Push for Cost Controls on Health Takes a Back Seat : Debate: Issue is receding because of political pressure, negative connotation. Focus shifts to universal coverage.


As the Senate launched its long-awaited health care debate this week, Majority Leader George J. Mitchell (D-Me.) declared that the American health care system is mired in “a crisis of affordability and price.”

Yet, ironically, the issue of containing health care costs has receded into the background of the discussion, almost drowned out by the far louder argument over universal coverage.

From the start, President Clinton and his allies have argued that universal coverage and cost containment are the interlocking parts of the health reform jigsaw puzzle. As long as large numbers of people remain uninsured, the costs of their treatment will continue to be paid indirectly by those who have coverage.

But the prospects for achieving universal coverage in the near future look increasingly bleak. And as congressional leaders struggle to hold the line in that arena, they are being forced to make concessions that erode cost-containment efforts in other areas.


Cost was the issue that got the entire health care debate going. America now spends 14% of its gross domestic product on medical care, a far greater share than any other country. As costs have soared, workers with coverage have been forced to forgo wage increases to pay for them and the consequences of being uninsured have grown to sometimes tragic proportions.

The President’s original approach to reining in costs, which included a form of government cost controls, was rejected early on by Congress. But the proposals that have replaced it in the major alternatives now before both houses are far from certain to do the trick.

The reason for the shift in emphasis, said Brookings Institution analyst Henry Aaron, is as simple as this: “Universal coverage brings joy. Cost containment inflicts pain.”

“Politically, there is absolutely no mileage in cost control,” agreed Uwe Reinhardt, a health expert at Princeton University.


Congressional leaders have inserted provisions in both plans that actually could undermine some of the cost restraint that already is going on in the health care market today.

“On the one hand, they’re saying we can’t have price controls. On the other, they’re removing the ability of the market to control costs. . . . Most proposals have really been at cross purposes,” said Bill Custer, research director of the Employee Benefits Research Institute, a private, nonprofit public policy research organization in Washington.

As a result, he said, the legislation that Congress ultimately produces--if, in fact, it produces any--might actually make health spending increase faster than it otherwise would have because more people would be using the system without any incentive to decrease costs.

As recently as this week, when an ABC News poll asked which was the more important goal of health reform, 49% said it was holding down costs, edging out the 45% who chose insurance for all. But while bringing down health care costs sounds good in principle, actually doing it is another matter entirely. That is because:


* Cost containment almost certainly means limiting consumer choice. Health maintenance organizations, for instance, have managed to bring down their costs by limiting the network of doctors and hospitals with which they do business.

However, the House Democratic leadership bill undercuts their ability to do that with the “any willing provider” provision, which requires networks to admit any qualified physician who is willing to accept their rates. Both bills also offer what critics consider overly broad definitions of the “essential community providers,” such as hospitals, clinics and medical professionals, with which the networks are required to contract. Moreover, the bills require companies to offer their workers at least one plan with unlimited choice of doctors, an option that is generally more expensive.

* The urgency has faded as the increase in health premium prices has slowed from double-digit levels in the late-1980s to single-digit figures now. In some areas, premiums are even going down. But some analysts say that health inflation could easily reignite, once the threat of restrictive legislation is gone.

* Most consumers are insulated somewhat from the true cost of their care because their employers pay all or part of their premiums. Proposals to shift more of the true cost to the actual users of medical care--by making health premiums part of their taxable income, for instance--have been dropped by congressional committees in the face of stiff opposition.


* Cutting costs means curbing the earnings of doctors, hospitals, drug companies and medical technology firms--all of whom employ powerful lobbies in Washington.

As the realities of politics have taken the health care debate away from cost containment, no one is more dismayed than the leaders of the nation’s biggest businesses. Their concerns over paying the skyrocketing health costs of their workers were a major impetus for embarking on the health reform effort. General Motors often notes, for instance, that it spends more on health insurance than it does on steel.

Now, “we could come out with legislation that could put us in worse shape than when we came in, in terms of costs,” said Michael J. Rourke, senior vice president of the Great Atlantic & Pacific Tea Co. Inc., which owns the A&P; Supermarket chain.

The chief executive of one of the nation’s largest corporations said that he is rethinking his support for the President’s health reform effort, because it is beginning to appear that no bill at all would be preferable. As things stand now, he said, he fears that Congress will pass legislation that perpetuates a system in which large companies continue to carry an undue share of an ever-increasing burden.


“Honestly, this is what scared me to death from day one and what scared all of us at this company, that this is exactly what would happen,” said the CEO, who spoke on condition that he not be identified by name. “This is the only way that we could have been hurt by this bill. It’s a shame that all of us who provide good health care are going to get clobbered again.”

Essentially, there are only two ways of curbing health spending and neither is foolproof.

The first is to have the government do it. That was an element of what Clinton proposed, when he suggested limiting the growth of health premiums. A somewhat weaker version of the same approach is in the bill being offered by House Majority Leader Richard A. Gephardt (D-Mo.), which will be the center of debate in the House.

Under Gephardt’s plan, if health spending in any state grew faster than other costs, a system of fee limits similar to those of the Medicare system would go into effect in the year 2000.


But any system of government-imposed cost controls raises the fears of rationing and a deterioration of quality. Moreover, history has never shown them to work over the long term.

As a result, Republicans and many Democrats argue instead for the second route, which is more a leap of faith: relying on the market.

Virtually every proposal before Congress includes provisions to make the market work better. Almost every one calls for the establishment of voluntary purchasing cooperatives, through which individuals and small firms could pool their purchasing power. They also aim to give consumers more information about providers, so they can comparison-shop for medical care the way they do for other purchases.

The Mitchell plan takes this more market-oriented tack, adding a 25% tax on the premiums of plans that grow faster than a target based on inflation.


In addition, the major health proposals include cuts in Medicare, which already pays only part of the costs of the services it covers.

“Already large employers are getting costs shifted from Medicare,” said Southern California Edison Co. Vice President Margaret Jordan. “That’s not going to help cost containment. That’s just more cost shifting.”