HHS Says Health Plan May Save California Billions

President Clinton’s health reform plan would be a financial boon to state governments and to employers and employees alike at companies already providing insurance to their workers, the Clinton Administration said Tuesday.

The Health and Human Services Department said that California would be among those states that fare best, saving $6.5 billion through the year 2000 because of reduced Medicaid payments, a slowdown in health care inflation and a new federal grant program for long-term care.

California businesses that already provide insurance to workers would pay $11.9 billion less in premiums during that period, or 2.6% of payroll. Their employees would spend $3.3 billion less in premiums, or $298 per worker.

The numbers mean “goods news to the nation’s governors . . . (and) considerable savings to state governments as well as to workers and businesses in these states,” said Kenneth E. Thorpe, deputy assistant health secretary for planning and evaluation.

But there is one catch. The projected savings assume congressional enactment of the President’s controversial plan largely intact--a long shot, at best.

Nationwide, the savings would be substantial: $46 billion to state governments, $60 billion to employers that already provide insurance to their workers and $29 billion to their workers by the year 2000, the Administration said.

Clinton’s plan would require all employers to pay at least 80% of each employee’s health premiums, with the individual picking up the rest. There would be federal subsidies on a sliding scale for low-income individuals as well as for small businesses with mostly low-wage workers.

Consequently, some companies and workers would be paying for insurance for the first time. Such workers, for example, would have to pay $9 billion, according to the Administration’s estimates, leaving a net savings to all workers of $20 billion.

A study last month by the Urban Institute, a liberal Washington think tank, also concluded that state spending would decline in all states while federal spending would increase in most states.

And a Congressional Budget Office study in February said that corporate outlays in health spending would drop by about $20 billion by the year 2000.

Some states, most notably New York, have said that they would suffer financially as a result of the Clinton plan. But Thorpe said that the new study is more accurate because it is based on the latest available data.

Separately, the head of an influential private group that came up with the health care reform theory underpinning the Clinton plan told the Senate Finance Committee that the Clinton proposal seeks to accomplish too much too soon.

Paul Ellwood, president of the Jackson Hole Group, said that his loose-knit organization of health care experts and health industry executives had backed away from its original recommendations in light of uncertainty over how much that system would cost.

After meeting several days last week, the group is moving toward a more cautious approach, which would not bring about universal coverage within the five-year timetable favored by Clinton.

The group is also abandoning its proposal--similar to the one in the Clinton plan--that would force most firms to join government-organized health care purchasing cooperatives.

The cost question “has made me more conservative about how we should approach universal coverage,” Ellwood said.