President Signals He Is Flexible on Health Coverage : Reform: Clinton tells governors he would be satisfied if a bill is passed that moves in direction of insurance for all. His congressional allies are caught by surprise.

Striking a new, conciliatory tone on health care that caught his congressional allies by surprise, President Clinton appeared Tuesday to water down his demand for guaranteed health coverage for all Americans.

Speaking at the annual conference of the nation’s governors here, Clinton said he recognizes that any piece of legislation would fall short of truly covering everyone and that he would be satisfied if Congress can pass a bill that moves in the direction of universal coverage.

“We know we’re not going to get right at 100% (coverage) but we know that you’ve got to get somewhere in the ballpark of 95% or upwards,” he said. The comment was in response to a question from a Republican governor who asked whether he would settle for something less than universal, employer-financed coverage.

Clinton also said he would accept a plan that does not require companies to cover all workers, the so-called employer mandate. “I would not rule out a health bill that didn’t have an employer mandate in it,” the President said, adding the qualifying phrase, “if we knew that we were moving toward full coverage and we had some evidence that it would work.”

For weeks, members of Congress have been arguing about whether Clinton’s demand for health care for all citizens had to mean, literally, care for everyone--a goal that almost certainly cannot be achieved without a law requiring companies to provide insurance for all workers--or whether the White House would accept something less, such as insurance for 95% of Americans.

And for weeks, White House officials strenuously have refused to get into that argument, fearing that to clarify their stance would evaporate the convenient ambiguity that may be needed to reach compromise on Capitol Hill.

Clinton changed that Tuesday.

The President had said similar things about the mandate in the past, but the timing of his remarks, combined with the language suggesting that 95% would be enough, set off a furor of spin and counterspin. The war of words left unclear by day’s end whether Clinton had deliberately set out to signal new flexibility in his position or whether he had merely succumbed to his periodic, and politically dangerous, habit of thinking out loud.

Whichever the case, the subject consumed official Washington for much of the day.

Conservative and moderate Democrats seized on the President’s words as a welcome sign of willingness to compromise. Liberal Democrats, members of the congressional leadership and some of Clinton’s own aides insisted that his words meant less than they appeared to mean.

“It means we can get a bill. . . . This is a big day,” proclaimed Finance Committee Chairman Daniel Patrick Moynihan (D-N.Y.), whose panel dealt the Clinton plan its most serious setback to date by passing a bill that does not include an employer mandate and does not reach universal coverage.

Senate Minority Leader Bob Dole (R-Kan.), the leading foe of the Clinton health plan, was so taken with the President’s comments that he read a transcript of them before a cluster of microphones and a bank of television cameras. Dole said that Clinton appeared to be “inching in our direction.”

“Good for him!” exclaimed Sen. J. James Exon (D-Neb.), a leading conservative Democrat. “Until the President said something like that, I think we were dead in the water.”

But Clinton’s words stunned his allies in Congress, where House and Senate leaders are at an extraordinarily delicate moment in their efforts to put together legislation that retains the controversial employer mandate.

Many of the Clinton plan’s supporters insisted publicly that his comments did not mark a change of position but off the record several indicated that they were furious.

“I guess there’s going to be some clarification,” said Senate Labor and Human Resources Committee Chairman Edward M. Kennedy (D-Mass.), trying to put the best face on the President’s comments.

Clinton did attempt to clarify what he meant later in the day but his remarks to reporters provided little additional guidance.

“I think you have to have a universal coverage goal because if you don’t have the idea of trying to essentially have functionally full coverage--whatever that is, it’s a very high percentage--then the rest of these reforms will not work,” Clinton said.

Clinton adviser George Stephanopoulos insisted that the congressional reaction was a “misreading” of what Clinton had said. “I think he said less than they think,” he said.

But, Stephanopoulos added, Clinton had “set a new standard” for what would be acceptable in a health reform plan, noting that Clinton repeatedly had said in his remarks to the governors that he wanted a bill that “will work.”

“Many of these plans that purportedly get to 95% don’t actually work,” Stephanopoulos added. “They’re underfinanced, they don’t actually do what they claim.”

But, as White House officials know, a bill that “will work” and a bill that “will cover everyone” are not necessarily the same thing.

By Tuesday evening, after watching Clinton’s remarks echo across the nightly network news programs, White House officials were sufficiently worried to have Chief of Staff Leon E. Panetta issue a statement trying to clarify what Clinton had said.

