Nursing the US back to health: Bill Clinton's plans have much in common with Britain's NHS reforms. Jack O'Sullivan explains

IT IS extraordinary that as European governments are trying to divest themselves of welfare responsibilities to citizens, the Americans are doing the opposite. While the British and the Germans, to name but two, are worried about financing present commitments, President Clinton is devising a plan to cover an additional 37 million Americans who have no health insurance.

This is the task before Hillary Rodham Clinton and the 400-strong team who are working on a programme to transform one seventh of America's economy: the dollars 840bn health sector. Next month, after Mrs Clinton completes her deliberations, she and her husband will begin selling his most important domestic initiative to Congress and the electorate.

If Mr Clinton successfully pioneers his health policy, he will turn upside down the conventional wisdom that the welfare state has no option but to retreat. Furthermore, his policy will have to be very different from similar post-war initiatives. Clinton must minimise the impact on taxpayers while maximising public leverage on the private sector.

The US health care system is very different from the NHS. While Britain's system is largely public, comprehensive, tax-funded and cheap, the American one is private, selective, funded mainly by insurance and is expensive. Most people can choose their hospital doctor, which many think is such a great plus that it outweighs the system's failures.

Most, but by no means all Americans are insured by their employers. The government picks up the bill for very poor and elderly people. But with inflation in the health care sector now in double digits, charges from doctors, drug companies and hospitals have rocketed, raising premiums and cutting the number of people the state can afford to assist. The 100,000 Americans who lose their insurance each month as employers drop the perk or sack workers cannot expect help from the government.

More and more working American families are caught between the two systems, terrified that illness will bankrupt them. In this context, health care is the issue that could restore the tarnished image of government. It is the area in which private industry has proved itself most incompetent. Rising health spending consumes almost 14 per cent of national income, compared with about 6 per cent in the UK. More than 1,500 insurance companies are involved in a paper chase, which results in an estimated one in five health dollars being spent on administration.

Mr Clinton will promise that with competent government, health costs can be controlled. He has stated repeatedly that the federal deficit cannot be tackled unless health costs are contained. Thus the economic and electoral fortunes of the administration are inextricably tied to health care reform.

Mr Clinton is not planning an NHS for the United States, funded by taxation and administered by public employees - 'socialised medicine' as the NHS is pejoratively called in the US. His mandate is too slight for such a radical policy. His new system will be one in which government 'steers but does not row'. Details are unclear, but the system will still be served by private doctors and hospitals and funded largely by employer- based private insurance. The difference is that the government will insist that this private system provides for all, within a controlled total budget, at prices everyone can afford.

However, the NHS reforms and Mr Clinton's plans have a great deal in common. The intellectual progenitor in each case was Alain Enthoven, a Stanford University professor. Professor Enthoven's appeal to both Margaret Thatcher and Bill Clinton is that his concept, known as 'managed competition' appears to create a system that synthesises markets and government bureaucracy. It appealed to Mrs Thatcher, who wanted markets, and to Mr Clinton, who needs a bureaucracy to implement his changes.

'Managed competition' in Britain involves NHS hospitals competing for business, and closing, for example in London, if they fail to attract enough patients. Under Mr Clinton's plan, also known as 'managed competition', large groups of consumers and businesses would band together to buy care from networks of doctors, hospitals and insurance companies. These million-strong purchasing groups would supposedly bully doctors, hospitals and insurers into lowering their prices.

The US government would dictate the rules of the 'managed competition' game. Insurers could not legally sift out people likely to fall ill and would have to charge everyone the same price for the same package. The government would fund the uninsured.

It sounds very simple, but there are problems. First, money: it is estimated that bringing 37 million people into the health system could cost dollars 100bn a year on top of this year's expected dollars 900bn health care bill. Since Congress rejected much of Mr Clinton's economic stimulation package, it will not agree to that. He will have to devise a strategy to delay the pain until the benefits of the reforms are recognised.

Second, despite its ideological appeal to both Britain and the US, no one knows whether 'managed competition' works in cutting costs. Mr Clinton likes it because he can assure the American public that private medicine is alive and well, while for the first time establishing a national bureaucracy through which government can influence the entire health system. To ensure cost control, he may also have to impose a price freeze on the amount charged by doctors and hospitals. Their industry - the fastest growing in America and with some of the most powerful lobbyists on Capitol Hill - would hate such controls. They have already defeated Mr Clinton's populist proposals to provide free vaccinations to all children and could halt health reform.

Lobbyists will play on potent fears of what they regard as the British disease: rationed care, long waits, less innovation and less freedom to choose a doctor. These fears are probably well- founded, for, if Mr Clinton is to secure coverage for all, the standard health care package defined by the Government may be more basic than Americans are accustomed to.

There is also a real danger that America is not ready for Mr Clinton's plan. 'Managed competition' does not have an easy ring. Furthermore, extending coverage to all may stretch Americans' poorly developed sense of social solidarity.

The United States' best-ever chance to introduce comprehensive health care reform could be fudged. As Joseph Califano, Jimmy Carter's health secretary, said recently: 'Congress and past administrations have played 'Abbott and Costello Go To The Doctor' for the past 30 years.' If the joke goes on under Mr Clinton, his hopes of setting the welfare agenda for industrialised countries will leave little behind other than wry smiles among the sceptics.

The author was until recently a Harkness fellow of the Commonwealth Fund of New York, studying US health care reform.

(Photograph omitted)