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+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ IS THIS AN UNTAMPERED FILE? This ASCII-file version of ShareDebate International was packaged by Applied Foresight, Inc. (AFI hereafter). Every AFI-packaged ASCII version of ShareDebate International is distributed in either an "-AV protected" ZIP file format or a SDN (Shareware Distributors Network) protected SDN file. "AV" is the authenticity verification feature provided to registered PKZIP users, which Applied Foresight, Inc., is. If you are using the MS-DOS PKUNZIP.EXE program written by PKWARE Inc. and do not see the "-AV" message after every file is unzipped AND receive the message "Authentic files Verified! #JAA646 Applied Foresight Inc." when you unzip this file then do not trust it's integrity. If your version of PKUNZIP is not the PKWARE-authored program (for instance, you are running a non-MS-DOS version), then this message may not be displayed. (Note: version 2.04g of PKZIP was used to create this authentication message.) SDN is the major distributor of Shareware and Copyrighted Freeware and users who extract files from an SDN file with the current version of the archive utility ARJ, should see: *** Valid ARJ-SECURITY envelope signature: *** SDN International(sm) SDN#01 R#2417 This file is an SDN International(sm) Author-Direct Distribution. It should be verified for the SDN Security Seal by the FileTest utility available at The SDN Project AuthorLine BBS 203-634-0370. (Note: prior to about May, 1993, SDN used PAK to archive its distributions and its authenticity message differs from the above.) Trust only genuine AFI-packaged archives ... anything else may be just that: ANYTHING ELSE. +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ From the Winter 1994 issue (Number 67) of Policy Review magazine: CLINTON'S FRANKENSTEIN The Gory Details of the President's Health Plan by ROBERT E. MOFFIT Reprinted with permission of The Heritage Foundation. All rights reserved. For permission to reprint more than short passages, fax or write to Ben Morehead, Associate Publisher, Policy Review, 214 Mass. Ave. NE, Washington, DC 20002-4958, (202) 675-0291. To order Policy Review, call 800 544-4843. It is January 2, 2001. Today marks three years since you marched down to the local office of your regional health alliance, enrolled your family in the national health plan, and picked up your health security cards. You thought the Clinton health plan would be the answer to many of your old health care complaints, but frankly, it's been a disappointment. You thought you'd have numerous choices among health plans through your alliance, but as it turned out, the alliance officials approved only three plans to offer services in your region: one fee-for-service and two health maintenance organizations. Your doctor was not among the private practitioners in the fee-for-service plan, so you joined an HMO because it was a little cheaper. You wait longer now to see a doctor than you used to, and when he finally arrives, the doctor barely has time to say hello, look you over, and write a prescription before he's off to the next patient. Waiting in the long line for a chest X-ray, you feel cheated --you're just a number on a chart to your HMO. Still, you're young and healthy, and so is your family. The kids are finally used to seeing a different doctor at every check-up, and the problems the pediatrics office had last year with shortages of vaccines seems to have stabilized. Your elderly parents are not so lucky. The state they live in opted to administer health care directly through a state agency, so there are no alternatives to the type of care they receive. Because their state includes several major cities with huge health care needs that threaten to exceed the health care budget, physicians, services, and the availability of some advanced technology is sometimes scarce. The doctors in their state alliance are young and inexperienced -- many of your parents' own doctors gave up on medicine when the health plan was enacted. Your mother has a heart condition that could be improved by a new drug which has already been approved by the FDA. But because the drug's cost might exceed the allotted budget, its inclusion in the comprehensive benefit package has been delayed by the National Health Board. Your father is in constant pain from arthritis and needs a hip replacement, but the waiting list for this surgery is five months long. Your parents feel they get short-changed compared to younger people, whose health needs are fewer; you know this is probably true. You never thought, when Bill Clinton started talking about health reform in 1992, that you'd actually end up spending more for this. Broken Promise The plan we were promised is not the plan we got. Bill Clinton promised Americans a new national health system based on free market principles, a plan that would streamline the medical system without nationalizing medicine. He continually stressed the principles of security, simplicity, savings, choice, quality, and responsibility. In fact, the Clinton health plan is anything but simple, and many of the other principles the President embraced have been compromised in development of the plan as well. Moreover, the power of the new federal bureaucracy, particularly the National Health Board, the president has proposed to administer health care will rival any in the history of the republic. The Clinton plan is actually the largest federal power grab made over a sector of the economy in peacetime. The president's plan promises top-down, command-and-control micromanagement of one-seventh of the nation's economy. As The Economist of London observed, "Not since Franklin Roosevelt's War Production Board has it been suggested that so large a part of the American