A Bridge to Compromise: Competition under a Budget

Prologue: Repeated efforts to enact public policies that would lead to universal access to medical care have faltered despite the efforts of Democratic and Republican presidents. Now, President Bill Clinton and First Lady Hillary Rodham Clinton have seized the day with expressed determination to introduce a health reform plan by mid-spring. Clinton articulated the broad outlines of his thinking during the campaign; it falls within the framework of this paper by Paul Starr and Walter Zelman, who have become key staff members of the president's health care reform interdepartmental working group. The authors' proposal for achieving universal health insurance through managed competition and global budgeting calls for a major restructuring based on the creation of health insurance purchasing cooperatives. It would require unparalleled change, but they assert that nothing less will achieve universality with cost constraint. Starr, a professor of sociology at Princeton University, began to formulate this approach about a year ago, while conducting research on his most recent book, The Logic of Health-Care Reform, in 1982 Starr won acclaim for his Pulitzer Prize-winning book, The Social Transformation of American Medicine. Zelman, special deputy for health issues to California Insurance Commissioner John Garamendi, chaired a task force that developed Garamendis bold effort to address health reform at the state level. Zelman, who holds a doctorate in political science from the University of California, Los Angeles, was executive director of California Common Cause from 1978 to 1990. He ran unsuccessfully against Garamendi in 1990 for the state insurance post. After Zelman lost, Garamendi hired him as a deputy. Garamendis plan was designed for California, but the proposal's unique combination of ideas, which the authors draw on liberally, has gained nationwide attention. Abstract: A new approach to universal health insurance combining managed competition and global budgets promises to break the impasse blocking comprehensive health reform. The central innovation is the development of regional health insurance purchasing cooperatives (HIPCs) as managers and reorganizers of the market and platforms for global budgets. Financing would be based on community-rated premiums, with obligations to employers capped as a percentage of payroll and to individuals as a percentage of family income. Budgets would cap the mandated core of spending and set a target for out-of-pocket expenditures.