Are You Ready for the Cure?

By GEORGE J. CHURCH

Health-care reform, the domestic program supposed to change Americans' lives more than any other legislation since the Social Security Act of 1935, will be unveiled by Bill Clinton with a flourish of trumpets and roll of drums around May 1. Hold it: about 10 days later. On third thought, let's say the week of May 17. Er . . . would you believe mid-June?

It will cost somewhere between $30 billion and $90 billion a year. Well, make that $100 billion. Or maybe $150 billion, tops.

It might be financed partly by taxing workers on generous medical benefits paid by their employers. Oh no, it won't. Well, probably a payroll levy split between workers and their employers -- only please don't call it a tax. Say "wage-based premium."

Anyway, there will be price controls to hold down the cost. Or will there? Some kind, maybe. And Medicare won't be touched. Yes, it will; in fact, eventually it might be swallowed whole by a new system.

Confused? So are the doctors, nurses, hospital managers, insurance officials and company executives, whose incomes or profits will be drastically affected by the plan, and members of Congress, who will have to vote on it. Not to mention the patients, whose health may be at stake, and the taxpayers, who will have to pick up the bills. All have been subjected to months of wildly confusing and contradictory reports. Some apparently were Administration trial balloons, launched to test the reaction of the public and special-interest groups. Many more, or so White House insiders insist, were leaks from some of the 500-plus members of the Administration's health-care task force, who greatly exaggerated -- probably even to themselves -- how seriously their bosses were taking their ideas.

But now the confusion is at last starting to clear. Within the past few days, a six-page briefing paper marked PRIVILEGED AND CONFIDENTIAL has emerged from the White House and has begun to circulate among legislators. It lays out the basic structure of a radical overhaul of health care and provides talking points for pitching the plan to skeptics. All Americans will be "guaranteed" the right to health insurance, even if they are among the 37 million not now covered. The Federal Government will define a standard package of benefits that must be made available to everybody; states will have the job of setting up "alliances" of consumers and employers that will negotiate with pools of < insurers to make certain the package is actually delivered.

Clinton is determined to build tremendous flexibility into the plan, so that states can develop their own systems and patients can have a reasonably wide choice of doctors and hospitals, said Ira Magaziner, the White House health- care adviser, in an interview with TIME. "It's just too diverse a country. If you try to put one template on the country, it will be too bureaucratic," said Magaziner. "We also think that it helps, when you're trying something new like this, having different states do it somewhat differently without pushing the whole country in some direction. As much as we've planned, we're not going to get it all right. You try to allow for a lot of self-correction as you find that some of your initial concepts are not working out."

The Administration is also seriously considering price controls, at least in the short run, on insurers, health-care providers, and prescriptions. Over the long term, it is leaning toward a kind of indirect price control on doctors called a "budgeted fee for service." The reformers envision a health-care system in which almost every physician in the country will become part of a network, practicing under caps and within a preset budget. Even if not part of a formal health-maintenance organization, groups of doctors will join together to offer their services through a health alliance. In return, the doctors will be paid on a "capitated" basis, a fixed amount for each person served in a given time period, regardless of how much service is actually used. Doctors will not be allowed to charge patients more than the fee in their contract, a practice known in Medicare today as "balance billing." Says Magaziner: "They need to live within that budget."

The remaining questions go well beyond pesky details, though there is no end of those, to basics that can be decided only in the Oval Office. Among them: Just what should the basic benefit package include? The answer will go far to clear up another puzzler: How much is the whole plan likely to cost? Whatever the figure, how will that cost be paid -- whose taxes should be raised how much? "These are all tough ones, and there are trade-offs with each, none of which are easy," says Magaziner.

As these questions loom, Clinton has begun once more to participate personally in the planning. Since April, he had pretty much let the Administration task force, which is headed by his wife Hillary Rodham Clinton, operate on its own. But the President began meeting with key members of the task force again over the weekend -- and not a minute too soon. He will have to preside over something of a split between the forces of the left, led by Health and Human Services Secretary Donna Shalala, and those of the right, led by Treasury Secretary Lloyd Bentsen. "Given their druthers," said an official, "the HHS crowd would rather have a ((government-run)) single-payer system with extreme regulation and cost controls. The economic types are worried about the economy, and so they want no cost controls and no regulation. I'm not going to deny there are tensions in the room. But we're going to end up somewhere in the middle."

