National Perspective : HEALTH CARE: Paying for Coverage

They have the same goal: health coverage for all Americans. But the Democratic leaders in the House and Senate have proposed very different ways of paying for it. House Majority Leader Richard A. Gephardt of Missouri would immediately require employers to provide coverage to their employees. Senate Majority Leader George J. Mitchell of Maine would provide incentives for employers to cover their workers voluntarily. His plan would only require employers to provide it if, by the beginning of the next decade, 95% coverage had not been achieved, and then only in states that had not reached that goal.

BUSINESS OBLIGATIONS

House Democratic Plan: All employers pay 80% of the premium for a standard package of benefits, with the worker paying the rest. Employers with 100 or more workers must provide coverage starting in 1997. Smaller companies must offer the insurance in 1999.

A new Part C of Medicare will provide health insurance coverage for the poor and the unemployed. Companies with fewer than 100 workers would have the option of buying insurance in the private market or through Medicare Part C. Or the small firms could enroll their workers in the health benefits program available to federal workers. Employers would be required to make prorated contributions for seasonal, part-time and temporary workers. A self-employed person, such as an independent contractor or a consultant, would pay for his or her own insurance.

Senate Democratic Plan: This aims to achieve coverage of 95% of all Americans by the year 2000 through voluntary measures. If the goal is not met, a National Health Care Cost and Coverage Commission will send to Congress by May 15, 2000, proposals to cover the remaining uninsured Americans.

If the legislation is not approved by Dec. 31, 2000, an employer mandate will be imposed. It would start Jan. 1, 2002, in the states where the 95% target has not been reached. All firms with 25 or more workers would be required to provide insurance coverage, splitting the cost with their workers on a 50-50 basis. If a state already had achieved 95% coverage for its residents, companies in the state would be exempt from the mandate. Businesses with fewer than 25 workers would be exempt in all states. Under the mandate, all individuals would be required to have health insurance.

INDIVIDUAL SUBSIDIES

House Democratic Plan: Some low- and moderate-income workers would receive subsidies to help with their 20% of the cost of insurance. Coverage would be free for those at the poverty level, which is $7,400-a-year income for an individual, $11,500 for a single parent with one child, and $16,000 for a family of four. Partial subsidies would be available on a sliding scale up to incomes of 240% of poverty, or $17,760 for an individual and $38,400 for a family of four.

Senate Democratic Plan: Starting in 1997, individuals and families with incomes at the poverty level will receive a full subsidy for the cost of buying an average health insurance premium in their regions. Partial subsidies will be available on a sliding scale for those with incomes up to 200% of poverty.

Pregnant women, and children up to age 19, with incomes up to 185% of poverty will receive a subsidy covering the full cost of the local insurance premium. Partial subsidies will be available for those with incomes up to 300% of poverty. Anyone receiving cash under Aid to Families with Dependent Children would receive a full subsidy for insurance.

If the mandate is triggered in 2002, these subsidies would be implemented: workers with incomes up to 200% of poverty will get help in paying for their 50% share of insurance. Those with incomes at the poverty level will pay no more than 4% of their incomes for insurance, with a maximum of 8% for those with incomes at 200% of the poverty level.

* Subsidies would be available to income-eligible workers, whether full-time, part-time or seasonal.

BUSINESS SUBSIDIES

House Democratic Plan: Firms with 50 or fewer workers would be eligible for a sliding-scale credit to reduce their costs of buying insurance. Maximum credit would be available when the average payroll is $12,000 or less per worker per year, and the subsidy would be phased out when the average annual salary hits $26,000. The smallest annual average contribution for a firm would be $1,275, or 61 cents an hour. For the biggest firms, the average would be $2,625, or $1.26 an hour.

Senate Democratic Plan: Employers are given financial encouragement to expand coverage voluntarily. Subsidies are available starting in 1997 for employers that expand insurance to cover all workers. Employers will pay a maximum of 8% of the newly covered worker’s wages or 50% of the cost of the insurance premium, whichever is less. The federal government will pay for the rest of the cost of coverage. Subsidies will be available for five years.

FINANCES

House Democratic Plan:

* Reduces the rate of growth in spending for Medicare (health program for people over 65 and the disabled) and Medicaid (health program for the poor).

* Raises the cigarette tax, now 24 cents a pack, to 69 cents.

* Imposes a 2% surcharge on all health insurance premiums.

* Requires all state and local employees to pay the 1.45% Medicare payroll tax.

* Eliminates the tax advantages workers now get by using “cafeteria” plans in which they set aside pre-tax funds at the start of the year.

Senate Democratic Plan:

* Reduces growth rate in spending for Medicare and Medicaid.

* Raises the cigarette tax to 69 cents.

* Imposes a 1.75% tax on all health care premiums.

* Imposes a 25% assessment on high-cost health plans, when increases in annual premiums exceed a target level.

* Eliminates the “cafeteria” plan tax exclusion.

* Requires all state and local employees to pay the 1.45% Medicare payroll tax.

COST CONTROLS

House Democratic Plan: Has a standby cost containment system. A new National Health Cost Commission will issue annual reports on the growth in health spending. Target rates of growth will be established for national health spending and for Medicare, with the goal of slowing spending to the general growth in economic output. The commission will decide in 2000 whether to recommend imposition of limits on spending. If Congress does not object, limits would be imposed in states where spending is growing faster than targets. Costs would be controlled by using the payment scale for Medicare patients and applying it to all doctor and hospital bills in the private sector. This would mean a sharp reduction in payments, because Medicare is significantly below private payment levels.

Senate Democratic Plan: The National Health Care Cost and Coverage Commission will study health care spending and recommend ways to increase coverage and restrain costs.

* WHERE TO WATCH: CNN plans extensive live coverage of the U.S. Senate health care debate. Coverage begins with start of the debate, tentatively scheduled for 8:30 a.m. PDT. C-SPAN also will cover the session.

TOMORROW: A look at the pros and cons of the plans

GLOSSARY

Here are some of the more important terms used in the debate on the reform of the health care system:

* Community rating. The practice in which health insurance premiums are based on the geographic area and family size, not on pre-existing health conditions, health risks or age. Modified community rating allows some differentials for age.

* Cost shifting. When costs are raised for insured people to cover the cost of caring for other groups, such as the uninsured or people whose costs are paid only in part.

* Employer mandate. The requirement that all employers must contribute to the cost of health insurance premiums for workers. Under the House bill, employers would pay 80% and individuals would pick up the remaining 20%. The Senate has no mandate for the first several years, although a 50-50 requirement could become effective in the year 2002.

* Federal Employee Health Benefit Plan (FEHBP). A menu of plans that covers members of Congress and other federal employees.

* Preventive services. Services aimed at preventing disease or detecting disease early. Immunizations, mammograms, cholesterol tests and Pap smears are typical services.

* Primary care. Care by non-specialists, such as family doctors, pediatricians, some internists and nurses. Usually the first place people go for care for a health problem.

* Purchasing pool or cooperative. Theses are pools of consumers who grouped together, should have greater bargaining power to get lower rates for insurance than individuals or small businesses usually get on their own. Under President Clinton’s original proposal, they were known as alliances and were mandatory, government-authorized groups that monitored health plans in a region.

* Single payer. Canadian-style health system in which a health tax is paid to the federal government, and individuals see any health care provider. Providers paid by government.

Source: Times staff, Reuters