“The President’s bottom line is what it’s always been--guaranteed health coverage for every American. And that’s what he said to the governors today,” Panetta said. “Are we willing to discuss ways to guarantee universal coverage? Absolutely. Are we changing the goal? Absolutely not.”

The reason Clinton’s remarks hit such a nerve is their delivery at a time when the congressional Democratic leadership has been delicately trying to piece together compromise bills that can pass. White House strategists have been hoping to pass a bill in the House that contains an employer mandate, giving themselves leverage for an eventual compromise with whatever bill emerges from the more conservative Senate.

But many House members have strongly resisted the idea of voting for such a controversial measure precisely because they think that the White House would only abandon the idea later, forcing them to cast a politically dangerous vote for naught. Clinton’s words only heightened those fears.

The White House had been billing the speech to the governors as a major health address and those who back the Clinton plan had been hoping for a new show of resolve on the most contentious provisions of the legislation.

Instead, Clinton repeatedly struck a conciliatory note. “All I ask in the closing weeks of this debate is that we take the political air out of the balloon and ask ourselves what will work for ordinary Americans.”

That statement drew resounding applause from the state chief executives.

The President’s remarks contrasted with the sometimes strident rhetoric of his recent speeches. His remarks also conflicted somewhat with those made earlier in the day by First Lady Hillary Rodham Clinton, who fielded questions during ABC’s “Good Morning America” program. She hewed closely to the official White House position, at least the one taken up to the time of the President’s speech, about the need for universal coverage.

Even Mrs. Clinton, however, offered some degree of wiggle room, talking of the need for universal coverage “at least being phased-in at some point.”

If that is not done, she said, “you will make the problem worse. I don’t want to be back here in two years explaining to people why their premiums have gone up under so-called reform.”

As for the President here among the governors, some of whom he had served with for years, Clinton spoke softly and carried not a big stick but an olive branch.

The unique fraternal chemistry that Clinton feels with governors can sometimes produce the unexpected. According to the accounts of several people present at a private meeting among Clinton and some governors early this year, the President said that he opposed the price controls in his own plan and indicated for the first time that he was willing to jettison his proposal to require most Americans to join government-organized purchasing cooperatives.

Those earlier reported comments, which Clinton subsequently denied making, had also exasperated his supporters. “I was a governor for eight years,” Sen. John D. (Jay) Rockefeller IV (D-W.Va.) said at the time. “I enjoyed it. I like governors. I like to be around governors. But I’m certainly more interested in health care than I am in the collegial feeling of being with governors.”

In his remarks Tuesday, Clinton went out of his way to praise Dole, who preceded him at the podium, for his commitment to produce some form of health legislation. Dole was for the most part characteristically caustic in discussing Clinton’s own efforts.

Dole argued for a much more gradual and limited approach to health care than Clinton has advocated, one that would postpone universal coverage and other key Clinton objectives, such as employer mandates.

“We need a reality check,” Dole said. He cited declining support for the President’s program in recent polls as evidence that Clinton was trying to push Americans further and faster on the issue that they want to go.

“The health care system may not be perfect but it is the best in the world,” he said. “It needs repair but I’m not certain that it needs a complete and total overhaul and certainly not a complete and total takeover by the federal government.”

Challenging the concept of universality, central to Clinton’s approach, Dole asked: “How do you get there? How much does it cost? Is it 91%, 92%, 95%? Is it Ivory soap? What is it?”

Pointing out that even the Social Security system, the broadest of all federal entitlement programs, did not cover all Americans when it was first introduced, Dole said: “I have no trouble with everybody being covered in America. The issue is how do we do it and how much does it cost. And I suggest that between getting it done right and getting it done fast, many of us would prefer getting it done right.”

Dole complained of partisan rhetoric by the Administration and called for a moderate and bipartisan approach that unwittingly anticipated the President’s subsequent address.

The Kansas senator said that he believes “there is enough good will left” to enact a program within the next 30 to 40 days. But, he said, unless Congress acts within that time, election year pressure would prevent enactment of any health reform measure until next year.

Whatever Congress enacts, Dole predicted, it will not include an employer mandate or a so-called trigger mechanism, which would impose a mandate in the future if nearly all Americans were not covered by health insurance by some fixed date.

Referring to criticism by governors of his own health care proposal because it proposes putting a limit on federal expenditures for Medicaid, thus adding to the financial burden on the states, Dole said that his staff is working on an alternative approach.

Times staff writers Karen Tumulty and Edwin Chen contributed to this story.