Those and many other issues must be resolved soon if the Administration is to meet its current mid-June deadline for presenting a plan to Congress. It had better, if it is to preserve any hope of getting something passed this year. Chances are not high in any case, given the complexity of the plan and the fury of the political fight its presentation is certain to touch off. But White House strategists want to try. The sooner the plan is set up, they reason, the more quickly it will start to generate eventual savings.

Passage sometime is central to Clinton's hopes of salvaging a successful presidency from a somewhat stumbling start. His deficit-cutting plan is again beginning to make some progress; his proposed tax increases have just passed the House Ways and Means Committee. Nonetheless, much of the public still views him as disappointingly ineffectual. In a TIME/CNN poll last week, 47% of those in the survey approved of the job Clinton is doing as President, down sharply from 56% the day after he announced his economic program. An apparent reason: 57% of the respondents thought that Clinton "has good ideas but can't seem to get them passed."

The public, however, is overwhelmingly in favor of the general idea of health-care reform, and it was one of the biggest vote getters among Clinton's campaign promises. Besides, it may well touch the everyday lives of more Americans more intimately than anything else on the President's agenda. So, many analysts within and outside the Administration view it as a make-or-break issue, one that conceivably could decide whether Clinton is re-elected in 1996.

Some of the confusion and opposition that occurred in developing the plan probably was unavoidable. The present health-care system is not really a system at all but a hydra-headed monster that grew by accretion over decades without any direction. Imposing any kind of plan on it is inevitably an immensely complicated undertaking, made more difficult because some people and organizations that have prospered under the inefficient nonsystem see any change as a threat.

But the Administration made the task harder by the procedure it adopted. Elementary prudence -- not to mention Clinton's usual habit of seeking to accommodate everybody -- would seem to have dictated trying to bring the major interest groups aboard from the start, at least to the extent of listening to their views and thus giving them a stake in a plan they could feel they had helped shape. Instead, the White House turned the job over to a 511-member task force whose very names were kept secret. When the Administration grudgingly issued a list, the task-force members turned out to be mostly congressional assistants, academics and think-tankers little known even inside the Washington Beltway. Typically, Daniel Callahan, the nation's best-known expert on medical ethics, said, "I know the top 10 minds in the country on this issue. I've talked to them." Not only were none of them on the task force; they knew none of the people who were.

Worse still, say critics, the task force was divided into working groups whose members concentrated on tiny parts of the plan -- and frequently solved one problem while unknowingly creating two more in other areas. When the Administration did finally begin to invite the opinions of about 50 outside experts, it did so under conditions of continuing secrecy. They were shown, one by one, into a room in the Old Executive Office Building and given a glimpse of the portion of the plan relating to their particular areas of expertise. But none were allowed to make copies or take notes, and few were permitted to see the whole plan, although several protested they could not judge the proposals in their area unless they could see how they related to the rest. Said Dr. John Lewin, health commissioner of Hawaii: "It's like visiting the Dead Sea Scrolls." The procedures supposedly were designed to insulate the task force from special-interest pleading. But the effect was to add to the practical and philosophical objections that were sure to come the resentment of experts who felt they could have made important contributions but were ignored.

Administration officials now contend that the 511 were never as important as either their critics or they themselves thought. Magaziner insists the huge group was needed but admits that the magnitude of the process may have unnecessarily inflated expectations. The task force did develop a wide range of ideas for Magaziner to consider -- at meetings, called tollgates, which dragged on for hours -- and pass along to Hillary Clinton. But, say insiders, many of those ideas were never even read; a core group of roughly 30 Cabinet members and their aides, and most of all Magaziner and Hillary, did the real planning. That is not altogether reassuring. Hillary Clinton continues to draw admiring comments about her intelligence, courtesy and sense of direction even from bitter critics of the plan. Not so Magaziner, a policy wonk's policy wonk who tends to be obsessed with process and speak in a mystifying jargon. "He costs us two or three votes every time he goes up to Capitol Hill," says one Administration official, not entirely in jest.

