Health Reform Tangled Up in a Knot of Deal-Killers

As President Clinton and members of Congress search for some kind of consensus on health care reform, they find themselves stumped by a seemingly insoluble political equation: The potential areas of agreement range from slim to none, but the list of probable deal-killers grows ever longer.

Consider these scenarios: Senior citizens will walk away if Congress doesn’t give them prescription drugs and long-term care. America’s biggest corporations will fight to the end any effort to let states write their own rules for regulating employee health benefits. Doctors demand the right to join any managed-care network they choose, but health maintenance organizations will bolt if they can no longer select the doctors they want.

Meanwhile, the President and Democratic congressional leaders are holding out for a future employer mandate that would force most firms to pay for a portion of their workers’ health insurance if the percentage of Americans with coverage doesn’t increase in the interim. But every Republican in Congress--and a significant number of Democrats--will vote against any bill that contains such a mandate.

Add it all up and the probability of a major health care reform bill becoming law this year appears increasingly minuscule. And while many participants in the debate are willing to let the reform effort expire, for this year at least, it would be a bitter pill for Clinton, who has made health care reform the cornerstone of his domestic policy agenda.

“No bill at all is better than a bad bill,” said James Klein, who heads the Assn. of Private Pension and Welfare Plans, a coalition of big firms that provide workers with comprehensive benefits.

At one time, the group’s members were enthusiastic backers of health care reform. They were particularly anxious to have an employer mandate, which would help curtail the problem of cost-shifting by health care providers. Experts estimate that businesses offering generous health benefits are being billed an extra $26 billion a year by hospitals and doctors to help cover the costs incurred by workers at firms that provide no insurance.

But the current proposals from the Democratic leadership in both the House and Senate would inflict “tremendous damage” on employers by allowing states to create their own rules for corporate benefits, Klein said. A mosaic of up to 50 sets of regulations could become an administrative nightmare for companies operating in multiple states, he said.

The management of IBM Corp. is so disturbed by the prospect of a patchwork regulatory system that it has taken the extraordinary step of sending computer messages to its 110,000 workers, urging them to contact members of Congress to oppose the House and Senate bills.

The changing calculus of health care reform has suddenly placed Klein and the leaders of Fortune 500 corporations in a surprising alliance with the small-business lobby that is leading the charge against the employer mandate. Not long ago, the captains of industry heaped scorn on small-business proprietors, calling them “free riders” who let other people pick up the cost of their workers’ health care.

On the growing list of potential health care deal-killers, the employer mandate still occupies the top slot.

The Democratic leadership bill under consideration in the House would make all companies pay 80% of the cost of employee health coverage. The Senate leadership plan contains a softer mandate. It would rely initially on voluntary measures, including billions of dollars in government subsidies, to help provide coverage to those who lack it. The mandate would be imposed only in states where coverage does not rise to 95% of the population by the year 2000. In those states, starting in the year 2002, businesses with more than 25 workers would be required to pay 50% of the cost of employee coverage.

To small-business owners, the House plan is viewed as the policy equivalent of arsenic--instantly lethal--while the Senate bill is seen as a slower-acting, but still deadly, political potion.

“It’s another example of government interference--we don’t trust them to put together a system that will work,” said John Motley, chief lobbyist for the National Federation of Independent Business, whose 600,000 members have been applying intense grass-roots pressure on members of Congress to kill the mandate once and for all.

“The only way the mandates will be won is on sheer political force, overriding the interests of the business groups,” said David B. Kendall, an analyst with the Progressive Policy Institute, a centrist Democratic think tank.

Disturbed by the mandate, as well as the prospect of a costly new prescription drug benefit, a bipartisan group of approximately 20 senators who call themselves the “mainstream coalition” proposed a drastically stripped-down bill Friday. It eliminates the employer mandate altogether and would trim $400 billion from future growth of Medicare and Medicaid over 10 years in order to generate funds to help poor people buy health insurance.

The plan also calls for a number of insurance reforms. Companies could no longer deny or cancel coverage on the basis of a customer’s health. All health plans would be available to all applicants. Policy renewals would be guaranteed.

Insurance reforms such as these are supported by just about everyone involved in the health care debate, including Clinton and Senate Republican leader Bob Dole. But the President and most Democrats also insist on pursuing their more ambitious goal of expanding coverage to the 37 million Americans who now lack insurance.

Therein lies Dilemma No. 1 for Clinton. He can’t win in the Senate without the support of the “mainstream” moderates. But the plan they offered is unacceptable to Clinton’s staunchest labor and liberal allies because it falls far short of his pledge to provide a generous panoply of benefits to every citizen.

AFL-CIO President Lane Kirkland sent a letter Friday to every Democratic senator, urging them to “defend and strengthen” the Democratic leadership bill. Sen. Paul Wellstone (D-Minn.), one of the chamber’s most outspoken liberals, denounced the “mainstream” plan as a mistaken effort that “would fail to make health insurance affordable for working people.”

