The Plan

The plan itself is broad and ambitious. It promises to provide basic health care insurance to all Americans, regardless of health or employment status, while retaining the current link to employment. It would create financial incentives for consumers to choose health care plans based on price and quality and establish regional alliances to facilitate such choices. Borrowing from the Jackson Hole Group's theories of managed competition, the plan sets up one or more such alliances in each state; a populous state such as California could have as many as 10, but not more than one per geographic area. These alliances would restructure the health insurance market by serving as the group purchaser for persons not receiving Medicare in a local area. Large companies with more than 5000 employees nationwide could choose to act as their own corporate alliance. In either case, the alliances would offer area citizens—employed or not—their choice of health plans and would help inform that choice by providing information about costs, services, and quality.

Each health plan would be required to offer a comprehensive set of "minimum" standard benefits, including hospital and office care, clinical prevention services, hospice care, and home health and long-term care. By the year 2001 it would phase in a comprehensive set of mental health and substance abuse services. Consumers could select a more expensive option with low out-of-pocket costs (only $10 per doctor visit), a version with more substantial cost sharing (with deductibles and coinsurance), or a combination plan that would impose out-of-pocket costs only for care outside the patient's own health care plan. For most of the country, at least three choices of plans would be available, presumably at least one fee-for-service and two managed-care options.

The Clinton Plan would require a complex administrative structure, starting with a seven-member National Health Board that would be responsible for general oversight, including overseeing the basic benefit package; national and state health budgets; and a performance-based quality of care system. Each state would have the power to establish and govern its regional health alliances, set procedures for risk-adjusting premiums to avoid penalizing plans that enroll older or sicker subscribers, and regulate the plans according to quality of care, fiscal stability, and performance of the specified benefits. The Clinton Plan also permits states to create single-payer systems.

The regional health alliances (and the corporate alliances as well) would enroll all eligible persons in health plans and would collect and distribute the premium dollars. Employers would contribute at least 80% of the averaged premium for basic plans in the region. Because consumers would pay the rest, they would have financial incentives to select less-costly plans. Small employers and low-income workers would be subsidized. The only exceptions to universal enrollment would be Medicare subscribers, who, for the time being at least, would continue current coverage, with an expanded drug benefit, and those persons now in the Department of Veterans Affairs and Indian Health Service systems. Non-citizens would be covered only for emergency services. Low-income patients covered by Medicaid would be brought into the mainstream by enrollment in a health care plan. The health alliances would oversee the marketing of health care plans to consumers, provide relevant information on the costs, quality, and performance of each plan, adjust for risk the flow of premium dollars, and write the actual contracts.

The health care plans, the bottom rung on this bureaucratic ladder, would actually be responsible for providing the care. A plan might resemble, on the one hand, a loose confederation of doctors and hospitals, such as occurs in Blue Cross/Blue Shield plans, or a closed-panel health maintenance organization, such as Kaiser Permanente. Inherent in the theory of managed competition is a belief that, with time, the more organized and efficient plans will outperform their rivals, thereby accelerating the current trend of increasing enrollment in managed care.

Plunging the 37 million uninsured and 29 million enrollees in Medicaid into the nation's health care mainstream will be costly. Funds for this and other health-reform purposes would come from several sources: a 75-cent-per-pack cigarette tax as well as a 1% premium on businesses that choose to form corporate alliances. Projected cost savings in the Medicare and Medicaid programs, primarily in the form of lower rates of payments to doctors and hospitals, would also contribute. But the most important source of savings would result from the reforms themselves, which would, according to managed-competition theory, use price competition and administrative simplification to wring excesses from the current system. Just in case that theory falls short, the plan proposes exhortation and, if that fails, high-pressure tactics to encourage price and expenditure restraint. It also would limit the national budget for health care payments to the consumer price index plus 1.5% for 1996, tapering to the CPI itself beginning in 1999. These rates of increase are far less than recent figures and projected trends.

A host of other worthy measures are featured in the Clinton Plan as well. A national work force strategy is proposed that would shift the generalist:specialist physician ratio in favor of generalists, decrease the total number of residency training slots, expand the National Health Service Corps, and reform fee-for-service Medicare payment to favor generalists. An ambitious program of quality-of-care measurement would involve developing quality and satisfaction measures as a way to educate consumers and stimulate competition among plans. Much attention is focused on information systems: On the one hand, data forms would be simplified; but on the other, new data would have to be collected, analyzed, and distributed to provide program oversight and to guide consumer enrollment decisions. Several components of malpractice reform are proposed, including imposing mandatory alternative dispute resolution before bringing a case to court, limiting attorney fees to a maximum of one third of the total award, and requiring medical specialist affidavits regarding injury and causation by substandard care. Stronger penalties for fraud and abuse, special access provisions for vulnerable populations, and enhanced roles for traditional public health also are featured.

Questions Raised by the Plan

Much of the public commentary has dealt with the Plan's financing. How realistic are the cost projections, and what will be the burden for small businesses? Because managed competition has never been tried anywhere as a national cost-control strategy, its ability to contain costs remains conjectural. Skeptics claim that it will fail because sick consumers will continue to purchase rich benefits, whereas those who will be most price sensitive are low users anyway; pressures from patients and special interest groups will force continued expansion of covered benefits; and true price competition will be blunted by market collusion [1]. Furthermore, the skeptics assert, the growth of managed care has only resulted in cost shifting, rather than produced net savings to society. Proponents of managed competition counter these arguments with assertions that carefully crafted combinations of market incentives and regulatory pressures can, indeed, hold down costs, even in the face of an aging population and emerging medical technology [2]. The debate about how to pay for the plan will doubtless consider the various funding options, including the phase-in period, the tradeoffs between providing universal coverage and deficit reduction, as well as the budget itself.