More important, the Administration has been bedeviled from the beginning by a conflict between two contradictory aims: extending coverage to everybody and holding down costs. Hillary Clinton and the task force have regularly favored covering everybody, and generously at that: psychiatric care, nursing-home care, payments for prescription drugs and other expensive propositions were steadily added to the menu. By April, some of the Administration's economic officials, notably Bentsen and Budget Director Leon Panetta, were concerned enough about the prospective costs to urge more work and a postponement in recommending the plan. Bill Clinton agreed (even though he had set the early May deadline by promising a plan within roughly 100 days of Inauguration), and a series of delays ensued.

The postponements do not seem to have brought the Administration much closer to its goals. Eager to hold down costs, Hillary, Magaziner and allies have been talking about broadening the plan still further, to encompass health payments for auto-accident and workplace injuries and to have people stay enrolled in the program rather than switch to Medicare as they turn 65. The aim would be to reduce costs by avoiding duplication. But even if that happened, the government would have to find a way of capturing from patients and insurance companies the money saved, so that it could finance extension of coverage to the uninsured and underinsured. A simple way of holding down costs would be to slow down the extension of benefits and coverage of the uninsured; & certainly the whole plan cannot immediately be put into effect. How rapidly or slowly to phase it in is another of the decisions only President Clinton can make, and that he must do soon.

Nobody has to theorize about how organized interest groups are likely to respond. Only two are backing the plan, and of them, only the American Association of Retired Persons has summoned any enthusiasm. That is a bit of a role reversal, since the 32 million-member AARP did much to kill a law enacted under the Reagan Administration that would have insured people against catastrophic illness. AARP helped persuade Congress to repeal the law on the ground that it imposed on oldsters too high a cost in extra premiums. This time around, AARP is pleased that the Administration intends to insure the aged against the often ruinous costs of long-term care and spread the extra costs among the population at large. The organization is noncommittal, so far, on the idea of folding Medicare into a wider health scheme.

The American Medical Association, which in the past has pronounced anathemas on anything sounding like medical price control, is also giving support to the Administration's plan. Pro forma support, anyway; the doctors are pleased the Administration has been listening to them and figure they have put themselves in a position to exert influence in further dickering over what finally emerges from Congress. Privately, confides one high-ranking AMA official, many members would be happy to see the plan defeated "so that we can start all over again and do it right. We want reform," he asserts, but experts estimate that the Clinton plan as it is developing will cost Americans $3,500 a year each on average, and "if costs spin out of control, the health-care system will suffer. We think the plan is reckless." The AMA will not say any such thing publicly, however, for fear of losing its bargaining leverage.

Otherwise, interest-group reaction ranges from skeptical to horrified. The AFL-CIO is afraid that union members who accepted smaller wage increases as the price of negotiating health benefits more generous than the Administration's basic package will have those scaled down too, or be forced to pay extra for them; the White House so far has failed to reassure the unionists. Small businesses that provide scanty or no coverage for their workers are terrified that they will be forced to pay huge sums -- as much as $60 billion a year, by one estimate -- to bring benefits up to the federally enforced minimum, and some fear they might be bankrupted. Magaziner insisted in a speech last week that if a small business was required to pony up, say, 8% of its payroll, that requirement would be phased in slowly enough to give the firm time to adjust. But like the unions, the little businesses will probably be hard to convince.

Big companies supposedly will fare well: if they have contracted to provide their workers benefits more generous than the federally guaranteed basic package, they can in effect opt out of the broader system and carry on as before. But some fear Clinton and Magaziner want to make them pay handsomely for that privilege, in the form of a tax or premium that would be used to cover the uninsured or skimpily insured. Says a medical executive: "Magaziner's philosophy seems to be that every place somebody is saving money is a place that he can get money."

