Cuts in Health Plan Sought After Big Deficit Prediction : Insurance: White House and reform backers react to budget office estimates. Universal coverage target date may be delayed past 1998.

The Clinton Administration and its Capitol Hill allies began searching Wednesday for ways to trim the cost of the President’s health reform plan, which the Congressional Budget Office says will add $74 billion to the federal deficit by the year 2000.

Possible targets include several costly new programs proposed by Clinton: coverage of long-term care, prescription drugs and mental health treatments, and federal payment of early retirees’ health insurance premiums, Administration and congressional sources said.

The pressure to cut costs could delay the target date for providing all Americans with guaranteed insurance coverage. The President proposed 1998 as the deadline for attaining universal coverage and White House aides have not yet backed away from that target. But they also are not ruling out the possibility of a longer phase-in period.

Also under discussion is the possibility of scaling back a proposal to make all but the largest employers join quasi-public health alliances that would purchase insurance on their behalf. By making participation in the alliances more voluntary, the Administration might be able to refute the CBO’s characterization of them as virtually government “agents,” analysts said.

No decisions have been made and the Administration at this point appears more inclined to work in concert with congressional committees than to redesign the President’s 1,342-page plan by itself, senior Administration officials said.

“We’re not going to rewrite the President’s plan because of the CBO,” said one senior Clinton adviser. “It’s more a process of working it out on the Hill.”

On Capitol Hill, many lawmakers suggested that bringing Clinton’s bill in line with the CBO’s deficit projections would not be difficult. Even CBO Director Robert D. Reischauer agreed that the projected shortfall could be offset.

“There are a number of things that could be done. The differences between the Administration’s numbers and ours are not large relative to the menu of options,” Reischauer told the Senate Finance Committee during a second day of congressional testimony.

On the one hand, the Administration clearly must respond to the CBO’s critique, particularly the issue of deficit reduction.

As the President acknowledged during a White House photo session: “Those are all things that we can work out. Those are relatively minor budgetary considerations and other things that we can work through to get our numbers in harmony with theirs. So I’m not at all concerned.”

On the other hand, any effort to lower the Clinton plan’s total cost probably means scaling back major elements cherished by influential interest groups, including the American Assn. of Retired Persons, labor unions, consumer groups and the auto industry.

Elements of the proposed benefits package that would be guaranteed to every American are being reconsidered because the CBO ruled that the Administration has underestimated the cost of insurance premiums under its plan by 15%. If the CBO is correct, that would mean that the government would wind up paying more than the White House has estimated to provide subsidies for low-income workers and small employers. The additional costs would add $25 billion to the deficit between 1995 and the year 2000, the CBO estimated.

Instead of trimming or eliminating specific benefits, the Administration could reduce outlays for subsidies by lowering the minimum amount that employers must pay on behalf of their workers, analysts said. Clinton’s plan, as written, would require employers to pay 80% of an employee’s premiums, with the worker paying the rest.

“Those things are negotiable,” said one top Administration health adviser. “But if you go down to 50-50, we’d say no. We picked 80-20 because that’s what most people have.”