economy should suddenly be brought under government control." Every aspect of the health-care system will be affected by the legislation. The 1,342-page bill, officially called the "Health Security Act," details sweeping government control of the health sector of the economy. To consider just a few of the hundreds of new rules in the bill is enough to illustrate its breathtaking scope. One example: The Health Security Act regulates medical education and the training of physicians, and will set limits on how many medical school students may specialize in a given field in any particular period. Too bad if Junior always wanted to be a brain surgeon; he may be restricted to becoming a general practitioner -- or a pediatrician, or an internist -- if he wants to practice medicine at all. Then there's the "I'm Okay, You're Okay" approach to insurance coverage: The regulations stipulate that everyone is the same under the Clinton plan, whether he's a tee-totaling jogger or a couch potato who spends his day with a cigarette in one hand and a beer in the other. This is promoting responsibility? Another provision of the Act creates a government- sponsored national data bank, into which the medical records of every single patient in America must be entered. Maybe this information really will speed communication between physicians and assist in treatment; maybe too, it will prove to be the first step toward nationalized care, and the end of privacy between doctors and patients. Finally, not content to control only the health insurance industry, the administration is reaching out to grab the auto and worker's compensation markets as well. These types of coverage will be coordinated with the new standard benefits package required by the health plan. Controlling Mechanisms Considering how deeply the new health regulations will be thrust into our lives, it is essential that Americans understand the basic structure of the Clinton plan. We must understand how fundamentally different the plan is from the one described by the Clintons' soothing rhetoric. And we must decide if we can tolerate the government's new role as arbitrator in the most intimate decisions of our lives. Today, lobbying for his health proposal, the president continues to stress the principles he vowed would be the foundations of his reforms. But the simplified, consumer-oriented reform that Bill Clinton promised America is in reality a full-scale, federal takeover of the $1 trillion health system. Lodged within the body of the legislation are provisions that will expand federal control over the financing and delivery of U.S. health services, and expand the already-enormous government bureaucracy devoted to health care. Government control in the Health Security Act is exercised through five key mechanisms: The National Health Board (NHB), which will have general oversight over the entire U.S. health system. Virtually every facet of the health system will be monitored, decided or reviewed by this presidentially appointed board. Regional Health Alliances, the state-based system of health-insurance cooperatives that will control the availability of health plans, enforce health budgets, enroll employers and employees in the new system, collect premiums, and generally enforce national insurance rules and regulations. Every American will be forced to obtain health insurance through these alliances, or through similar corporate-sponsored plans if they work for a large company. A Standard Benefits Package, the detailed list of benefits that must be included as standardized government health benefits. The standard package contains not only major medical services, but also coverage for routine care, such as eye and ear exams, and even elective abortion and expensive treatments for substance and alcohol abuse. The standard benefits will be tax free to all Americans; those wishing more coverage than the standard package must pay for it out- of-pocket with after-tax dollars. Employee Mandates, which require all employers to provide at least the standard package and to pay at least 80 percent of its cost, with special subsidies and provisions depending on the size of the company. Premium costs are limited to 3.5 percent of payroll for small firms and 7.9 percent for larger companies. Firms with over 5,000 employees will still have to provide at least the standard package, but they may opt out of the alliance system and form their own cooperatives. Government Budgets and Spending Caps. The Clinton plan is riddled with price controls; the central cost control mechanism of the plan is not competition, or even "managed competition," but a rigid set of caps on public and private health insurance spending, plus fee controls for doctors in private practice. Under the plan, the growth in health-care spending is to be forcibly ratcheted down each year until it is in line with the growth of inflation. The target date for this goal is 1999. At first glance, the Clinton plan may not seem unreasonable -- it may even look generous and friendly. It is in reviewing the details, which follow below, that the coercive nature of the plan becomes clear. The Supreme Court of Health The first of the key elements is the National Health Board (NHB), a new federal agency in the executive branch of government. It is created primarily for the purposes of setting national standards for the new federal system and for overseeing the administration of the health care systems in the states once they are up and running. The NHB will be comprised of seven members, appointed by the president and confirmed by the Senate, each serving a four-year term. The chairman of the NHB will be able to serve a maximum of three terms. Secretary of Health and Human Services Donna Shalala, during congressional testimony last October, described the