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For people above the poverty level, working but unable to afford health insurance, we would provide them an additional tax benefit to help defray the costs of health insurance. The other important thing to do is to increase what's called pooling, so that there's much more risk sharing. The costs for people in very small firms are averaged out over a very much larger pool, which brings the price of insurance down for them.
ALTMAN: That's part of the Clinton plan too.
DARMAN: On the how-do-you-pay-for-it side, we favor administrative savings, but we estimate we would only get about $10 billion. We also propose tough malpractice reform. Governor Clinton has been consistently opposed to any sorts of caps on liability. But if you have them, then the principal driving force for excess utilization is weakened, because right now doctors are overprescribing as a measure to protect against liability.
ALTMAN: What would your proposal do on the cost side?
DARMAN: Competition. We say the combination of competition, coordinated care and emphasis on prevention would produce about $45 billion, so that's up to about $80 billion saved there. Now, our tax credits and other tax benefits would cost almost $100 billion over 5 years, so we're short except for this. Under our system, we would insure virtually everybody in the system, and as they come into emergency rooms they would come in automatically insured.
The government currently reimburses hospitals for people who are uncovered by insurance, so you save that. Well, the savings we estimate would be at least $45 billion. So that the combination of those would be $135 billion or more, more than enough to finance our plan.
ALTMAN: What he's outlined is not likely to reduce the explosive inflation of health-care costs, and that's the ultimate long-term problem.
What we're proposing is a system, the main features of which involve a standard, mandated benefits package and a cap on what providers can charge for it, to induce competition among, particularly, the medical insurers. Today's incentives create excessive procedures, but incentives under our approach would be for efficient provision of care. Some insurance companies won't make it, but the efficient ones will.
DARMAN: Is Clinton for the payroll-tax increase to pay for this? It was estimated to be a 7% to 9% tax. If he is for it, how is that going to be good for small business? If he's not, how does he finance his universal health-care coverage? Is it magic?
ALTMAN: Clinton is not proposing a payroll tax. The real payroll tax that has gone on is what's happened to health-care costs on the Bush watch. Health-care costs have risen to 13% of gross domestic product, and to 8% of payroll.
What Clinton wants to do is treat this system as broken. The way we have to fix that is essentially through managed competition. By lowering the rate of inflation in health care from 9 1/2% today to 5 1/2%, we can save enough to pay for the extension of coverage to the 36 million Americans who today don't have health insurance.
DARMAN: The numbers are absolutely absurd. I know no one anywhere who says you can get savings like that without draconian rationing.
ALTMAN: We have rationing today, de facto rationing.