‘ClintonCare’: a Catastrophe for Economics : Captive consumers, absence of competition--sounds like health care on the cable-TV model.

President Clinton likes to describe his health-care plan as a bold reform that takes on big business in the name of consumers. But a careful reading of the draft plan tells a different story.

In fact, ClintonCare looks a lot like two familiar government schemes that benefit well-connected or incompetent businesses at consumer and taxpayer expense. If you love your local cable monopoly and enjoyed the savings-and-loan bailout, you’ll adore ClintonCare.

The centerpiece of the plan is the system of “regional health alliances.” An alliance may be a state agency or a nonprofit corporation overseen by the state. The government-appointed alliance board determines which insurance companies and HMOs can offer health plans in your area. Employers and self-employed people pay premiums to the local alliance, and (declares the draft plan) “it is the obligation of every eligible individual to enroll in a health plan.”

The regional alliance resembles the local cable franchise--a government-created monopoly through which consumer services flow. “States may establish one, and only one, regional alliance in each area.” Like a cable company’s, the alliance’s prices and services are tightly regulated. Consumers have “choice” among health plans offered through the alliance, just as they can choose whether to buy Showtime or HBO. But the number of plans is limited, and most are nearly identical in what they offer. The regional alliance has no competition and thus no incentive to give good service or add new options. The consumer’s only escape is to move to another region and hope that the alliance there is better.

Each insurance plan must provide a standard benefit package and price its premiums within a narrow range based on a “target” established by a National Health Board. If premiums are too high, they have to be “renegotiated” or reduced via an “assessment” (a.k.a. a tax) on the high-priced plans. The Clinton draft doesn’t specify what happens if no company will offer services at the approved premium.

ClintonCare also creates a medical version of the savings-and-loan fiasco: It encourages insurance companies and HMOs to bid low for customers, then guarantees them a bailout if they go belly-up, whether because of incompetence, bad luck or fraud.

It’s quite likely that at least some companies will overpromise, only to discover that they can’t cover their expenses at the premiums they charge. And even if they do charge premiums that look sufficient, they may not be able to collect. The Clinton draft declares that “health plans may not terminate, restrict or limit coverage for the comprehensive benefit package for any reason, including non-payment of premiums .” (Emphasis added.) Why pay when you can get the same care for free?

If your health plan fails, you needn’t worry, says the Clinton draft. Your doctor can’t come collecting, and the hospital can’t discharge you. But ClintonCare doesn’t make the doctors work for free, at least not forever. It covers their bills by taxing the surviving health plans.

Under normal circumstances each plan will pay into a “guaranty fund” very much like the deposit insurance that gave us the S&L; crisis. In addition, if a health plan fails, “the state may assess . . . other plans within the alliance to generate sufficient revenue to cover outstanding claims against the failed plan.” In both cases, good plans subsidize bad ones.

It’s not hard to picture the race to fail first. And, as plan after plan exits the market, the survivors look more and more like suckers--unless they can renegotiate to offer less service at higher prices, a tactic not unknown among regulated monopolies. For patients, there is no escape.

Two years ago, I was very glad to move from one cable franchise to another, so that I could finally program my VCR to tape on more than one channel. But putting up with a lousy cable monopoly wasn’t exactly a matter of life and death. Putting up with a lousy health alliance could be.