Ronald Pollack and Charles Kahn

Since the failure of the Clinton administration’s reform plan for universal health coverage in 1994, the problems it was meant to solve--steadily rising numbers of uninsured and medical costs soaring well above inflation--have only grown. Despite an unprecedented economic boom, the number of Americans without health insurance has mushroomed, from some 37 million to 43 million. Despite the best efforts of health maintenance organizations to economize, insurance rates are rising at twice the inflation rate.

Some health policy experts doubt that President George W. Bush will turn to the federal government to fix problems that the free market hasn’t. But two arch opponents in the 1993-94 health battle have joined forces to argue that Bush can succeed where Clinton failed. Ronald F. Pollack is executive director of Families USA and was a key backer of Bill Clinton’s health reform plan. Charles N. Kahn III is president of the Health Insurance Assn. of America, and his organization’s “Harry and Louise” TV ads helped defeat the first Clinton plan.

Pointing out that candidate Bush set aside $132 billion over 10 years to expand access to health coverage, Kahn and Pollack have proposed a plan on how to spend the money. They say their proposal to provide health insurance coverage to the low-wage working population with incomes below 200% of the federal poverty level uses just the sort of state-based funding mechanisms that Bush is likely to support.

The plan, co-sponsored by the American Hospital Assn., would give states federal money to expand the Medicaid and Children’s Health Insurance programs, as presidential candidate Al Gore preferred. It would also allow states to offer tax credits for employers that provide coverage for all workers, with special premium subsidization for low-wage workers, an approach preferred by Bush.

Some Republicans have criticized the Pollack-Kahn plan for allowing an unfettered expansion of public health insurance, while some Democrats have decried it for relying too much on the private sector. But all sides acknowledge that it has outlined a framework for bipartisan cooperation on health reform this year.

Pollack and Kahn were interviewed at The Times.

*

Question: Last session, Congress was unable to add a prescription-drug benefit to Medicare even though the $20-billion proposal was popular with the middle class. What makes you think the new Congress will be willing to spend at least that much on your plan to benefit poor people who lack political clout?

Kahn: I don’t think it’s coincidental that both presidential candidates allocated a significant amount of money in their ideal budgets to [expand health-insurance coverage]. They didn’t come at solutions in the same way, but in terms of what they put on the table, there’s not as much baggage as you have with other issues like pharmaceuticals, where drug companies find it against their interest to have a certain kind of payment system.

Pollack: Low-income people don’t have the same kind of political clout that higher income or middle income people do--no question that’s true. However, I think we have a better chance of achieving a consensus with respect to a lower-income population than we do in a higher-income population. No single organization is going to be threatened by [our proposal]. We’re not going after small businesses and saying they have to provide coverage; we’re not saying something to the hospitals or to physicians or to nurses or to pharmaceutical companies that is threatening.

Q: A new report by the bipartisan Congressional Budget Office shows that existing public health insurance costs, now rising at twice the inflation rate, will wipe out the entire federal surplus in a few decades unless cost efficiencies are introduced. Can you make any fiscal arguments in favor of your plan?

Pollack: We can’t say this is cheaper than the status quo.

Kahn: Part of the trouble in calculating cost savings is that the money that funds health care today comes from a number of different ledgers. Some of it comes from employers, some from the county tax base, some from state taxes and some from people’s pockets. So if you have a program that gets all these people covered, there will be some savings, there will be less cost shifting in hospitals, and whatever health plans are paying for the indigent will, to some extent, be ameliorated through the cost shift. The trouble is, at the end of the day, our proposal will, according to Congressional Budget Office calculations, add an expenditure to federal spending. We can’t walk away from that.

Pollack: One of the things we tried to do is simplify what we have. Because we have such a fragmented health-care system, nobody gets served well. . . . There are a couple of ways in which we are trying to change that. In our public health insurance programs, we have all these different rules, depending upon what your family status is. We have one set of rules for kids, another for parents, a third for adults who are not parents. We want to end the kind of fragmentation that exists for programs like Medicaid and CHIP [the Children’s Health Insurance Program, called Healthy Families in California]. We want to create a seamless web in which you don’t have to start talking about what your family status is. Our current system stems from 16th-century Elizabethan poor laws. When Medicaid came along in 1965, it said the pathway to getting health care was being on welfare. One of the things we do is end that [linkage between welfare and health insurance].

