An American approach to health system reform.

In terms of the major objectives one would have for health system reform, this plan makes the following choices: 1. It would cover everyone, through Medicare (the elderly), employer-based coverage (some workers and dependents) or a state-level public program that would replace Medicaid (the poor, unemployed, and other workers and dependents). 2. There would be a standard minimum package of required benefits for employer-based and public programs, with legislative requirements on maximum cost-sharing. Choice of provider might be restricted in some states. 3. Administration of the private programs would be the responsibility, as now, of the employers and/or insurance companies. Administration of the public program would be the responsibility of the states, with the objective of maximizing responsiveness to local needs and conditions. 4. It would control costs through giving the states a substantial financial stake in ensuring that the public program costs did not grow faster than nominal GNP. State control would also allow the testing of different mechanisms for cost control, with the ultimate objective of identifying the most effective cost-containment strategies. 5. The cost would be borne by employers, employees, and taxpayers. Employers would be protected from exorbitant costs by being allowed the option of paying into a public plan rather than providing health insurance themselves. The poor and unemployed would be protected by having their coverage under the public program subsidized on a sliding scale. 6. The political feasibility test would be met by retaining a major role for insurance companies and by retaining the role of employer-based coverage--thus reducing the tax increase needed to ensure universal coverage. By allowing flexibility in design of cost-containment strategy, some of the controversy over this issue would also be deflected. Our proposal is also not without problems. First, our approach would still have adverse effects on the profitability of small businesses and on the employment prospects for low-wage workers--although these effects would be less than under conventional mandates and less than under proposals with higher tax rates. Second, some states may not want the responsibility we envision or have the capacity to carry it out. But several Canadian provinces are relatively small and are able to perform the same administrative functions within the Canadian national health system. In addition, since the federal government would continue to administer the Medicare program, states would have the option of tying their policies for hospital and physician payment and utilization control to those of Medicare.(ABSTRACT TRUNCATED AT 400 WORDS)