Preliminary diagnosis: what Clinton's health plan might mean for the cities.
At this point, while the plan apparently is moving in the direction of most of NLC's adopted evaluation criteria for health care reform, the plan also contains many challenges and questions for America's cities and towns.
The plan would change the way cities provide and municipal employees choose health care, alter the way that public health care services like public hospitals, health care centers and ambulance services are paid for and impact state municipal league operated health care and workers compensation programs. At the same time, this plan proposes a number of mechanisms to control health care costs, a top objective for municipal leaders.
Employee Health Insurance
The proposal would require all municipal employers, and most other employers except the largest, to pay 80 percent of an annual premium into new, state-created regional health alliances or state single-payer plans, on behalf of their employees and dependents. Each employee would be responsible for the balance of the cost of the "alliance premium."
The maximum cost of alliance premiums for all employers, including municipal employers, with 50 or more employees is set at 7.9 percent of payroll. For small municipal employers (those with fewer than 50 employees) the contribution would be capped at lower levels based on the average wage of a comparable full-time municipal employee. For those communities whose average municipal wage cost is $12,000 or less, the cap will be 3.5 percent. Then there is a graduated scale until the average annual wage level exceeds $24,000. At that point, the cap is 7.9 percent for small municipal employers, as it is for all large municipal employers.
Annually, city employees would be able to choose their coverage from among a list of certified health plans for their coverage. If their state government elected to create a single-payer plan, which is an option for states under the proposal, no particular choices would be required by the employee. If their state elected to create a health alliance(s) then the employee would have the choice of three plan types:
Low Cost Sharing Plan--an HMO-like plan with low out-of-pocket cost exposure for the employee;
High Cost Sharing Plan--an HMO-like plan with higher out-of-pocket cost exposure for the employee;
Combination Cost Sharing--a preferred provider fee-for-service type plan "Combination Cost Sharing."
The out-of-pocket cost exposure for the employee in the preferred provider-type plan would be the highest.
Depending on the number of health plan bidders that submit successful proposals to the health alliance and decisions by the health alliance an individual would be able to choose from any number of HMO-like and preferred provider type plans. However, the alliance may elect to limit the number of preferred provider plans to three.
The health plans would be paid for with money held by the regional alliances or state single payer plan based on the amount of enrollment that they experience. There is no direct relationship between the "alliance premium" paid by an employer and employee and the "health plan premium" paid to a health plan on behalf of individuals and families.
Whether cities will experience savings or greater outlays will vary depending on several factors. For some cities there may be potential savings because their current plans may cost more than the "alliance premiums" which would be uniform over large market areas. For other communities the mandated "alliance premium" may exceed current costs, because the city belongs to a group with good experience, because dependents are not covered, because part-time employees are not covered or because the package of benefits currently provided is narrower than that proposed in the reform plan's package.
Employers opting to carry more than 80 percent of the cost may do so, however, that amount above the benchmark will become a taxable benefit. Municipalities and other employers are permitted to pay more than 80 percent of the "alliance premium," but over time the tax preferred nature of these payments to employees will cease. To administer this provision, all employers, including municipalities, would be required to register benefit plans with the U.S. Labor Department by December 31, 1994 and list on employee W-2 forms the amounts of tax-exempt and taxable contributions for health coverage.
State League Insurance Pools
The plan would eliminate all municipal league health pools unless these pools elected to become state certified health plans opening their enrollment to anyone and having a minimum capital of $500,000.
The operation of municipal league workers compensation pools would also be affected. Under the plan, the injured employee's chosen health plan would be the initial medical care provider in all cases, including workers compensation cases. The municipal pool or employing jurisdiction, in the case of self-insured jurisdictions, would be billed by the individual's health plan for the cost of the individual's care.
All health plans, in order to be certified by the state, must be in a position to provide the specialized medical services required by workers compensation. State laws regarding the choice of medical providers in workers compensation cases would be overridden. The same general procedure would be followed in the case of auto insurance.
Public Health, Ambulances and Public Hospitals
The plan would dramatically revise the method by which public hospitals, doctors and other public and private health care providers are compensated for services. Payment would be provided for a comprehensive package of medical services on behalf of all care recipients, except undocumented residents.
At the same time, the health plans and alliances would be under strong pressure to constrain the cost of care both through controls on the type of care given and on rates of provider reimbursement. Thus, individual public health providers will have to evaluate how these two competing changes would balance out: (1) payment for most everyone who walks through the door and (2) strong cost controls on reimbursement rates for all services.
The plan, under a schedule yet to be released, would eliminate disproportionate share payments now made under the Medicaid program to medical institutions serving disproportionate numbers of poor clients. The plan would create a category of "essential community providers" that serve a disproportionate number of poor clients and require all health plans to reimburse these providers at the same rate as other providers or at rates based on Medicare principles for a five year transition period.
Most health plans currently exclude various preventive services often provided through publicly operated health centers. However, these are required components of Clinton's guaranteed health package, which must be offered by all health plans. Public health institutions, therefore, must aggressively seek to have their services included in the offering of health plans or seek certification as essential community providers so that reimbursement can be obtained for these services.
Ambulance services are included in the basic health plan so that cities which operate or subsidize the operation of ambulance services should seek inclusion in all health plans. Reimbursement of ambulance services will be made on determinations of medical necessity.
Major Reforms Aimed at Current Problems
Current large and spiraling medical costs are to be controlled by several major steps: 1)standardization of claim forms, procedures, and policy components; 2)gradually setting enforceable targets for the permitted rate of health premium cost increases; and 3)dramatically reducing the number of health care payers.
The uninsured population, currently estimated at 37 million, is to be covered by the new program. All residents except undocumented residents and those in prison are to be covered by the new plan.
Other problems, such as the variation in benefits and inability to compare the offerings of health plans be addressed by a mandatory standard and comprehensive package of benefits for all as well as the provision of comparative performance information on all plans.