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President Clinton takes health care bill to Hill.

The President and the First Lady last week hand delivered copies of their $332 billion, 1336 page "Health Security Act" of 1993 to Congress. The massive bill, which would overhaul one seventh of the nation's economy and directly affect every city and town in the nation, would reform the nation's health care system in an effort to provide coverage for all Americans while at the same time reducing the growth in costs of health care. The proposed bill would affect every municipality, both as an employer and as a service provider of last resort.

As introduced, the President's bill includes changes from his earlier plan:

* to cap mandated municipal contributions, but not until the year 2002;

* to limit the power of regulatory alliances;

* to cap federal assistance to low income families and small businesses;

* to push back the date by which states would be required to join the new system to January 1, 1998;

* to make the National Health Board directly accountable to the President; and

* to expand the size of small businesses eligible for subsidies.

In two of the key changes for cities and towns from earlier versions, the administration bill states that mandatory contributions towards employee health care benefits by cities and towns would be capped at no more than 7.9 percent of municipal payrolls - beginning in the year 2002, and the plan would require state and regional health alliances to finance cash short-falls with taxable, rather than tax-exempt debt. The cap under the plan for all other private and non-profit employers would begin immediately. The discriminatory mandate is projected to cost states and local governments billions of dollars.

Earlier versions of the administrations plan provided for tax-exempt financing for the health care alliances, potentially flooding the municipal market with hundreds of billions of dollars of tax-exempt bonds, and forcing up the cost of borrowing by states and local governments. The final version would ban tax-exempt financing by the alliances, but left unclear whether state and local governments might be forced to issue billions of dollars of tax-exempt bonds to bail out failed health care plans intended to provide guaranteed health care benefits.

Overall, the administration projects that its package will cost $331 billion in new federal spending between 1995 and 2000. But the spending increases would be more than offset by cuts in federal entitlement spending for Medicare and Medicaid and new taxes and revenues of $389 billion. For states and local governments, the decision to make cities ineligible for the cap until 2002 and the cost of mandatory Medicare is projected to cost in excess of $25 billion.

While an overwhelming majority of members of Congress support reforming health care, President Clinton's bill is but one of six major alternatives Congress will consider in a Congressional process that is projected to take at least a year. In responding to the President at the Capitol on Wednesday, House Minority Leader Bob Michel (R-Ill.) said:

"There are substantive and profound policy differences between those who support the concepts at the heart of your bill, and those of us - like my-self - who see another, different road to health care reform."

Delivery of the bill came as the Senate Finance Committee, House Ways and Means Committee, and House Education and Labor Committee commenced hearings and as an internal struggle began in the Congress to determine which committees in the House and Senate will be given main jurisdiction over the comprehensive legislation and five comprehensive alternatives. The legislation will affect pensions and retirement, health care, federal taxes, and labor agreements - creating a difficult task for the Congressional leadership to sort out.

With Congress hoping to adjourn in three weeks, this means that Congress will be considering the six major alternatives to health care reform next year, in an election year - adding to partisan pressures and further complicating achieving results.

Last Minute Changes

In a last minute change, the administration amended its plan to limit municipal employer liability for the federally mandated employer health premium payment to regional alliances. But the limitation would not begin until the year 2002.

As late as the week of October 18 (see the October 18th NCW municipal employers were not going to be protected from this segment of health costs in the same way as other employers. The legislative proposal still leaves municipal and other state and local employers unprotected by the so-called premium cap until the year 2002 as the plan is phased-in. All other employers in regional alliances would be protected from the date the plan is put in effect within their state.

The cap is in the form of a "limiting percentage" which is proposed at 7.9 percent of payroll. The plan leaves open the possibility that municipalities and all other employers can negotiate or otherwise decide to pay costs higher than the cap amount if they decide to do so. Examples of how this might occur would be if a city decided to:

(1) continue special medical benefits now provided to employees which are in excess of nationally mandated "Comprehensive Benefits Package," or

(2) pick-up all or part of the employee share of the regional alliance health premium.

A city is only obligated by the proposed legislation to pay an amount roughly equal to 80 percent of the total regional alliance premium on behalf of its employees and dependents. As a practical matter, municipal employers will be subject to considerable pressure by their employees and the organization which represent them to do both.

The proposed legislation also appears to make smaller cities and towns eligible for the special small employer caps covering the same element of health costs. The full-time equivalent work-force size for the small employer cap was raised from 50 to 75 employees from the earlier proposal and this proposal. The cap amounts vary from 3.5 percent of payroll for an employer of less than 25 full time equivalent employees who earn average wages of less than $12,000 a year to 7.1 percent for an employer of 50 to 74 full time employees whose annual average wages are between $15,001 and $18,000. Again this small employer cap does not apply to municipal employers until 2002.

Since states are allowed to place their cities, businesses and citizens under the plan either on January 1, 1996; January 1, 1997; or January 1, 1998, the length of time that cities will be under the new system without a cap will vary.

Pressures will exist on state municipal leagues to decide whether to push for early or late entry by their states. The selection of 2002 would still appear to save the federal government over $20 billion over five years according to their own estimates and thereby create a cost exposure for state and local governments that otherwise would be dependent on local decisions. The year 2002 will follow complete phase-in of all states and also follows the year 2001 - the date by which a potentially costly expansion of mental health and dental coverage is to be added to the basic plan benefit. Delay of the cap's protections of municipalities until 2002 may create pressures to defer or modify the protections of local government before the cap becomes effective.

Mandatory Medicare

The plan continues to provide that all state and local governments and their employees will be subject to the Medicare taxes effective October 1, 1995. According get Office figures, this change would cost city and other state and local government employers $7 billion over five years.

Opting-Out of

Regional Alliances

The bill continues to provide that private employers with 5,000 or more employees can elect to opt out of their regional alliance and instead operate as their own "corporate alliance," but continues to prohibit this option for municipalities and other state and local governments. The bill in a special provision continues to allow the health plans of rural electric and telephone cooperative or their association which covers more than 5,000 employees to opt out of their regional alliance and maintain their own plan.

Other Issues

The bill clarifies that the entire standard Metropolitan Area within one state must be included in the same regional alliance and specifies anti-discrimination criteria which will govern the states in their drawing of alliance boundaries. The bill lowers the administrative hurdles for a state electing to run a single- payer plan through-out their state.
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Title Annotation:Capitol Hill
Author:Shafroth, Frank
Publication:Nation's Cities Weekly
Date:Nov 1, 1993
Previous Article:The metropolitan perplex: navigating the new regional models.
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