Health Proposal Advances The President Was Close To Final Approval. Key Issues Include Taxes On Cigarette And Liquor, And Cuts In Medicare And Medicaid.

Posted: September 04, 1993

WASHINGTON — President Clinton neared final approval yesterday of a health-care reform plan expected to move four out of every five U.S. workers into new government- sponsored health insurance plans.

Clinton and his top health-care planners worked into the evening attempting to meet a self-imposed deadline to complete the plan by today. Next week the President intends to consult with Congress on the plan before formally presenting it the week of Sept. 20.

Key questions awaiting final decision included how much more to tax cigarettes - options narrowed to between 50 cents and $1 a pack - whether to raise the tax on hard liquor, and how much to slash the growth of Medicare and Medicaid expenses, White House sources said.

Clinton's plan promises to give every American minimum health-insurance benefits at least equal to what most Fortune 500 firms give their employees.

"It would be a substantial plan, covering more than what a lot of small- business people offer now," said Anne Lennan, director of federal affairs for the Society of Professional Benefit Administrators, a trade group.

Two big decisions affecting firms with more than 5,000 employees also were unresolved.

One key question was whether to limit how much big businesses would have to pay toward health insurance for employees. One leading proposal would set a cap at 7.5 percent of payroll.

The other big-business question was how much to tax firms for giving their employees health-insurance benefits more generous than the federal minimum mandatory package that Clinton will propose. Any such tax would not take effect before 1997 or 1998.

Decisions on those controversial questions could determine whether the plan can attract enough support to pass Congress in what is expected to be the biggest challenge Clinton will face over the next year.

Both the payroll cap and the tax on extra benefits are matters of intense interest to big business, private consultants say.

The decisions could determine whether many big firms retain independent health-insurance plans for their employees or opt to put them into Clinton's new health co-ops.

Under Clinton's plan, which will seek to overhaul an industry that represents one-seventh of the U.S. economy, four out of every five U.S. workers would be required to join new regional co-operatives that will contract with medical-service providers for federally mandated minimum health benefits.

The remaining 20 percent - those working in firms with 5,000 or more employees - could end up in the new co-ops too, especially if Clinton chooses to make big firms pay too high a price to stay out.

"The incentive for big companies to retain independent (health-insurance)

plans would be they could retain independent control over their own operation, which a lot of employers want," Lennan said. "Insurance companies are very bureaucratic and don't provide tailored services."

Clinton's plan would require most employers to pay 80 percent of costs for employee health insurance, with employees paying the rest.

Federal subsidies would ease that burden for small businesses - those with 50 or fewer employees - especially those with low average employee wages. The exact amounts of those subsidies was still under discussion yesterday.

Small businesses probably will be guaranteed that they would not have to pay more than 7 percent of payroll toward employee health insurance, and perhaps as little as 3.2 percent, one White House aide said.

A small firm's exact payroll-percentage cap would be set on a scale according to its average employee wage. The lower payroll cap would apply to small firms with very low average wages, say $12,000 a year. Small firms with higher average wages - say, more than $30,000 a year - would pay a higher percentage of payroll for employee health insurance, White House sources said.

One major unresolved debate centered on how much to cut projected spending growth for Medicare and Medicaid. The amount to be slashed from current services under those programs is to go toward paying for new benefits, including prescription drugs and long-term care.

Several Clinton cabinet officers and economic officials argue that no more than $100 billion over five years can be cut from existing services without setting off politically damaging protests from senior citizens' groups, organized labor and health-care providers.

But Hillary Rodham Clinton and top health adviser Ira Magaziner reportedly are pushing to cut up to $250 billion from current spending plans to free money for more extensive new benefits, according to sources close to the debate.

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