And even if Clinton could swallow something less than an employer mandate, many members of Congress clearly could not. Among congressional liberals, at least 100 House Democrats and 20 senators are urging the President to stand fast. Many of these members originally supported a single-payer system of universal coverage in which private health insurance would disappear and the government would reimburse hospitals and doctors with tax dollars.

The President long ago dismissed the single-payer formula as politically impossible. But he still needs the votes of the single-payer caucus, and its members say they won’t accept any plan that does not include an employer mandate and a comprehensive benefit package with mental health coverage, preventive care and other coverage provided by big companies.

“At some point, it doesn’t make any sense to support the bill,” warned Rep. Jim McDermott (D-Wash.), leader of the single-payer group. “Then you’re not doing health care reform, but just moving the deck chairs on the Titanic. Embroidering around the edges is nonsense.”

McDermott said he believes that the House leadership bill, crafted by Majority Leader Richard A. Gephardt (D-Mo.), can hold the single-payer advocates because it includes a hard mandate. But he doubts whether the group would vote for the Senate package, designed by Majority Leader George J. Mitchell (D-Me.), because it would impose no mandate for at least eight years, and only then in some states but not others. “It still leaves 25 million people without health insurance,” he said.

Dilemma No. 2 revolves around the powerful senior citizens lobby. After a special meeting last week, a council of 35 groups that represent the elderly declared its opposition to any health care bill that does not contain prescription drug coverage and financial help for Americans who require long-term care. Both drugs and long-term care would represent significant expansions of federal benefits--and the cost of providing them.

Members of Congress who vote against the proposed new benefits for the elderly “will see their votes dog them the rest of their political lives,” threatened Dan Schulder, director of legislation for the National Council of Senior Citizens.

On Saturday, senior groups expressed disdain for the “mainstream” plan.

“It uses very deep Medicare cuts to fund other things,” said John Rother, director of legislation for the 33-million-member American Assn. of Retired Persons. “From the senior point of view, it is all pain and no gain.”

Bill Ritz, a spokesman for the 5-million-member National Committee to Preserve Social Security and Medicare, denounced the “mainstream” plan as a “shocking” proposal.

“They are trying to squeeze Medicare and senior citizens to cover the uninsured,” he said. His group isn’t happy, either, with the official Democratic leadership plans. Although those plans offer prescription drug and long-term care benefits, they require some Medicare cuts too. “They ask too much of seniors,” Ritz said.

Dilemma No. 3 arises from the many physicians and medical societies who see an opportunity in health care reform to limit the increasing power of health maintenance organizations and other managed-care networks operated by commercial insurance companies.

The insurers, backed by many employers, say their ability to rein in rising medical costs will be undermined if they lose the freedom to screen the doctors they sign up, monitor their work, and throw out those who perform too many medical procedures or authorize too many tests.

“Too often, we think they put the emphasis not on quality, but on costs,” said James Stacey, a spokesman for the American Medical Assn. One sign of growing antagonism: The Texas Medical Society has sued Aetna and Prudential, two of the biggest managed-care firms, for dismissing doctors from their networks.

Many doctors want the health care reform bill to include an “any willing provider” rule, which would require that networks accept any doctor who is willing to work for their fee schedules. But the Group Health Assn., which represents health maintenance organizations, insists that an “any willing provider” rule would add as much as $1,284 a year to the average cost of a family insurance policy.

California has the highest HMO penetration of any state, and leading networks recently warned in a letter to the state’s congressional delegation that premiums could rise by as much as 28% if they lose their exclusive power to pick doctors.

Other unresolved conflicts facing health care reform advocates include:

* Higher-cost health plans. The mainstream group and other moderates want to restrict the ability of businesses to claim tax deductions for high-priced health plans. Their proposal is opposed vigorously by corporations that offer top-of-the-line benefits and unions whose members receive them.

* Cost controls. The Administration wants standby price controls, which would limit insurers’ ability to raise premiums. The insurance companies say this would interfere with free-market forces and cripple their ability to raise funds needed to operate high-quality medical service networks.

Can the Administration unravel these dilemmas and assemble a winning coalition? To an increasing number of insiders, it looks highly doubtful.

“We’re trying to form a marriage, but it may be a shotgun wedding,” said Sen. John B. Breaux (D-La.), a key moderate and skilled deal-maker who so far has been unable to find the middle ground on health care.

Not everyone is lamenting the paradox facing Clinton and his allies. Republican lawmakers are gleeful, convinced they are dealing with a weakened President who has lost the confidence of the country on the complex health care issue.

As Senate debate moved along at a glacial pace last week, Sen. Bob Packwood (R-Ore.) chortled over the Democrats’ hapless efforts to make their bill palatable enough to pass. The entire exercise, he said, reminded him of the movie “Weekend at Bernie’s,” in which two young friends try to camouflage the condition of a deceased employer.

“The kids keep changing the clothes, but the body is still dead,” he said.