Q: Still, won’t fundamental reform have to include some mechanisms to improve the efficacy of health-care spending, given the pressure legislators face to rein in spiraling health-care costs?

Kahn: If you try to solve the issue of costs in the context of . . . expanding coverage for low-income people, you’re going to drown. The cost issue needs attention, and the people I’ve worked for care a lot about keeping coverage affordable for consumers, but you can’t do both at the same time.

Pollack: Let’s [consider] the role that pharmaceuticals play in health-cost inflation. The pharmaceutical industry has a very strong voice in this process, and if we did something to try to deal with costs on the pharmaceutical side, we would get opposition to expanding coverage. Similarly, if we tried to deal with doctors’ right to organize [into unions that pressure managed-care companies to raise their compensation] or to guarantee a patients’ bill of rights, we’d have disagreement. If we’re going to say . . . that access to health coverage for the uninsured is our top priority, I think we’re going to have to say there are many other agenda items that deserve attention, but at a different time.

Q: How would you respond to critics who say your plan, by allowing states to funnel new funding through private insurers, preserves inefficiencies like managed-care companies that spend 20 cents of each health-care dollar on administration?

Kahn: One of the dilemmas in the discussions of the Clinton initiative was that [Clinton health care advisor] Ira Magaziner had this belief that from all the money you’re spending right now, you can squeeze out enough money to cover the uninsured. That caused him and [Hillary Rodham Clinton] to invent a lot of systems in which money was sloshed around the table, and at the end of the day, you had some people who were worse off than before. I don’t think that approach works.

In terms of the cost curve, the biggest driver right now is pharmaceuticals. The good news is that [drugs] make a difference in a lot of people’s health. The bad news is that [pharmaceutical] companies have to maximize their revenue, and that’s not always to the advantage of the premium payer or the consumer. The second issue is that the successes of managed care are grinding to a halt because the industry was asked to do something and now it’s being told we don’t want that. The industry is in retreat from all the techniques and tools used to control costs in managed care, sometimes because of legislative mandates. Also, the public is demanding more choice, so they’re getting more choice, but that’s expensive.

Q: A common middle-class fear is that we are all just a catastrophic illness away from losing our health insurance and perhaps our life savings. Is this anxiety realistic and, if so, shouldn’t Congress be expanding health insurance in a way that provides a safety net for the middle class as well as the poor?

Pollack: Maybe what we’re seeing is the reflection of a good economy, but we did a lot of focus groups and polling prior to [the Clinton health plan of] 1993-94 and [continue to do so], and the anxiety that existed in the early ‘90s is not as great today. Maybe we’re fooling ourselves because the economy is so good, and employers are feeling they’ve got to compete [for workers] by providing better health plans. I don’t think, when you look at [the findings of] these focus groups, that the middle class, by and large, feels at great risk. I’m sorry about that, because I think it is at risk, but the perception is different today than it was before. If we have a downturn in the economy, I think that the risk is going to go up, big time.

Q: Are you suggesting that the focus groups that support your plan now--the ones where people say they’ll pay up to $200 extra a year in taxes to help the poor get health care--are doing so for purely altruistic reasons?

Pollack: I would wish nothing other, in terms of the politics of this issue, than we could say this was self-interest, because I think self-interest is going to change this issue in a much easier way. But--and I know I’m saying something heretical here--I think the issue [of expanding health coverage to the poor] at this point in time has a significant element of altruism, rather than self-interest, even though I think health insurance reform is in people’s self-interest.

Q: Given all the health-care problems competing for Congress’ attention, from spiraling costs to the need for better prescription-drug coverage, what’s your best argument for attending first to the low-income uninsured?

Kahn: Well, you have to ask: If not now, when? Right now, with the federal surplus, we have the ability to allocate new funds to help [poor] people. Indirect subsidization, which is the way we have paid for the care of many of these people, is inherently inefficient, sloppy and frequently leads to money that shouldn’t be spent being spent. If you look at the average teaching hospital that serves as the hospital for the indigent in any community, there is a hell of a lot of waste there that managed care and the private sector want to wring out when people with coverage are being paid for.

Pollack: If we don’t do it now, we’re going to shift the burden to the states and to communities. I think that’s part of the problem in Los Angeles, where there’s such a high proportion of uninsured people. You have to pick up in formal ways. A proposal like ours will give the states and communities the capacity to expand coverage. And only the federal government can do that.