The Congressional Budget Office last week gave bipartisan supporters of a managed-competition bill both good and bad news, concluding that the alternative plan to President Clinton's reform proposal would fall short of universal coverage.
As with its analysis of Mr. Clinton's health plan, CBO's long-awaited scrutiny of the Managed Competition Act-sponsored by Rep. Jim Cooper (D-Tenn.) and Sen. John Breaux (D-La.)-provided both proponents and detractors of the proposal fodder for their respective positions.
At the center of the debate on Capitol Hill is the extent to which costs can be curbed and universal coverage achieved without government intervention. Mr. Clinton has vowed to veto any bill that doesn't ensure universal coverage.
At a Senate Finance Committee hearing on the CBO report, Senate Majority Leader George Mitchell (D-Maine), said a principal conclusion of the report was that "those who believe that we can achieve universal coverage-that is to say that every American will be insured-without requiring such coverage are mistaken."
The Cooper-Breaux proposal, which has 61 sponsors, 26 of whom are Republicans, would enhance coverage primarily by providing individuals with incomes below 200% of the federal poverty level with government subsidies to purchase private health insurance. Medicaid would be abolished, and all current recipients would be moved to a private plan.
The proposal would require employers to offer-but not pay for-health coverage. Coverage for small businesses and individuals insurance would come through regional buying groups, called health plan purchasing cooperatives. The measure also would require health plans that contracted with the groups to accept all comers, regardless of their health status or age. The proposal's chief source of revenue would be a cap on the tax deductibility of health benefits equal to the lowest-cost plan in an area.
Because the proposal didn't specify what benefits would be in standard plan, the CBO analyzed the effects of a comprehensive benefits plan similar to the one in Mr. Clinton's reform proposal and one that was 20% less generous.
Under either set of benefits, the CBO said the Cooper-Breaux proposal would provide health insurance to 15 million more Americans in 1996, reducing the portion of the uninsured population to 9% from the current 15%.
In contrast, the CBO analysis of the Clinton plan said that proposal would result in universal coverage.
Sen. Daniel Patrick Moynihan (D-N.Y.), chairman of the Finance Committee, called the prospect of 91% coverage under the Cooper proposal "pretty impressive" and said it would be a "considerable achievement" to lower the number of uninsured living below the poverty line to 4 million in 1996 under the Cooper-Breaux plan from a projected 15 million.
Using a comprehensive benefits plan, the Cooper-Breaux proposal would raise the nation's healthcare tab by $86 billion from 1996 through 1999. After that, the plan would reap savings, which by the year 2004 would total $54 billion. With less generous benefits, the plan would raise costs by $27 billion in the first three years and achieve savings of $176 billion by 2004.
The most costly feature of the bill would be federal subsidies to help low-income individuals and families buy insurance, the CBO said. By 2004, under a comprehensive benefits plan, the subsidies would amount to $277 billion. In the event that government savings and revenue increases weren't enough to cover the cost of subsidies, the private health plans that provided insurance to low-income people would have to absorb the cost by raising premiums to other customers.
If subsidy shortfalls were substantial, this form of cost shifting could require premium increases of as much as 30% and "introduce considerable uncertainty and instability into...markets," the CBO found.
The agency predicted that from 1996 to 2004, with a generous health plan, subsidy shortfalls would total $387 billion. With more modest benefits, the shortfall would amount to $24 billion over the same time frame.
Assuming that shortfalls would be covered, the CBO estimated the plan would reduce the federal deficit by $86 billion by 2004 under the comprehensive benefits package or $111 billion under the less generous benefits plan.
The CBO said the Clinton plan would add $136 billion to the deficit from 1996 through 2004, but after that, the plan would begin to cut the deficit.
In addition, the Clinton plan would reduce overall health spending by $30 billion after a $75 billion increase from 1996 through 1999. In 2004, the nation's healthcare bill would be $2 trillion, $150 billion less than what current policies would produce, the CBO said.
The CBO also is working on analyses of proposals by Sens. John Chafee (R-R.I.) and Don Nickles (R-Okla.).
The Senate Finance Committee, meanwhile, which is struggling to find a starting point for drafting health reform legislation, moved further away from an employer mandate last week as two Democrats announced their support for a Republican plan that features an individual mandate to purchase insurance.
Sens. Robert Kerrey (D-Neb.) and David Boren (D-Okla.) said they'd co-sponsor the moderate Republican proposal by Mr. Chafee that would require all Americans to buy private insurance and give subsidies to the poor.
Also last week, the House Education and Labor labor-management relations subcommittee rejected 16-10 a GOP alternative to a Democratic reform plan and voted to add a new program to develop rural emergency hospitals. The proposal, drafted by Chairman Pat Williams (D-Mont.), resembles the Clinton plan but has more generous subsidies for small businesses and the poor and would eliminate mandatory alliances.