President’s Health Plan vs. Rival Backed by Business : Legislation: Rep. Cooper draws attention with his alternative to the Administration bill. But many are unclear on how the two plans differ.

Propelled into the spotlight by powerful interest groups, Rep. Jim Cooper’s formula for national health care reform is now being hailed as the leading alternative to President Clinton’s proposal for improving the way Americans receive medical treatment.

Proponents praise it as the sensible middle ground between radical tinkering and doing nothing. Critics deride it as a business-oriented scheme to shift health care costs onto middle-class workers and predict that its appeal will evaporate under closer scrutiny.

But the overriding fact about the Cooper plan--written by the Tennessee Democrat and Rep. Fred Grandy (R-Iowa)--is that almost no one outside the health care industry has more than the haziest impression of what it would do and how it would do it.

Would the plan, for example, offer greater freedom of choice for consumers? Would it assure universal coverage? Would it avoid large bureaucracies making what ultimately are highly personal decisions about the medical care of thousands of individuals and families?

It is easier to tell what the Cooper plan would not do: Unlike the Clinton formula, it would not require businesses to provide health benefits for their workers, and it would not impose government cost controls.

It was for these reasons that the Business Roundtable, the U.S. Chamber of Commerce and the National Assn. of Manufacturers came out against the Clinton plan last week. The Roundtable, composed of the heads of 225 large corporations, and the Chamber of Commerce endorsed the Cooper plan, the Roundtable calling it a good “starting point” for the health reform debate.

The Cooper bill, said Sen. Phil Gramm (R-Tex.), one of the President’s chief conservative detractors, is “Clinton with a smile.” Not so, said Sen. Thomas A. Daschle (D-S.D.), a Clinton ally who derides the Cooper measure as “health care that is barely there.”

Both plans spring from the same premise: that consumers, by banding together in large groups, can gain more clout in the health care marketplace and force quality up and prices down.

To that end they both would create huge cooperatives that would purchase health care--whether from health maintenance organizations, more informal networks of doctors or doctors working on a traditional fee-for-service basis--for most Americans.

Here is how Cooper’s bill diverges from the Clinton plan:

Who Is Covered?

Because it does not require anyone to buy health insurance, Cooper’s bill falls short of what the President has said is his bottom line: guaranteed coverage for every American.

The President’s reasons for wanting to bring everyone into the system are more than humanitarian. Many health economists argue that it is impossible to bring costs under control until everyone is covered by the same system, because the uninsured will continue to receive care at the expense of everyone else. In principle, it is like trying to put a family on a budget while leaving one relative a credit card to use without limits.

Cooper insists that the difference between his approach and the President’s is semantic. Once the obstacles that prevent many Americans from affording insurance are removed, Cooper says, “there is no reason why everyone won’t be covered. If there are some, we will soon know who they are and be able to cover them.”

What Benefits Do They Get?

Clinton’s plan spells out a list of guaranteed health benefits that the White House says are similar to those offered by most major corporations. Critics warn that Congress would be tempted to embellish Clinton’s formula.

Cooper claims his approach will take the politics out of the process by establishing a commission to decide which benefits would be covered in all health insurance plans. Congress would be allowed to accept or reject the package, but not to amend it.

Who Would Have to Join Health Purchasing Groups?

Although Cooper would not require all employers to provide health benefits for their workers, those that do and have 100 or fewer employees--in other words, those that employ about half the U.S. labor force--would have to buy benefits through a state-chartered alliance.

Conservatives say they are worried that forcing businesses into purchasing alliances would dampen competition. Many firms, they say, would do better if left to provide their own health coverage--as many large companies do now and would continue to do under either the Cooper or Clinton plans.

Clinton would force even more companies into government-organized purchasing groups. His proposal calls for those firms with fewer than 1,000 workers--or those employing more than 70% of the work force--to purchase coverage through alliances.

How Are Costs Contained?

Both plans say competition will do most of the work in keeping health costs under control, but both add other incentives.

Clinton’s plan would put limits on health premiums--a thinly disguised price-control mechanism. Critics point to history as evidence that this is bound to fail.

Cooper’s plan turns to the tax code, allowing employers to deduct from their taxable income only the cost of the cheapest plan in their area. Employers could offer more, but the incremental costs would not be deductible.

He says it is wrong for the taxpayer to continue subsidizing fully loaded “Cadillac” health plans when 37 million Americans do not have even a stripped-down Chevy.

But Rep. Henry A. Waxman (D-Los Angeles) says the Cooper proposal would encourage employers to offer their workers only bare-bones coverage. “People are going to be losing what they already have,” he said.

Businesses also object to losing some of their tax breaks.

At the same time, Cooper’s plan would break new ground by allowing individuals to deduct their full share of the cost of the cheapest health-care option offered by their alliance.

What Happens to Medicare and Medicaid?

Cooper and Clinton would leave Medicare, the government program that finances health care for the elderly, intact. But Medicaid, the joint federal-state program for the poor, would be changed.

Medicaid’s acute-care benefits would disappear under both plans, which would integrate the poor into the same purchasing cooperatives that would serve other Americans.

Clinton’s plan would leave Medicaid’s long-term care unchanged, with the federal government and the states roughly splitting the bill. Cooper’s plan, by contrast, would gradually put the entire burden for long-term care on the states.

This provision in the Cooper plan is generating deep concern among the nation’s governors. Gov. Pete Wilson warns that California, which now pays about half of Medicaid’s $2.4 billion a year in long-term care costs, would face “a bottomless pit.”

What About Those Who Cannot Afford Coverage?

The Clinton plan, while it would require businesses to spend up to 7.9% of their payrolls on health care for their workers, would provide subsidies for those businesses with fewer than 75 workers and average wages of less than $24,000. Those subsidies would reduce the effective cost to as low as 3.5% of payroll for firms with fewer than 25 employees who earned less than $12,000.

Clinton also would require most individuals to pay about 20% of their health care costs, up to 3.9% of their income. But those earning less than 150% of the poverty level would be eligible for subsidies that, for the very poorest, would reduce their contribution to nothing.

The federal government defines a family of four earning less than $14,764 as living in poverty; thus, those earning $22,146 or less would be eligible for subsidies.

Cooper targets all subsidies toward individuals, with those earning up to 200% of the poverty level eligible.