National Health Board as a "minor oversight group" -- completely miscasting the board's power and scope. In fact, the board will have wide rule-making, standard-setting, and oversight authority, making it, in effect, the "Supreme Court of Health." The National Health Board's responsibilities include: Oversight of the health-care system established in each state. The board will establish standards and requirements for health insurance plans in the states, approve state implementation of health-care reform, and monitor compliance. Control over changes in the comprehensive health-care benefit package. The NHB will have almost absolute authority over which benefits will or will not be included in the standard health benefits packages available to Americans. Its decisions are final, unless Congress intervenes. The NHB is also charged with establishing and enforcing compliance with a global budget for national health-care spending. The board will issue regulations for implementing a national health-care budget in the form of price caps on health- insurance premiums. The board will determine per-capita premium targets, or baseline budgets, for every regional alliance in the country, taking into account "regional variations" in price, inflation, and other factors. The board will also certify compliance of the regional alliances with the national health budget. Establishing and managing a "quality management and improvement system" for health-care delivery. The board is to establish and have ultimate responsibility for a performance-based system of quality management and improvement through a new federal program called the "National Quality Management Program." The day-to-day management of the program is to be run by yet another new federal agency, the "National Quality Management Council," composed of 15 members appointed by the president who are "broadly representative of the population of the United States" -- although none of these members may be a doctor, health-care provider, insurance company employee, or in any way connected with the health-care industry. The council is to develop measures of quality -- through consultations with doctors, consumers, insurers and state officials, as well as other health experts -- in order to standardize the measurement of the performance of the health programs. In other words, the council will attempt to quantify "quality." Monitor breakthrough drug prices. The National Health Board is not authorized to set drug prices. However, the board is charged with establishing a special committee of its own membership -- the "Breakthrough Drug Committee" -- which will, in conjunction with another new group, the "Advisory Council on Breakthrough Drugs," monitor breakthrough drug prices to determine whether the initial prices are "reasonable." A breakthrough drug is defined in the language of the bill as a drug "considered to be a significant advance over existing therapies." The bill language, however, does not give either the Council or the NHB explicit powers to roll back a drug price. But the National Health Board is no cheerleading section for high risk investment in new breakthrough drugs. The power and scope of the National Health Board is awesome. Normally, the Office of Management and Budget (OMB) can review regulations proposed by a federal agency and block them if they would be too onerous. But the current language of the Health Security Act suggests that OMB will not have this authority over regulations passed by the National Health Board. In other words, the board will be able to make its decrees without risk of being over-ruled except by Congress. Considering how far-reaching the Clinton plan is, this is an enormous concentration of authority for one government agency. Moreover, it will be extremely difficult to appeal Board decisions once they are made. In fact, all decisions of the NHB over insurance pricing are exempt from either judicial or administrative review. The bottom line: The NHB will decide exactly what benefits and treatments will be available and at what price. And unless the Congress intervenes, no significant change in any aspect of the American health-care system may be implemented without the approval of the NHB. The Clinton administration has clearly attempted to insulate the NHB from the normal means of review faced by other federal agencies. No wonder some critics are calling it the "Health Politburo." The Apparatchiks If the National Health Board is the Politburo of health policy, the individual states are the apparatchiks. It will be the legal obligation of each state to make sure that every citizen armed with a "Health Security Card" is enrolled in a health plan. The states will certify health plans, administer subsidies for low-income individuals and small employers, collect data on health-alliance and health-plan performance, and meet federal quality, management, and fiscal solvency requirements. And by January 1, 1998, each state must have established a regional alliance system for the enrollment of employees and employers in approved health-care plans. The regional alliances are the powerful cooperatives through which health coverage will be purchased and regulated. The alliances may be either public or private entities, a matter left totally to the discretion of state officials. They could simply be state agencies, even an extension of the Governor's office. A board of directors --made up of employers and consumer representatives, but no representatives from any health-related agency or business -- will help run the alliance system in each state. Americans will be required to purchase their health coverage through the regional cooperative to which they are assigned, based on where they live. The boundaries for each region are to be determined by the individual states; each