say they believe will be a defining moment in this year’s health care debate, the Congressional Budget Office will render an initial opinion.

Because the nonpartisan CBO is the official arbiter for Congress on such matters, its analysis is being viewed by many experts as the equivalent of a Supreme Court ruling on health care. Even White House officials acknowledge that a favorable CBO report is critical to Administration efforts to advance Clinton’s initiative.

Just last week, three leading business groups, the Business Roundtable, the U.S. Chamber of Commerce and the National Assn. of Manufacturers, stunned the Administration by announcing their opposition to its proposal, and health care analysts say they doubt that the Clinton plan can survive a negative assessment by the CBO.

“This is the Rodney King verdict of health care reform,” said one senior health care staffer in the Senate, describing the importance of the decision.

In its analysis, the CBO will announce whether it believes that the insurance “premium” that all Americans and their employers will be required to pay under the Clinton plan should actually be defined as a new “tax.”

What’s more, the question will be addressed as part of a larger CBO analysis of the costs of the plan. For the most part, Congress will rely on its estimates of the potential price tag of the Clinton reform plan and the size of the premiums needed to cover its costs.

While CBO analysts have used data provided by the Administration, their estimates may vary significantly from the official figures released by the White House.

One recent private analysis conducted by Lewin-VHI, a Fairfax, Va., health care consulting firm, found that the mandatory premiums will have to be 17% higher than the Administration has estimated in order to cover the costs of Clinton’s benefit plan, including proposed subsidies for small businesses and the uninsured.

If the insurance premium is considered a tax, and private-sector health premiums become part of the federal budget, many Americans would regard the Clinton plan as a vast expansion of the federal government’s role in the health care arena--a view the Administration desperately wants to avoid.

“I don’t think we ought to be trapped by what I call the budget wonks, or score-keeping issues,” White House Budget Director Leon E. Panetta said Sunday on ABC-TV’s “This Week With David Brinkley.”

Fearful that its initiative would be seen as a form of socialized medicine, the Administration has sought to design a proposal that would restructure the health care system without appearing to stage a government takeover of private industry.

For instance, it quickly rejected a “single-payer” health system, like those found in Canada and many European countries, that would be operated and financed directly by the government.

Instead, Clinton embraced the concept of “managed competition,” in which quasi-governmental health alliances would collect mandatory premiums from workers and their employers, then buy insurance for them from a handful of private insurers. The idea is to have the alliances act as buying cooperatives, using their size and savvy to bargain for lower rates.

The only portion of the Clinton proposal the Administration believes should show up on the government’s financial records are the federal subsidies, most of which would go to help small businesses, retirees and low-income workers pay their new premiums to the alliances.

Those new subsidies, the Administration says, could be financed from cost savings in the Medicare and Medicaid programs, and from revenues from new taxes on cigarettes and other tobacco products and on corporations that decide not to join the new system.

Eventually, the Administration asserts, the reform measures would yield enough costs savings in Medicare and Medicaid to reduce the federal budget deficit by $58 billion over five years.

“We think we are on the cutting edge of developing good, solid cost estimates,” said Gene Sperling, a White House policy adviser.

But the Administration’s delicate cost structure could come crashing down if the CBO declares that the entire managed-competition system--not just the federal subsidies--should be considered part of the government’s budget.

Republican health care analysts say the bookkeeping change would boost future federal deficits by about $250 billion annually, a whopping increase that would give almost any member of Congress the jitters.

“If CBO rules that the Clinton plan is on-budget, rather than off-budget, you can forget about the Clinton plan,” said one White House economic policy-maker.

“A negative ruling for the Administration would certainly underscore the need for compromise, to say the least,” said Henry Aaron, a health care analyst at the Brookings Institution.

With so much riding on the outcome, the CBO has come under almost constant lobbying from the Administration as well as its Republican critics. “The pressure is more intense right now than anything I have ever seen at CBO,” said Rudy Penner, a former CBO director.

Quietly, health care experts at the White House have been working closely with the CBO, providing the agency with data on the Administration proposal and trying to divine what they can about the CBO’s intentions.

At congressional hearings and public events over the last few weeks, CBO Director Robert Reischauer has been pumped for information and grilled by Republicans who want him to declare that Clinton’s health insurance premium would be a tax.

“This may be the most important decision that Reischauer and the CBO ever make,” said Rep. Dick Armey (R-Tex.).

The White House argues that since the mandatory premium of 7.9% will be paid to private insurers, it is simply a substitute for existing premiums. The money isn’t going into government coffers, and therefore is not a tax, Administration officials insist.

Critics counter that the premiums should be considered payroll taxes because Americans would have no choice about whether to pay them. They add that when Washington discovers it needs more money than anticipated to subsidize universal health care coverage for the poor and uninsured, politicians will certainly look to the premiums paid by middle-class workers as a ready source of funds to pay for the subsidies.

What’s more, if the premium is considered a tax, it would reasonably follow that the entire health alliance system should be considered part of the federal government.

“When you are requiring that all employers provide health insurance, that could be declared a tax,” said John Shiels, vice president of Lewin-VHI. “And if it is a tax, then arguably the plan should be in the federal budget.”

Analysts note that the ruling revolves around semantics and symbolism. But symbols can be powerful, especially if they change the way the nation thinks about an issue such as health care reform.

“Semantic issues carry political weight,” Aaron said. “Depending on how the tax issue comes out from CBO, the spin doctors will be whirling dervishes.”

* CLINTON, COOPER PLANS: President’s health plan is compared to Rep. Jim Cooper’s. A13