Health Alliance Detractors Gaining the Upper Hand : Insurance: Their fears of gigantic bureaucracies find growing support. Rejection of purchasing network concept could doom Clinton’s plan.
To President Clinton, the gigantic purchasing alliances that constitute a central pillar of his proposed health reform plan would give consumers wider choices of health care plans and greater bargaining power versus hospitals and doctors--plus a welcome guarantee that health insurers could not reject them.
To critics, the alliances are simply mammoth bureaucracies that would strangle competition, deny individual businesses the right to tailor health benefits to their own workers’ needs and force individuals to give up their family doctors.
Which of these visions comes closer to the probable reality?
Unfortunately for Clinton, his critics are making considerable headway in convincing Congress of the negative view. And if their efforts ultimately succeed, it will be bad news for the President: Without health purchasing alliances, his entire plan could come tumbling down.
Clinton is counting on the alliances to hold down runaway medical costs. And if costs cannot be contained, his reform plan could quickly turn into another ruinously expensive government entitlement program run by an entrenched federal bureaucracy.
“You are looking at the beginning of a monstrous and potentially powerful agency . . . a massive bureaucracy erected to hide a government program,” said Rep. Jim McDermott (D-Wash.). “It’s not at all clear who they will answer to, and I fear they will be accountable to no one.”
More than that, the alliances offend some of the most powerful special interests in the health care debate.
Insurance companies fear the alliances would squeeze them out of most of their medical business. Big corporations argue that, having only recently gained a modicum of control of their employees’ health costs, they would lose that control to the alliances.
If Congress passes the President’s proposal, “we’re out of the benefits business--we lose complete control of the system and it’s all up to the government,” said Dan Spiller, manager of benefit plans for the Mead Corp. “That’s completely unacceptable.”
These mysterious alliances, in simplest terms, are not quite so exotic as they may seem. The basic principle they rest on is one that big businesses, chain stores and discount merchandisers have followed for decades: centralize your purchasing to take advantage of economies of scale.
A supermarket chain that orders potatoes by the ton and cornflakes by the boxcar can negotiate better prices than the old mom-and-pop groceries that buy by the case.
Similarly, a health care alliance representing several thousand consumers can theoretically drive a sharper bargain with networks of health care providers than individual patients could.
Indeed, large companies that provide health care benefits for their employees are already operating just like Clinton’s proposed alliances. They now approach hospitals, groups of doctors and other providers and say, in effect, “We will deliver large numbers of patients--and thus profits--if you will cut us a deal on the price.” The resulting agreements have brought changes and savings to employer-supplied health care programs in almost every corner of American business.
On a smaller scale, farmers in many parts of the country have long joined together in cooperatives to buy seed and fertilizer and other commodities at lower prices.
Similarly, families in cities sometimes form food-buying cooperatives to get better quality and better prices on such things as fruits and vegetables.
If Clinton’s plan became law, almost all Americans would belong to the health alliance serving their state or region. The major exceptions would be those who were covered by Medicare and, in some cases, those who worked for companies with more than 5,000 employees.
Each alliance would act as the sole health care purchasing agent for almost everyone in its region. It would negotiate with health maintenance organizations and insurance companies for the best deals for its members.
Apart from that, their very size would allow the alliances to spread the costs of particularly expensive medical treatments over large groups, thus limiting insurers’ exposure when they have to cover the elderly and the ill.
“The alliances are designed to end discrimination in the marketplace,” White House senior health adviser Ira Magaziner said. “It is not right that because of your age or health status you pay more. If you want to achieve an end to discrimination, you need a large pool.”
State governments would decide on the alliances’ geographical boundaries and select their boards of directors, which would have to be equally divided between consumers and business representatives. No one working in the health industry--doctors, nurses, hospital employees or insurance company employees--could serve.
Each year a newly created federal agency called the National Health Board would set a target for total health care spending in the nation and give each regional alliance a corresponding budget target. The alliance would use its authority over fees and charges to keep spending at the required level.
A market such as Los Angeles would have one alliance, but the alliance could approve 10 or more health plans, probably including such well-known names as Kaiser Permanente, Blue Cross, Aetna and Prudential, for its individual members to choose from.
All these vendors would be required to offer a standard, comprehensive set of benefits more generous than currently offered by most employers. Plans could offer extra benefits, such as prescription eyeglasses and cosmetic surgery, for extra charges.
Once a year, consumers could choose among the approved health plans. They could still go outside the doctors and hospitals that participate in their plans, but they would have to pay out of their own pockets for the medical care provided.
That is the theory. Proponents say it would achieve its goals with little or no pain to consumers or to providers--if they are reasonable in their charges and efficient in their operations. Certainly the alliances would be far less bureaucratic than the paper shufflers who operate today’s health care system, says Sen. John D. (Jay) Rockefeller IV (D-W.Va.).
Critics reject that view and argue that the reality of the alliances would turn out to be anything but benign.
Even the impartial Congressional Budget Office, in its analysis of the Clinton plan, warned that the inexperienced alliances could be overwhelmed by their enormous job.
And not surprisingly, many segments of the existing health care industry worry about what the alliances would mean for them.
Foremost are health insurance companies. The big ones, such as Aetna and Prudential, would probably assume the job of stitching doctors and hospitals into the provider networks that the alliances would offer to their members.
But they resist the degree of government supervision that the Clinton plan entails. And the small insurers worry that they would have no role at all.
In a television commercial sponsored by the Health Insurance Assn. of America, a young, concerned couple worries that “thousands of government bureaucrats” would dictate their health care.
Businesses are no happier with the prospect that the alliances would wrest from them the control they now exercise over their own benefits programs. They don’t trust the President enough to surrender that power to him, even in return for his promise to hold down health costs nationally.
When Clinton launched his crusade for health reform, he counted on big business--beset as it was by rising medical care costs--to rally around his plan. After months of intense flirting, entreating and cajoling, however, the White House still has failed to enlist any significant business backing for health alliances.
To attract big business support, the President’s plan would allow companies with 5,000 or more workers to stay outside the regional alliances and create their own “corporate alliances.”
Treasury Secretary Lloyd Bentsen said recently that the 5,000 threshold could be lowered.
Business was not impressed. It argues that the gigantic regional alliances would so dominate the purchasing of health care that even the biggest companies, unable to compete, would have no choice but to join them. And it strongly objects to the 1% payroll tax that business would have to pay for the privilege of maintaining corporate alliances.
Many executives refuse to believe the White House claim that corporations under the Clinton plan would spend no more than 7.9% of their payroll to buy insurance packages that include comprehensive coverage for doctor and hospital bills plus payments for prescription drugs and home care for the chronically ill.
