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Keeping The Health Plan From Kicking The Bucket


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KEEPING THE HEALTH PLAN FROM KICKING THE BUCKET

Time is running out for President Clinton and his allies in Congress. They don't have the votes to pass the comprehensive, mandatory health insurance plan Hillary Rodham Clinton proposed 11 long months ago. If the Clintons want to rescue any sort of victory from the current chaos, they must drop their demand for universal coverage and shift the debate to a basic question: What can Congress do now to solve the most pressing problems of our bloated, unfair health-care system?

The answer: a lot. Washington has already reached a consensus on sweeping revisions of health insurance that would ban the most loathsome practices--such as redlining the sick or dropping policyholders when they need coverage most. Coupled with simple steps to make the medical market more efficient, these reforms--widely acceptable politically--could reverse the twin spirals of declining coverage and out-of-control costs that are undermining America's health care.

Hillary Clinton scoffs at such "incremental" reforms, warning that they could make Americans worse off. That certainly has been the case in New York, where legislators took ideas designed for a mandatory insurance plan--guaranteed access to coverage at prices that ignore age-related differences in health costs--and laid them on top of a voluntary system. Premiums shot up as older, sicker people flocked to buy policies, while young adults dropped insurance. The result: 25,000 fewer New Yorkers have insurance now. The Health Insurance Association of America figures that careless reforms could drive up premiums nationwide by 29% to 45%.

But pitfalls such as these can be avoided. If Congress wants a practical health-reform plan that can fly, here's a blueprint:

-- Let everyone buy insurance--but not on the way to the hospital. Every major bill in Congress requires insurers to sell to all comers, healthy or sick. "With some bills, you can pay a $400 first-month premium, get a $10,000 operation, then drop the policy," says Henry J. Bachofer, an analyst at Blue Cross & Blue Shield Assn. The solution: penalty rates and limits on coverage of preexisting conditions for patients who let their coverage lapse. Sick people could change insurers without facing any penalties, but free-riders who can afford coverage but go months without it would pay extra to buy back in.

-- Let insurers set premiums by age, not by health. A 60-year-old uses four times as much health care as a 25-year-old. But many reform plans would make both pay the same premium--a scheme known as "pure community rating." Besides being unfair--young workers would subsidize middle-aged people who are in their peak earning years--such plans drive young people to drop their insurance. (The elderly are a separate matter: Their costs are largely covered by Medicare, which isn't being reformed.) Smart reform would protect the sick but would let premiums vary by family type, age, and local health costs.

-- Give consumers clear benefits choices, but don't lock in a one-size-fits-all plan. Reformers want to impose a standard benefits plan, so buyers can easily compare prices and quality. The pitfall: When politicians specify benefits, as the Clintons did in their bill, the plan inevitably becomes expensive and inflationary, as every medical interest group insists on being covered. The best remedy is to create a half-dozen model packages that let insurers experiment without confusing buyers.

-- Tell consumers how much they're spending. Few people realize what their employers pay for health insurance--or that insured workers share in a $75 billion-a-year tax break. Reform should require companies to spell out those costs on annual wage statements. Congress should ignore labor's opposition and tax the richest medical benefits.

These reforms alone won't bring health insurance to every American. Small business must step up efforts to form purchasing cooperatives to bolster its buying power and bring down premiums. The government still must subsidize the poor. And even then, some people--mostly the young who don't expect to need care--will choose not to buy insurance.

But incremental changes can halt the decline of America's health system. And they're accepted by virtually every insurer, health provider, and business. That's a formula for political success--and better health care for millions of Americans.

A HEALTH PLAN THAT CAN PASS--AND WORK

INSURANCE REFORM

-- Let insurers set premiums by age, but not by health status. The healthy will subsidize the sick; the young won't be driven out.

-- Keep some restrictions on preexisting conditions. Charge free riders extra to resume coverage.

-- Let insurers experiment with variations on standard benefits.

COST CONTROL

-- Make health costs visible. Employers should let workers know what impact their health premiums are having on wages.

-- Start limiting tax breaks for

insurance.

-- Make doctors and hospitals compete. Don't pile restrictions on efficient managed-care plans.

DANIEL ADELMike McNamee


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