A Formula for US Health-Care Services

ONLY someone who is very healthy or very wealthy could be unaware of the need for complete reform of our nation's health-care system.

We spend 1 out of every 7 of our dollars on health care, yet 1 out of 7 people are without health insurance. We are cost-inefficient and humanely ineffective, a double failure. Our non-system causes personal and societal disruption and distorts our national economic well-being and our global competitiveness.

The most promising and widely embraced proposal for health reform rests on a careful mixture of two effective and enduring principles of our culture, management and competition.

Managed competition is based on two fundamental beliefs. The first is that competition serves consumers better than do bureaucrats or self-interested third parties; the second, that effective and just health-care competition requires careful fine-tunning.

Managed competition involves four basic market realignments.

* Health insurance would be purchased by pools made up of employers, the self-employed, and recipients of public programs. A large employer (defined as one with 1,000 or more employees) might choose to be a direct purchaser. These purchasing pools are run by private managers, not by government employees. They assure that all purchasers have equal access to the market, with even the smallest benefiting from economies of scale.

* Health services would be delivered by comprehensive health-care organizations. These are cooperative efforts between institutions, providers, and insurers. Any organization that met the standards set by the National Health Board would be free to compete for customers.

These health-delivery groups, called accountable health partnerships, would have to offer a uniform package of effective health-care benefits, assuring patients in advance that they would have the coverage they needed.

* A National Health Board, composed of nationally recognized private-sector experts, appointed by the president and approved by the Senate, would be established to provide the infrastructure for a well-managed, budgeted system.

Modeled on the Securities and Exchange Commission - which does not seem to have strangled the free enterprise spirit of Wall Street - the board would be a private/public partnership with government intervention only in times of extremity, such as an epidemic. Not a bureaucratic entity, this board would remove Congress and a myriad of governmental agencies from the micro-management of the health-care system.

Private-sector control would be further strengthened by the formation of advisory boards. Made up of members from all sectors of the health-care industry, they would determine health-insurance standards, benefits packages, and consumer satisfaction.

* The federal tax code would be revised to limit both the employer and employee tax deduction to the price of the lowest-cost qualified plan available within the purchasing area. Anyone could purchase additional health care, paid for with post-tax dollars.

This would give purchasers real incentives to hop among plans, since they would have to pay for luxuries out of their own pockets. Health-care providers would have to satisfy these newly cost-conscious buyers through efficiency, improved services, and other market incentives.

Purchasers would have access to the insurance market on equal terms. Insurance would be portable, with risk spread across the entire community so that one serious illness in a small employer's work force would no longer mean disastrous premium increases that could close down the business.

Every American would have access to a uniform and sufficient package of health benefits. Everyone would be required to have health insurance, and to pay their appropriate share of the cost. This corrects a gross inequity of the current system, which requires employers who supply health insurance to pay a 28 percent surcharge to cover those who are not supplied work-based insurance.

DOES it sound rational and fair? Well, it would be. Does it sound easy? Well, it certainly would not be.

We should not expect to reform an industry representing 14 percent of our economy without confrontation and upheaval.

Many groups, such as insurers and providers who have profited from health-care hyperinflation, will be reigned in. Others, such as brokers and administrators who add cost but not value, would be displaced.

Some would continue to insist that government has no role in managing this most vital of services. But, this is the viewpoint that has left 1 out of every 5 of our children without any health insurance.

The Clinton administration has shown real courage in embracing the concept of managed competition, defying vested interests and extremist beliefs. For this, it has earned our support.

The aura of inevitability that now surrounds health-care reform is a fragile one, as President Clinton and Hillary Rodham Clinton, his chief health lieutenant, certainly know. We shall all pay dearly if this opportunity, decades in coming, is allowed to slip away.