Clinton Spells Out His Plan to Curb Health Care Costs : Campaign: His reform package stresses free-market forces. But government would still play a major role.

RAHWAY, N.J. —  Democratic presidential nominee Bill Clinton, campaigning in what has until recently been a Republican stronghold, filled in several blank spots Thursday on his plans for health care--an issue his strategists see as a key to winning suburban voters alienated from President Bush.

Although Clinton has made health care reform a major issue in his campaign for many months, he has until now left most of the important details vague, preferring not to tip his hand on ideas that may prove controversial.

But, after considerable internal campaign debate, the Arkansas governor late last week sided with those advisers who have argued that one of his strongest arguments in the race is the claim that he has been more specific about his plans on major issues and who, therefore, advocated spelling out the details of his health plan.

Speaking to a crowd of workers at the northern New Jersey plant of Merck & Co. Inc., one of the country’s largest drug makers, Clinton outlined a plan that would seek to control health care costs in large part through free-market forces, rather than direct government controls. But the plan also calls for a major government role in setting overall health care budgets within which insurance companies, hospitals and doctors would have to work.

No Democrat has carried New Jersey in a presidential election since Lyndon B. Johnson’s 1964 landslide, and until recently Clinton did not plan to campaign in the state. But with polls continuing to show him leading here, the Democrats have begun trying to cement a lead, knowing that New Jersey is must-win territory for Bush.

With middle-class voters increasingly concerned about the cost of health care, the issue has become prominent in the pitch Clinton makes to the sort of suburban voters who dominate the state and who form a key voting bloc elsewhere.

Overall, the Clinton plan would amount to a major restructuring of the way medicine is practiced and paid for in the United States. If the program works, access to health care would be expanded to millions of Americans now without insurance and the spiral of health-cost inflation would be brought under control.

But the costs, which Clinton generally avoids discussing, would probably include reductions in the income of many doctors, closures of hospitals in some areas that currently have excess beds and a substantial change in the traditional fee-for-service relationship between doctors and patients.

In addition, although Clinton argues he can finance his plan without new taxes, outside experts regard that claim skeptically.

Bush campaign officials immediately attacked Clinton’s proposal, saying that although it claims to avoid new taxes, it actually would end up requiring them. “It’s camouflage,” said Bush campaign spokeswoman Alixe Glen. Clinton’s plan, she insisted, would be “a prescription for disaster” requiring higher taxes and bringing about price controls on new drugs that would severely damage American drug manufacturers.

Clinton, in his speech, defended his plan against the expected assaults. “We are the only advanced nation in the world that does not provide basic health care to all its citizens,” he said. Describing some of the horror stories of the current system, he declared that “we cannot go on like this.”

“This issue should be beyond partisan political debate and beyond the shallow and simplified rhetoric of hurling arrows at one’s opponent. This is a matter that is critical to the future of this country’s survival.”

Clinton’s plan has several major elements:

* All companies would be required to insure their workers. Unlike proposals by some congressional Democrats, businesses would not have the option of paying a new tax instead of providing coverage.

Although 85% of businesses do cover their workers, the mandate would be a significant new cost for those businesses that do not do so. Clinton would phase in the requirement over several years and offer tax credits to ease the burden on small businesses. Clinton aides said they had not yet determined how large a tax credit would be needed.

* Insurance companies would be required to drastically change the way they do business. Companies would have to insure all customers, abolishing current rules that, for instance, allow insurers to refuse people who have “pre-existing conditions.” Bush has proposed a similar change. In addition, insurers would have to provide the same rate to all people in a given geographical area, eliminating the current practice of giving lower rates to large companies and charging higher amounts to small employers.

Health care experts argue those changes could save billions of dollars a year by eliminating the huge amounts of money insurers currently spend to try to screen their customers. But Clinton aides freely admit that another effect would be to drive many insurers out of the health care market, leaving the country with far fewer, although larger and more efficient, health insurance companies. Those companies that stand to lose business are certain to fight the plan.

But a representative of one of the insurance industry’s chief trade associations offered cautious praise for Clinton’s plan. “We certainly like the fact that he is relying on private-sector plans and not setting up a separate government plan,” said Edward Neuschler of the Health Insurance Assn. of America.

* Medicare for the elderly would continue, but Medicaid, the government program that covers the poor, would be eliminated. Instead, low-income Americans would be provided government help to buy into the same insurance program that would cover other Americans.

* The government would not directly regulate the way doctors and hospitals provide care. But the government would set minimum benefit levels for insurance plans and encourage companies to sign up their workers with large, privately managed insurance networks. States would each set an overall health care budget and limit the per-person fee a network could charge. That would give the networks incentive to limit the fees of doctors and hospitals. And because the networks would each have huge numbers of people enrolled, they would have tremendous clout in the marketplace.

Clinton argues this system would leave direct cost regulation up to the free market, rather than government. But regardless of how costs are regulated, health economists agree that, to be effective, any cost-control program would have to limit some treatments and access to physicians.

The Bush campaign argues those cost controls amount to “rationing health care,” Glen said. Clinton denies that and argues that under the current system, “we are rationing health care today, but we are doing it in sneaky, bureaucratic, absolutely indefensible ways.”

Although Bush’s plan and Clinton’s share certain elements, the two candidates overall have dramatically different assessments of the nation’s health care problem. Essentially, Clinton believes the health care system is irreparably damaged and needs drastic reform. Bush, by contrast, believes that the vast majority of Americans have good health care and effective insurance protection, and that the system needs only marginal repairs.

Clinton argues that his plan, with federal and state targets for spending, would provide enough savings from government programs such as Medicare and Medicaid to buy coverage for the 37 million Americans who are uninsured. But experts are skeptical that such savings are possible because hospitals already complain that the payments from the government don’t cover the full costs of treating patients.

The Bush Administration wants to expand coverage by offering new tax credits to make health insurance more affordable for those individuals who don’t have it. But the White House has never said how it would pay for the tax credits without expanding the federal deficit.

“The Bush plan does not go far enough--the Clinton plan goes too far,” said Dr. James Todd, executive vice president of the American Medical Assn. “And neither one says how he will pay for it.”

Lauter reported from New Jersey and Rosenblatt from Washington.

Today on the Trail . . .

Gov. Bill Clinton campaigns in Hartford, Conn., and Boston.

President Bush campaigns in Chicago.

TELEVISION

A behind-the-scenes look at President Bush’s campaign swing earlier this week through the six states surrounding Arkansas will be featured on C-SPAN’s “Road to the White House” at 2 p.m.