Critics of Health Reform Raise Bugbear of Bureaucracy : Debate: Opponents are drawing Orwellian images of red tape and faceless federal workers. The fear tactic could kill any bill, analysts say.

The naked shoulder belongs to a vulnerable-looking patient. It is framed by the reassuring hands of a physician. There’s nothing subtle about the ad. Intimacy was what the American Medical Assn. sought to convey.

And its message is clear: Would you rather trust your life to a doctor or to some government bureaucrat or insurance adjuster?

As the debate over health care reform nears a climax in Congress, opponents of comprehensive reform, including many Senate Republicans, are increasingly exploiting the public fear of a proliferating bureaucracy.

And for good reason. Americans have always been leery of burgeoning red tape and bloated government. And their concerns have risen sharply as the debate has unfolded.

President Clinton’s now-discarded plan would have created a vast array of government agencies with broad new powers, such as allowing the Treasury secretary to impose a payroll tax on all employers in any state.

Even most of the less ambitious reform plans, including the one being debated in the Senate, would necessitate the creation of numerous state and federal agencies--to enforce new rules designed to extend coverage to the estimated 39 million uninsured Americans.

“There’s a bureaucratic cost to doing these things,” said Drew Altman, president of the Kaiser Family Foundation, a Menlo Park, Calif., health care philanthropy and think-tank.

Indeed new government bureaucracies will be an inevitable byproduct of any successful effort to seriously reconfigure what is one-seventh of the U.S. economy.

Yet the nation’s health care system is already burdened by the administrative imperatives of the 1,500 private insurance companies now doing business, with clerks minutely examining reimbursement claims and sometimes determining in advance whether a particular medical procedure is permissible.

Any reform of the U.S. health care system probably will substitute public bureaucrats for private ones. That leaves a particularly knotty question: Can government agencies carry out their duties--such as ensuring that subsidies reach the needy--without becoming the intrusive force that the AMA and the public fear?

Unless such concerns can be allayed, the public’s deeply ingrained fear of an uncaring bureaucracy could kill health care reform, analysts said.

“It’s a huge issue because ‘bureaucracy’ and accusations that a plan is a ‘big government’ plan have become almost nuclear weapons,” Altman said. “And critics have been tremendously successful in instilling fear and skepticism about the government’s ability to reform the health care system.”

Hardly a day goes by now in the Senate without a member producing a multicolored chart to demonstrate the complexities of the plan crafted by Majority Leader George J. Mitchell (D-Me.).

Mitchell himself went on the Senate floor Monday to rebut his critics, saying: “My bill does not provide for a government-run health insurance system. It is a voluntary system, which builds on the private insurance market.”

Rhetoric aside, those with alternatives to the President’s agenda are discovering--as Clinton already has learned--that any significant overhaul of the health care system will require a certain amount of new government initiatives.

The hardest challenge is that of providing subsidies to the needy.

Clinton had proposed requiring employers to pay at least 80% of a worker’s premiums, with the individual paying the rest. His plan called for subsidies for small firms with low average payrolls.

But because of a firestorm of opposition to the 80% employer mandate, Mitchell would delay the mandate until 2002--and require only a 50% premium contribution from employers with 26 or more workers.

The scaled-back mandate would be triggered only if voluntary measures based on market incentives do not achieve 95% coverage--and only in states that fall below the 95% level. Nationally, about 85% of the public is now insured.

Analysts said that Mitchell’s approach would lead to a more effective subsidy program, allowing the targeting of individuals instead of companies.

But there would be a trade-off. In potentially defusing opposition to the employer mandate, Mitchell created grist for foes on another front: A greater bureaucracy would be needed to administer a subsidy program that targets individuals.

Mitchell’s bill would subsidize not only low-income people but also children and pregnant women as well as those temporarily unemployed. Some of them would be eligible for more than one type of subsidy at the same time.

But, as the Congressional Budget Office recently noted, “determining eligibility for subsidies would be an enormous task for states, made more complicated by the three different subsidy programs.”

States also would be responsible for the annual reconciliation process in which a subsidized family’s income is checked to ensure that it had received the appropriate funds. “Tracking people who moved from one state to another during the year would also be difficult and would require extensive cooperation among the states,” the CBO added.

Administering subsidies would be just one of many new responsibilities required of the states by Mitchell’s plan.

In all, his proposal would create dozens of new federal and state agencies, empowered with new authority over how insurance is purchased and how medical services are delivered.

Mitchell would create, to name a few, a seven-member National Health Care Cost and Coverage Commission to monitor trends on insurance coverage and costs, a seven-member National Health Benefits Board to define the scope of a standard benefits package, a 15-member National Quality Council to establish regional and state organizations to implement certain goals and standards, a National Council on Graduate Medical Education to set requirements to attain something of a balance between specialists and general practitioners and 50 state Consumer Information and Advocacy Centers to gather and disseminate “report cards” on health plans.

States also would be required to enforce new laws that prohibit insurers from discriminating against the sick or the aged.

In all, according to Sen. Dan Coats (R-Ind.), who released a half-inch-thick “primer” on Mitchell’s bill, it proposes 50 new bureaucracies and would impose 177 new responsibilities on states.

“This is . . . probably the largest expansion of government ever proposed,” fumed Sen. Don Nickles (R-Okla.). “It’s very complicated and very bureaucratic--definitely a step in the wrong direction.”

The CBO, a highly regarded, nonpartisan research arm of Congress, said in more neutral language that, for the system proposed by Mitchell to work effectively, “new data would have to be collected, new procedures and administrative mechanisms developed and new institutions and administrative capabilities created.”

That’s hardly a vote of confidence in Mitchell’s plan. And the Maine senator conceded that point when he unveiled his plan earlier this month.

“It requires a lot of administrative work,” he said, “and we don’t know whether that can be done.”

But Theodore R. Marmor, a Yale professor of public policy and management, offered a different perspective.

“In terms of either interference with professional practice or the amount of both form-filling and administrative expense, the American health care system is by far the most administratively complex and costly in the advanced world, while our government role is weakest.”

Added Edward F. Howard, executive vice president of the Alliance for Health Reform, a nonpartisan educational group: “You have to remember the burden that current programs face and what they will look like five years from now.”

He and Altman also noted that government-run health care systems are much more efficient than those run by the private sector.

Whereas Medicare’s administrative expenses are about 3% and Medicaid about 5%, they said, the comparable cost for private plans is 15% to 30%.

“Government programs are dramatically more efficient than private programs,” said Howard.

“This is an area,” Altman added, “where facts and perception are at total loggerheads.”