The most surprising opposition has come from some of the intellectual parents of managed competition: the idea of grouping consumers and doctors into huge pools that would bargain with insurers over premiums and coverage. It was a foregone conclusion that small insurance companies would object, fearing they might be driven out of business, and they do. The odd thing is that the handful of large companies -- Aetna, CIGNA, MetLife, Prudential and Travelers -- that broke away from an organization called the Health Insurance Industry of America to form the Alliance for Managed Competition are also gearing up to oppose what is supposed to be their handiwork. Their argument: Instead of trying to institute a true managed-competition system, the Administration is opting for an unworkable combination of that and a system known as single-payer. Under a genuine single-payer system, like the one that operates in Canada, the government is the only insurer and pays all doctor and hospital bills, negotiating with the caregivers as to what is an appropriate charge.

While the nascent Administration plan is not at all that, critics say it seems likely to include some features that are incompatible with a real managed-competition system, which would rely on rivalry among networks of buyers and insurance sellers to hold down costs. Says John Moynahan Jr., executive vice president of MetLife: "There seems to be an almost inexorable drive toward regulation and price controls coming from people whose mind-set has historically been toward a federally run, single-payer national health- insurance system." Critics in particular single out Shalala, who supposedly salted the Administration's task force with allies eager to push the plan as far toward a single-payer system as they could. But a senior White House official ridiculed the criticism by the managed-competitio n purists and said, "Look, this is not going to be managed competition or single-payer. It's going to be something completely new and different."

Despite the flak from interest groups, the Administration has some powerful political levers it can pull. Congressional Democrats are eager to help their President, though apprehensive about the costs of the reform the Administration is contemplating. Says a conservative Southern Senator: "Everyone knows that health care will be the issue that the President cashes in all his chips for. Democrats won't stray unless they have great reason to. But we still don't know how health-care reform will be paid for, and we're not just going to rubber-stamp the deal." Republicans, like the Democrats, are getting an earful from their constituents about the high costs, insecurity and gaps in coverage of the present jerry-built nonsystem. Some will try to find reasons to vote for reform, and even those who are inclined to oppose it are leery about unleashing their ultimate weapon, the Senate filibuster. Says an aide to Senate Republican leader Robert Dole: "It's not even on the radar screen at this point. A filibuster might be viewed as an endorsement of the status quo on health care, and a lot of Republicans don't favor that."

Even so, Administration officials know they will have a tough selling job with the public. Much as they approve of reform in general, the 220 million Americans who now have medical insurance are really looking for lower bills and better-quality care, or both. Republicans are likely to tell these people that they will be asked to pay more for less or no better care, for the sake of covering the 37 million uninsured. Administration officials concede that contention may be troublesome -- especially since polls show as many as 70% of those questioned think that Clinton is "too willing" to raise taxes, even before he addresses paying for health care. Says an official: "We don't have too far to go before we've gone too far."

Clinton lieutenants are preparing counterarguments. The briefing paper hints at the main line: yes, you might pay more, but we are offering security. You could not be turned down for insurance, dropped or forced to pay a higher ! premium even if you have AIDS, cancer or some other "pre-existing condition," in the insurance jargon. You could not lose your insurance or have it reduced because you are fired or laid off, or because your company goes bankrupt or because you quit to look for a better job; your benefits will be portable. "The health-security button is the one we're pushing," says a White House official involved in the planning. "People will pay more for security."

Maybe. But there are other aspects of the plan that might antagonize the great middle class. More than half those polled told the Yankelovich pulse takers that their support would go down if the plan interfered with their choice of a doctor, or "allowed you to see a doctor less frequently," or made the doctor get permission from an insurer before performing a medical procedure. The White House briefing paper stoutly insists that the developing plan "allows all Americans to choose their doctors as they can today."

Simultaneously, though, the briefing paper speaks of "gatekeepers" who "will discourage unnecessary consumer usage" of medical care, in part by asking patients to pay more of the cost. In addition, some health plans will limit the pool of doctors from which consumers can choose. All of which sounds exactly like the kind of regimentation the people in the TIME/CNN survey object to.

About the only certainties are that presentation of the plan, whenever that occurs, will ignite one of Washington's epic fights and that, as Administration officials freely concede, if anything is finally enacted, it will be a heavily amended version of what Clinton winds up proposing. The big question is whether the final plan will actually improve the nation's health at a reasonable cost or turn into a mishmash as bad as the one it is intended to replace.

With reporting by Janice Castro/New York, Michael Duffy and Dick Thompson/Washington, with other bureaus