The success of managed competition hinges on the willingness of Congress to let the National Health Board take potentially unpopular steps to achieve cost control. Perhaps creating a political buffer zone, such as exists now with the closing of military bases, is the only way to enable the Board to carry out its intended functions. Other important questions are raised by the Clinton Plan, especially regarding implementation. Probably few states possess the organizational capacity to establish and oversee the regional health alliances. It is also unclear how quickly the alliances and plans could be created, or how well they would perform, especially in those many areas of the country where fee-for-service care is the major form of medical care. Technical assistance would be provided for these purposes, and one can imagine a whole new industry of health care consultants drawing up plans to help organizations execute the Clinton Plan as well as to outwit it.

Another set of questions relates to fiscal performance. What will happen to the excess capacity already in the system if managed competition really works? How can politically unpopular budget controls be enforced? How realistic is it to expect savings from controlling overuse if the group receiving the most benefits—Medicare enrollees—is exempted for political reasons? How can oligopoly control by a few strong health plans be prevented? If the Clinton Plan is to succeed in constraining increasing health care costs, it must create some unhappiness in the industry.

Formidable technical obstacles also exist. The theory of managed competition depends strongly on adjusting for severity of illness among the competing health plans so that they will not be penalized for enrolling sicker or older patients. Absent such correction, plans will find it more profitable to compete in terms of selective enrollment rather than efficiency. Similar adjustments must also occur to make valid comparisons of quality of care. Unfortunately, the precision of severity or quality measurement is not up to the task required, although funds are earmarked for this purpose.

Legal issues present another set of hurdles. In our litigious society, the complex regulatory structure so intrinsic to managed competition will have to survive myriad court challenges.

Finally, the Clinton Plan presents an unprecedented challenge to academic medicine's classic triad of research, teaching, and patient care. The research challenge may be the easiest because it merely asks for enhanced capability in prevention and health services research, in addition to the traditional emphasis on biomedical research. The educational challenge will be more difficult: Shifting from a specialty-dominant residency mix to one that features specialism and generalism equally flies in the face of entrenched faculty availability and biases as well as clinical practice plan configurations. Perhaps the most difficult challenge will be the domain of clinical practice. To be sure, some effort will be made to preserve unique clinical capabilities of academic centers, such as cardiac transplantation. But the current tertiary and quaternary capacity of these centers far exceeds epidemiologically justifiable demand. Thus, to a large extent, academic centers will have to compete with other health care centers on unfamiliar terms: price, quality, and consumer satisfaction. Some are well positioned to thrive, but many are in for a rude shock.

Even if no legislation passes, the threat and stimulus of the plan already have catalyzed major changes in the organization and financing of health care. The plan has many attractive features, chief among them the promise of universal coverage—symbolized by the health security card. Its promise of administrative simplicity will sound sweet to all hassled internists, and the strengthened role of generalism inherent in managed care also holds great promise. The fact that the plan will be judged on the basis of the health outcomes of all enrollees, not just the users of facilities, offers great potential to improve the health of the nation. Health plans accountable for the health of populations can direct premium income according to need rather than by virtue of which services happen to be delivered, as occurs with fee-for-service care. The serious attempt to curtail health care spending addresses a significant national problem. Finally, the chance for some malpractice relief will be cheered by all practitioners.

The Health Security Plan also contains a number of potential hazards for clinicians. Some are intended as a part of market reform, whereas others stem from the political jockeying likely to occur during the next year. If successful, the plan will accelerate the decline of fee-for-service medicine, which, at its best, offers the finest medical care in the world; unfortunately, its excesses are a major driver of runaway medical care costs. Subspecialty care providers and academic medical centers also will be challenged as never before, and they may not currently possess the tools to respond positively to that challenge.

The constant shifting of people from plan to plan as relative premiums change over time, a feature touted by the managed-competition advocates, would impair the continuity of physician-patient relationships and generate unnecessary transitional costs [3]. Unrealistic marketing claims may create heightened consumer expectations that cannot be met [3], and the tendency of the poor to be segmented into lower-cost plans may result in a two-tiered system [1]. Finally, the many layers of new bureaucracy may create an unwieldy and rigid system unresponsive to patient needs.

These cautions aside, the unveiling of the Health Security Plan appears to be the best chance yet for Americans finally to achieve universal health care coverage. The Health Security Plan, with its huge scope and complex structure, is the most important U.S. health policy development since the enactment of Medicare and Medicaid. Perhaps the worst outcome of the forthcoming political debate would be to sacrifice the commitment to universal coverage because of the understandable concerns about costs, the deficit, and the economic vulnerability of small businesses. The natural political instinct to phase in expanded coverage should be vigorously opposed by physicians and the public. Only by having everyone in the system can we be sure that it will best serve the public. In whatever ways the Plan may evolve in the next year, let us hope that Congress and the President will stand firm on the principle of providing basic health care for everyone. This is an achievable dream, which the art of politics must now render.