geographic area will have only one regional alliance. The only alternative method of providing health care available to a state other than the alliance system is a single-payer system. That is, a state may choose to control health care directly through a state agency. Under a single-payer system, of course, consumers are denied the freedom of choice of alternative health coverage plans, because there are no alternatives. Although the Clinton administration is downplaying the regulatory strength of the regional alliances, they will have impressive powers. They will decide which insurance companies will compete in their regions and which will be excluded, and will negotiate contracts with the insurers and other health-care providers they approve. The alliances will collect all health insurance premiums; they also will strictly monitor and distribute consumer information on the various plans allowed to participate. The alliances will "represent the interests" of both employers and employees in negotiating coverage with the plans in their regions, as well as enforce the strict federal health budgets. The alliances also have the authority to impose separate budgets and fee schedules on doctors. Ultimately, all issues related to health care and health insurance coverage in a particular area will be funneled through the local alliance. Political Health Care The basic flaw in the alliance system is clear: Health concerns will become political concerns. The alliance plan will politicize health care at every level while severely limiting competition in the health-care market. First, since so much discretion in staffing boards of the individual alliances is left up to the states, alliances will inevitably reflect their local state politics. It is likely that conservative governors or state legislatures, not immune to pressure from their supporters, will develop an alliance system that reflects their views; likewise for liberal state governments. The structure of a state's alliance network will become a political bargaining chip in state elections. But partisan pressure will be just the beginning. Because of the many competing groups that have interest in how the regional boundaries for each alliance are drawn, there is the inevitability of "gerrymandering" - - the creative drawing of regional district boundaries -- in order to provide better prices to favored constituencies. Elizabeth McCaughey, a fellow at the Manhattan Institute in New York who has written extensively on the Clinton plan in the Wall Street Journal, notes that "The system promises to pit black against white, poor against rich, city against suburb." There will be strong pressures on state officials by groups wanting to be included or excluded from certain alliances. Since each alliance will be required to enforce strict budgets for total health care provided in its region, voters will want areas with higher-than-average incidence of older citizens or retirees, pregnant teens, violent crime, or HIV infection excluded from their alliances, and areas of low potential health cost included. As Ms. McCaughey observes, "Everyone will figure out that you get more health care for your dollar or pay lower premiums in an alliance without inner-city problems. The plan will be an incentive for employers to abandon cities and relocate." In spite of regulations in the health legislation prohibiting any type of discrimination in setting boundaries, there are likely to be intense political battles and many lawsuits over this issue. And laying aside geography, let's consider the intense lobbying that will result from the alliances' veto power over insurance plans. Technically, an alliance is required to approve any health plan that wants to offer coverage in its region so long as the plan meets all the federal requirements set down by the National Health Board. But what will prevent a weak, but politically well-connected, plan from being retained in the system? What prevents a good plan from being barred from competing in an alliance system because it poses a threat to politically influential, well financed plans? If the Clinton health plan is enacted, such political problems will spill over to the insurance market place, already heavily politicized. The only exception to enrollment in a regional alliance -- or state health program, in those states opting to manage health care directly -- is for companies with over 5,000 employees nationwide. Such companies may elect to set up their own alliance rather than join a state-based regional alliance. In general, corporate alliances must meet all the same criteria as a regional alliance, but oversight of these corporate groups is delegated to the Department of Labor rather than the Department of Health and Human Services and the National Health Board, and they may initially use different insurance rating systems. The corporate option is discussed further below in the section on employment issues. I'm OK, You're OK How will insurance be offered in the alliance system? There will be standard methods, and each state will set up its individual alliance system or systems in accordance with federal rules. But on one issue there is no question: All insurance companies are legally required to offer insurance at the same premium for any individual or group, regardless of health risk. As opposed to the current system, insurance companies are forbidden to take health histories, lifestyles, and other factors that affect health risk into account when offering insurance. This insurance rating system -- known as community rating -- is supposed to guarantee that no one will be denied insurance because of his prior medical history; no one will have a "pre-existing condition" that will affect premiums. But in the same way that insurance rates will not discriminate against the