Clinton Health Plan Sparks Numbers Flap

DO the numbers in President Clinton's health plan add up?

Even before the president looked into his teleprompter on Sept. 20, the number crunchers were starting to pick apart his figures.

On NBC's ``Meet the Press,'' Sen. Daniel Patrick Moynihan (D) of New York called the figures ``fantasy.'' Herb Kosloff, an actuary with the research firm of Towers Perrin, called the numbers ``unrealistically optimistic.''

Then, a day after the speech, Martin Feldstein, a former chairman of the Council of Economic Advisors, said the president was off by about $210 billion - in the wrong direction.

The criticism was not unexpected. Mr. Clinton had tried to counter such comments by proclaiming that his figuring had been examined by government agencies and by private actuaries and accountants. ``So I believe our numbers are good and achievable,'' the president proclaimed.

Clinton is backed up by John Bertko, one of the actuaries called to the White House by Ira Magaziner, the president's manager of the health-care overhaul. ``To the best of anyone's ability to look at and model the numbers, they are as good as anyone could have done them,'' says Mr. Bertko, a partner in the San Francisco office of Coopers & Lybrand, an accounting firm.

He says there were times when the group gave Mr. Magaziner bad news about the numbers. ``He said go back there and sit with those folks and come back with the right numbers,'' Bertko says.

However, despite the president's best efforts, the debate over financing is likely only to intensify, especially as the administration begins to reveal how it did its arithmetic.

The most controversy is likely to revolve around the issue of savings. Under the Clinton plan, there will be $441 billion in savings by the year 2000. Over half of it will come from Medicare and Medicaid.

Gail Wilensky, who ran Medicare and Medicaid in the Bush administration, says the projected Medicare cut of $124 billion ``is a nonstarter.'' Ms. Wilensky does not think Congress could find cuts this size after struggling hard to find $56 billion in savings as part of the president's last budget proposal. The Medicare numbers, she says, ``are off by several orders of magnitude.''

The Clinton Medicare numbers are based on cutting down on paperwork, fraud, and abuse. However, most of the savings will come through a flat reduction in the amount of money the government will pay to hospitals and physicians. ``They just won't increase the price of the payment to the provider,'' says Albert Herman, a Dallas-based partner in the Health Services Group of the accounting firm Arthur Andersen & Co.

To prevent the health-care providers from merely shifting their costs from the public to the private sector, Clinton proposes placing a cap on how much money the private sector can spend. And then he proposes limiting the premium costs to the corporations to a maximum 7.9 percent of their payroll.

There is considerable doubt that this will work. Outside experts believe the cost pressures will be mammoth. Under the Clinton plan, corporations will pay for their own employees' coverage plus part of the burden for the uninsured, small businesses, and retirees in the 55-to-65 age bracket. At the same time, Clinton proposes savings in paperwork for the companies by standardizing forms.

``Yes, there will be savings administratively in the way care is provided, but even when you squeeze the fat out, I think you are still left with an increase in the cost for corporate America,'' Mr. Kosloff says.

If costs increase, Kosloff says he believes companies will either be socked with a tax increase or with payroll costs higher than 7.9 percent - in effect an additional corporate tax.

The rest of the money needed to finance the plan will not come from income taxes, the president has assured the nation. Instead, the plan proposes raising $105 billion from sin taxes and corporations.

In order to raise that kind of money, Kosloff says the administration is figuring on raising cigarette taxes by $1 per pack. According to the Tobacco Institute, Americans currently consume 25.5 billion packs of cigarettes annually. If the tax were enacted, it would raise an expected $16 billion per year (not $25 billion, since the higher price would make cigarettes too expensive for some people), or $80 billion over a five-year period.

However, the Tobacco Caucus in Congress has already rejected the possibility of a 75-cent-per-pack increase. ``They are not playing politically realistic games,'' says Walker Merryman, a spokesman for the Tobacco Institute, an industry group.

Senate majority leader George Mitchell (D) of Maine has also ruled out an increase in alcohol taxes. So, other means may be needed to raise money. ``My personal concern is that the hidden agenda is to get the program on the books, get reelected for a second term and then raise taxes to pay for it,'' says Kosloff.