Clinton lite: why would big business, in rejecting the Clinton health-care plan, go for one with many of the same features? - Bill Clinton's managed care reforms

National Review, March 7, 1994 by John Hood

THE Clinton Administration's health-care bandwagon wobbled into February with two fiat tires and a twisted axle. Already some liberal Democrats were castigating the President for compromising too much, insurance-company ads on national TV were cutting into public support for the plan, and Senate Finance Committee Chairman Daniel Patrick Moynihan (D. N.Y.) was sending strong signals that he thought welfare, not health care, should be Congress's top priority in 1994. But the biggest speed bumps were yet to come.

In quick succession, four organizations-the National Governors' Association, the Business Roundtable, the U.S. Chamber of Commerce, and the National Association of Manufacturers-staked out positions either mildly or strongly at variance with the President's legislation. The Business Roundtable's announcement probably stung the most. Partisans of the Clinton plan, including the First Lady herself, had been lobbying members of the big-business group for weeks. By a large margin, however, its policy committee endorsed as a "starting point" in the debate a rival "managed competition" plan sponsored by, among others, Representatives Jim Cooper (D., Tenn.) and Fred Grandy (R., Iowa), and Senator John Breaux (D. La.).

Liberal lawmakers and Administration defenders were quick to spin ClintonCare's setbacks as expected and irrelevant. White House aide George Stephanopoulos hinted that the U.S. Chamber was "bowing to some sort of pressure--I don't know what." Senator Jay Rockefeller (D., W. Va.) told the New York Times that if the Administration had won business support for its plan "it would have been the upset of the decade." But the reality is much more interesting. Clinton partisans actually believed they could win significant business support for a muchexpanded government role in health care, and fought until the very end to get it. Nonetheless, business executives preferred the version of managed competition put forth by Cooper, which even he calls Clinton Lite. For average Americans seeking more health care for their dollars and more control over their medical destiny, however, Cooper versus Clinton could be a distinction without a real difference.

The Same, but Less

JIM COOPER, until recently a backbencher in the House, now plays an almost unbelievably powerful role in the health-care debate--lobbying Perot's United We Stand one day, talking to White House staffers the next, cozying up to medical and business groups the day after that. What's amazing is that his plan is so widely considered a palatable alternative to ClintonCare, when in fact it is so similar. Here's a comparison of the two plans' main elements:

--Both would create a national commission to specify a uniform benefits package that all insurers must offer--in Clinton's bill to be part of the system at all and in Cooper's in order to qualify for federal tax exemption. While the Clinton bill spells out many of these benefits, Cooper-Grandy provides broad outlines of allowable coverage and then leaves decisions on specifics to the commission. But in either case, the result will be a relatively generous package, with very low deductibles and co-payments. Defining a standard-benefits package will inevitably be a heavily politicized process, with lobbyists for each segment of the medical industry pushing to have its services or treatments included. We already find such a process in state capitals, where legislatures have imposed a large number of mandates on the provision of health insurance, ranging from chiropractic care and acupuncture to drug counseling and mental-health services.

Requiring all insurers to offer a standard package with low deductibles is no reform at all. Patients aren't really getting anything from the deal; they are still paying for services included in the basic package, but they're doing so up front, through high premiums, which decouples their medical consumption from the costs of that consumption, reducing their financial incentive to shop wisely for routine care. It is this system of pre-paid health care, in which the bill is funneled through third parties (insurers or the government) that drives a significant part of medical inflation. There are really two approaches to controlling the demand for health care: either give patients a direct financial stake in reducing their consumption, or else let the third-party payer "manage" the patients' healthcare consumption for them. Both ClintonCare and Cooper's Clinton Lite choose the latter approach. They would not permit "patient power" plans allowing consumers to buy catastrophic insurance with high deductibles and deposit their premium savings in medical savings accounts to pay for routine expenses directly.

--Both bills would authorize monopoly health alliances to pool purchasers of health insurance. But while Clinton's bill requires employees of all companies with fewer than 5,000 workers to join an alliance, the Cooper bill establishes a much lower threshold of 100 workers and simply ends federal tax deductibility for those under the threshold who purchase coverage outside an alliance. However, this still forces all small businesses and self-employed individuals to buy their insurance through a government-controlled monopoly or else be heavily taxed by Washington. And even though medium-sized businesses can escape participation in health alliances under the Cooper plan, they will still have to offer at least the standard benefits package in order to avoid punitive federal taxation. In effect, both ClintonCare and Clinton Lite would tell most employers and individuals what kind of insurance they can buy and from whom they can buy it.