sick, they will not be able to reflect better health conditions either. Imagine what this means. Those who overeat, smoke, drink, abuse drugs, and engage in promiscuous sexual behavior will be rated exactly the same as fervent health nuts. The logical outcome of such a system is that the healthy -- who require less medical services - - will subsidize those who are choosing riskier lifestyles. Not only does community rating discriminate against the healthy, it actually rewards those who abuse their health. So much for encouraging personal responsibility. Another problem with community rating is the stress it will cause on alliances with higher-than-average incidences of health problems. Alliances serving inner cities facing, for example, the higher rates of drug abuse, violent assault, and premature birth that are endemic to urban areas will spend their health budgets faster than alliances serving suburban or rural areas. Premiums will eventually have to rise to meet the higher costs for an alliance with these pressures. Where it has been implemented -- for example, in the state of New York -- community rating has tended to result in higher average insurance costs. Of course, the Clinton plan solves this problem by simply capping premium costs above a mandated level. The National Health Board is also directed to set up a national risk-adjustment system to compensate for the inequalities inherent to community rating. But these steps are unlikely to eliminate the central weakness of community-rating systems: If a plan attracts higher- risk individuals and groups, but its premiums cannot be raised, the plan may face huge pay-outs and financial collapse. The only alternative is to bail it out, and more costs to the taxpayers are likely. Keeping your Doctor Although the president has emphasized consumer choice as a main principle in reforming health care, the choice available to families is limited by the government, with few exceptions. Unless you receive health benefits through Medicare, military or veterans benefits, or unless your spouse works for a large company, the law will require you to buy health insurance from the limited choices offered by your alliance. And all families must join a regional alliance, or face penalties. For many Americans, a basic concern is whether or not they will be able to keep their own doctors under the Clinton plan. Theoretically at least, they will be able to do so. The Health Security Act requires each alliance to offer at least one fee-for-service plan -- a plan where families choose the doctors they want and the doctor is reimbursed by the insurance company for his services. But the Clinton plan places harsh regulatory burdens on those who practice fee-for- service medicine, including strict fee schedules and budget limits. Politically, it is easy to clamp down on doctor's fees. The fees doctors will be allowed to charge are unlikely to even meet their overhead, much less allow them any profit. Many doctors may find it impossible to continue in private practice under these conditions. As Newsweek recently reported, "Despite the president's attempts to be reassuring about the changes that will ensue, there is a very good chance that our relationship with our current doctor will be disrupted -- the physician may leave medicine altogether or join a health plan we do not choose to join." The wealthy will still be able to go outside their plans and pay for a physician's services out-of-pocket, with no tax deductions, but for average Americans such expenses will be prohibitive. Private practice medicine will become a luxury item reserved only for those who can afford it . One Size Fits All A particularly mind-numbing section of the Health Security Act is the 56-page section devoted to the standard benefit package that every health plan must offer to its subscribers. This benefits package is not just a minimum or catastrophic package. It is a comprehensive benefit package covering a broad range of medical services, and it is this precise package -- no more and no less --that health plans are required to offer. Bill Clinton promised America "Fortune 500 health care," and his standard benefits package certainly gives that impression. It will provide major medical coverage, including an impressive array of hospital and physician services, diagnostic services, preventive care, mental health and substance abuse benefits, family planning and "pregnancy related services" -- including abortion --prescription drugs, hospice, home health and rehabilitative services, vision and hearing care, and preventive dental care for children. Among the items specifically excluded from the benefit package: in vitro fertilization, sex change operations, and dental implants. Who could argue against such lavish coverage? Some doctors and patient groups do, claiming that it is still not comprehensive enough. But the problem with the benefits package is not so much what it covers now, but what it might not cover in the future. Once the standard benefits package is finalized, approved by Congress, and executed by the health alliances, it may become very hard to amend. Other federal experiences in setting benefits suggest that it will be extremely difficult, once the standard benefit package is in place, to add new treatments, procedures, or benefits to it. Medicare, the federal insurance program that cover some 35 million elderly and disabled Americans, provides a good example of the delays that can occur in evaluating new technologies, medical procedures, and medicines. The bureaucratic method used in the Medicare system to evaluate new treatments involves several government agencies and a lengthy review process. Consider medical technologies: In 1991 and 1992, only 18 such evaluations were completed of the many pending. Some assessments have