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Health Care: The Anatomy Of a Reform

How a professor's little-noticed article led to the most-sweeping legislation since New Deal

PRESIDENT Clinton's plan to overhaul the health-care system is not just another eye-glazing, book-length litany of policy proposals.

What has emerged from hundreds of experts working into the night last spring in the Old Executive Office Building and the White House West Wing over many Chinese takeout dinners may be the most ambitious social legislation in American history.

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Mr. Clinton's speech Sept. 22 before a joint session of Congress initiates a new phase in the health-care debate. It is moving from the policy workup phase, in which the debate has largely been among experts, to a full public hearing.

Clinton's proposals will rattle noisely around Capitol Hill committee rooms and kitchen tables across the country for many months as public opinion and the body politic come to judgment.

Much of the public diplomacy and salesmanship for the Clinton plan will be led, as was the task force that developed the policy, by Hillary Rodham Clinton. She has been strikingly effective so far at building bipartisan goodwill for her project in Congress.

But the Clinton plan has many obstacles to avoid and will inevitably change in the process. It involves restructuring one-seventh of the American economy and moving it under closer government management.

At the heart of the plan is an idea developed by a Stanford University business professor, Alain Enthoven, in the late 1970s. But even two years ago, relatively few policy experts had heard of ``managed competition,'' Professor Enthoven's treatment for a health-care system that, many say, is progressively bankrupting the country.

He refined his idea in a 1989 article in the New England Journal of Medicine. What Enthoven proposed, in essence, is that businesses band together in purchasing cooperatives to buy health insurance for their employees, giving them strong negotiating clout with insurers and giving even small businesses economies of scale that can cut costs.

The theory is that the cooperatives would hold down costs, while consumer choice would force up quality.

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The idea was endorsed and spread by the Jackson Hole Group, policy analysts and health-industry executives who form a kind of loose think tank.

For skeptics doubtful of managed competition's ability to hold down health-care costs, a liberal Princeton University sociologist, Paul Starr, added a key element. He proposed that the government set global limits for all health- care spending as a kind of backstop in case managed competition's market forces failed to control costs.

Most Democratic politicians, meanwhile, were on a different tack. During the last presidential campaign, most of them backed a concept called ``play or pay,'' which set up a public insurance plan to cover the uninsured. Businesses could either offer health insurance to their employees or pay into the public plan.

Others, such as Sen. Bob Kerrey (D) of Nebraska, a former presidential contender, favored Canadian-style national health insurance.

WHEN Clinton wrote his campaign book, ``Putting People First,'' in the summer of 1992, his health-care proposals had most of the goals that guide his current plan. But his method smacked of ``play or pay.''

By August, managed competition was working its way into Clinton's policy, and by his first major health-care policy speech, almost exactly a year ago, Clinton's plan looked very much like Dr. Starr's version of managed competition.

For all the internal disputes, delayed deadlines, and a cast of hundreds cloistered through the spring in White House working groups, the plan has changed little since last September.

Some shifts have occurred. The basic benefits package was once proposed to be better than 85 percent of current plans. Now it is set at the average. States had little flexibility in earlier versions. Now they have much more flexibility, including the option of becoming single-payer systems, Canada-style.

A payroll tax was considered for funding the plan. Now it is funded mostly through a premium payment, but one adjusted by ability to pay.

The central debate among Clinton advisers then remains the central question today: Do the numbers add up in financing universal health-care coverage largely out of cost savings?

Brookings Institution economist Joshua Wiener recalls a conference call in June 1992 with candidate Clinton, his lead health-care adviser, Ira Magaziner, and several other campaign aides.

Mr. Magaziner argued that all Americans could be covered with money squeezed out of Medicare and Medicaid. Mr. Wiener argued that Magaziner's cuts would come up short. Clinton finally ended the call in frustration.

Magaziner, Wiener notes now, has won the argument within the Clinton administration.

Now Clinton must persuade a bigger audience.

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