Health Plan Adds Choices, First Lady Says : Medicine: In defending the proposed reforms, she denies they would lead to a government-run system. Insurance firms criticized for policy limitations.

In a spirited defense of President Clinton’s health reform proposal, First Lady Hillary Rodham Clinton said Tuesday that the plan she helped design will increase consumer choice of medical providers and will not lead to a government-run system, as critics claim.

Lavishly praising doctors and nurses, Mrs. Clinton also characterized the reform effort as a battle against the insurance industry, which she blamed for having created “probably the stupidest financing system in the world for health care.”

The First Lady also touted a universal benefits package under the Administration’s plan that would not impose lifetime limits, as most policies now do.

Under the current system, she said, “if you get really sick and you spend whatever that limit is--and some policies have limits as low as $50,000, others have millions--but once you hit that limit, you are not insurable anymore unless you pay a huge, huge increase in your premiums.”

Mrs. Clinton also took aim at insurance companies for barring coverage for people with “pre-existing medical conditions”--a practice that would be prohibited under the President’s plan.

“We’re learning so much about the human gene system, and what genes cause various diseases, that by the turn of the century, every one of us is going to have a pre-existing condition. If we don’t hurry up and get this health care system reformed, none of us is going to be able to afford insurance at the rate we’re going.”

The First Lady’s remarks to an American Legion conference here were the Administration’s staunchest defense yet of a plan that has come under intense attack this month, largely from business groups.

The U.S. Chamber of Commerce said Clinton’s 1,342-page prescription “cannot even be used as a starting point” because “it proposes such a burden of high employer premium contributions, rich benefits and counterproductive regulation. . . . “

Mrs. Clinton said: “Now you’re going to hear a lot, as you already have, about how the government is going to take over health care. That is not the President’s plan at all.

“The President’s plan,” she said, “is designed to simplify our system to get it to the point where we can put doctors and nurses back in charge of this system again, where they can be making the decisions--not insurance company executives or government bureaucrats.”

Mrs. Clinton also urged her audience not to believe a particular TV advertisement sponsored by health insurers that assert Clinton’s plan will reduce consumer choice.

“Well, that’s just flat untrue,” she said. “In fact, we’re going to give you more choice because the choice is not going to be your employer’s, and the choice is not going to be the government’s. The choice is going to be yours to make.”

Under the Clinton plan, government-appointed regional health care alliances will designate various coverage plans--including health maintenance organizations and insurance-company sponsored organizations--from which local residents can choose. In theory, residents would have more choices than they currently enjoy under most employer-sponsored health plans.