been buried in the bureaucracy for as long as three years. And when considering the procedures for adding new benefits to the package, Americans should also give serious thought to the history of long delays in drug approval by the Food and Drug Administration. Bureaucratic delays by the FDA in approving life-saving drugs actually caused the Bush administration to launch an overhaul of the approval process and expedite approval of drugs to treat deadly diseases such as AIDS, cancer, and cystic fibrosis. Americans should be alarmed at the prospect of approval procedures like these for the general health care system. Not only might vital new medicines, treatments, and technologies be excluded from the benefits package, or only become available after long delays, but such a system invites special interest pressure. Inevitably, what is or is not included in the benefit package will become the subject of intense political debate and heavy lobbying, with Congress and the National Health Board pitted against medical specialty boards, groups afflicted with particular conditions, and other special interest groups. This will compound the politicization of health care, already established through state- government management of the regional alliances. Your Health or Your Job The Clinton plan places the enormous burden of insuring America on American employers. Every employer in America will be required to participate in the financing of health-care reform, whether that employer is a private household employing a nanny or a huge corporation employing hundreds of thousands. For full-time employees, the employer must pay at least 80 percent of the average premium for the individual or family coverage of the employee. The employee pays no more that 20 percent of the average cost, plus any extra premium for selecting a higher-than-average cost plan. Employers of under 5,000 workers -- small businesses -- must place all their employees in a regional alliance; the employees will then have their choice of plans from among those offered by that particular alliance. The federal government has placed a cap on the total contribution made by employers whose employees join a health alliance: The difference between this cap and 80 percent of the average premium will be picked up by the federal government. Counting this subsidy, the employer contribution for firms with 75 or fewer workers, as a percentage of payroll, ranges from 3.5 percent for low- wage employers to 7.9 percent for high-wage employers. No employer in a regional alliance will be obliged to pay more than 7.9 percent of payroll for health insurance. Low-wage workers -- such as minimum wage workers or some part-time employees who join regional alliances -- will also receive government subsidies to help them pay their share of the insurance premiums. In the Clinton plan, no family with an adjusted income of less than $40,000 will pay more than 3.9 percent of income in premiums. A company with 5,000 or more workers has two options. First, it may place all its employees in regional alliances, and take advantage of the employer- contribution caps and other subsidies available for those in the regional alliance system. Or the corporation can elect to set up its own corporate alliance. If a business chooses this option, the corporation's managers would organize their employees into a distinct corporate purchasing cooperative, where at least three different types of plans must be offered: a fee-for-service plan and two other plans that are not fee-for-service. Oversight to these corporate alliances is designated to the Secretary of Labor, who may dissolve them if they do not meet budget targets on time. Although the Clinton plan does provide the corporate option, there are strong disincentives to creating a corporate alliance. Firms choosing this option face a double whammy. First, it is the employer, and not the government, that subsidizes the employee's share of the premium for low-wage workers. And second, subsidies are not available to corporate-alliance employees -- in other words, the payroll caps on premiums do not apply to corporate-sponsored alliances. A "Small" Impact? A simple rule of economics is that any mandate on employers to provide health insurance necessarily adds to the labor costs of firms that do not now offer health insurance, or offer a package less generous than the Clinton benefits package. Higher labor costs translate into higher prices for consumers or reduced compensation for employees, either in wages or benefits. Depending on the size of the firm, the higher labor costs will translate directly into lower wages or job loss. Since the Clinton plan places such a large additional cost burden on employers, there is virtually no question that some workers will pay for the plan with their jobs. Most economists, and even administration officials, agree that job loss will occur, but disagree on how much. Time magazine reported an estimate of 1 million jobs lost. A recent study conducted by Baruch College Professors June and David O'Neill for the Employment Policies Institute estimates the job loss caused by the new employer mandates at 3.1 million. The more conservative estimates from the Employee Benefit Research Institute range from 200,000 to 1.2 million. Even Council of Economic Advisors Chairman Laura Tyson admits that job loss will occur, although she estimates the loss at roughly 600,000 jobs -- an impact she considers to be "very small." How Much is Too Much? President Clinton has always argued that one of the most important reasons to reform the national health system was to get the price of health care under control. And controlled it will be. The Clinton plan calls for spending reductions starting in 1996 that will align health spending increases with the consumer price index (CPI) by 1999. The National Health Board will set a global budget -- the total amount that may be spent on health care in America in a given year -- and set a per-capita premium target for every regional alliance in the country. In other words, the federal government will decide how much America can spend on all aspects of health care, in what regions, and set a budget. And this budget will become the law. To help achieve this budget, the plan will constrain the price of health insurance, also by pegging its cost increases to the CPI. It will be the job of the National Health Board to enforce the global budget. If a regional alliance in any state exceeds its official budget target, an "assessment" -- in other words, a fine -- will be imposed on each plan whose premium exceeds the limit for the alliance. Fines will also be imposed on the doctors and other health-care providers in the existing plans. The wisdom of using the consumer price index as a benchmark for health prices remains in doubt. The CPI is a particularly rigid standard; moreover, the CPI is not a crystal ball that can accurately predict coming health costs. Using the CPI target, according to one federal expert, "would create a tighter spending control system than that of any other nation." Elizabeth McCaughey, writing in the Wall Street Journal, is also skeptical: "Mandatory limits on health care spending may wring waste out of the system for the first year or two, but will cause hardship in succeeding years as the 77 million baby boomers age and require more medical care. Limiting spending growth to the CPI, in defiance of this population trend, will have predictable results. In Britain, where health care is rationed, people over 55 are routinely denied kidney dialysis." What will be the practical effect of the price cap on health insurance? Ms. McCaughey has said it well: "Limiting how much people can choose to pay for insurance limits how much money is in the pot to take care of them when they're sick." What happens if health-care consumers in a regional alliance spend their budget before the end of the year, even if there are still patients left to treat? The alliance and the plans will cut, slow down, or even stop payments to doctors, hospitals, and other providers -- even though these same providers are legally required to treat members of the alliance, regardless of whether payment will be received. It is entirely possible that, in a particular alliance, an unanticipated surge in spending could result from a nasty flu epidemic, an increase in AIDS in the region, or an outbreak of other types of infectious disease. These are all pressures many regions are facing today. But even such understandable spending increases might be labeled excessive under a pre-set system of rigid spending caps. Insurance companies will be the organizations with the strongest incentives to hold down costs in such a system. Desperate to avoid fines, insurance companies will do everything possible to restrain what they consider to be "unnecessary" medical practices, procedures, and diagnostic tests. The easiest way for insurance companies to restrain costs is to refuse payment for certain kinds of care. Doctors will be more hesitant to order treatments they are afraid will not be covered. They may end up curtailing some necessary procedures in the process. The inescapable fact is that in a global budget system, the only ways to hold down spending are to impose price controls and limit services. The global budget will inevitably lead to rationed health care. They're Not Buying. . . A final question every American should ask about the Clinton health plan: If it's so great, why are federal workers refusing to sign up for it? Because today, federal workers are covered by a popular health benefits system known as the Federal Employees Health Benefits Program (FEHBP). FEHBP covers some 10 million federal employees and retirees, including all members of Congress and the executive branch of government. The program allows federal workers to choose from among dozens of health plans; FEHBP relies on the principles of choice and competition to control costs. Competition works: The federal government recently announced that many workers enrolled in the plan would actually see their premiums decrease next year, and many will receive "new or improved preventive care services." The FEHBP has worked for federal employees for 33 years, and they're not willing to give it up without a fight. So when President Clinton proposed abolishing FEHBP and folding federal workers into a national health plan, pressure from federal unions and certain influential members of Congress forced him to delay their inclusion in a system some of them will actually run. In an extraordinary letter to Hillary Clinton, which highlights the benefits of a delay, Office of Personnel Management Director James King wrote, "I think that it is important the FEHBP population be given the opportunity to see that national health reform is working before they are transitioned into it." It seems that not even those government workers with access to the best information from the White House are willing to take a chance on the Clinton plan. The result: Federal workers are not to be enrolled in the Clinton plan until January 1998, after everyone else. The health plan that's good enough for you is clearly not good enough for your congressman, your mailman, or any other federal worker -- at least not until you try it out first. Think about that the next time the president asks you to sign up and make your "contribution." ------------------------------------------------------- To reprint more than short quotations, please write or FAX Ben Morehead, Associate Publisher, Policy Review, 214 Massachusetts Avenue, NE, Washington, DC 20002, FAX (202) 675-0291. ###