National health-care reform will have no "immediate or drastic" impact on ratings for health-care facilities or state and local credits, a Standard & Poor's Corp. official said Friday.
Robert Fuller, a managing director, said that most Standard & Poor's ratings already reflect the credits' ability and willingness to meet debt service obligations in an era of health-care reforms.
Fuller, who made his comments at a meeting of the Municipal Analysts Group of New York, pointed out that the specifics of reform will be subject to debate in Congress. He said the debate could begin as early as this week if President Clinton presents his health-care reform bill as anticipated. Clinton formally unveiled the plan to the nation in September.
Clinton's proposal relies in part on curbing health-care spending growth by trimming Medicaid and Medicare programs by $238 billion over six years and limiting premium increases by insurance companies. The plan would also impose a tax on cigarettes.
Basic financing for the plan will come from premiums on individuals and businesses as it does today. Under the plan, all employers would be required to pay at least 80% of the average premium for the standard package of benefits for each employee. Individual employees would pay for the remaining portion.
The plan also would establish managed-care network incentives and would create regional health-care purchasing pools called health alliances that would be able to issue tax-exempt debt.
While the reforms are not expected to cause drastic effects on ratings, Fuller said, the Clinton plan could present challenges for health care and governmental credits.
Revenues flowing into health-care facilities will be "clamped" under reforms, Fuller said, partly due to an increasing focus on outpatient health care, which is more efficient and less costly than inpatient care.
Standard & Poor's believes that many well-managed, low-cost, effectively capitalized providers that are leaders in their markets already have the management talent and balance sheets to make the transition from sole providers to integrated finance and delivery networks, Fuller said.
"When you look at the strong and durable hospital credits in the market, you'll find that many have made the changes that will see them through the accelerating rate of change in the era of national health reform. Those that cannot or will not make those changes will falter," Fuller said. He added that credit quality between the haves and the have-nots will continue to widen.
The market should not be surprised if the future holds some reductions in debt service coverage for strong credits, Fuller said. The integration of hospital, physician, and insurance components will be very expensive, with long-term benefits perhaps coming further down the road, he said.
The trend of health-care mergers, acquisitions, consolidations, and affiliations will continue to grow in complexity, Fuller said. In addition, health insurance companies, physicians' groups, and alternative health organizations such as nursing homes and retirement communities will increasingly be a part of the new combinations.
For state and local governments, reforms could be a mixed blessing, Fuller said.
While states would become the sponsors of the cooperative health alliances, which the Clinton plan calls for, and would administer and enforce health reform, they also would get the headaches that go with managing a complicated system, Fuller said.
Fuller said that states could be saddled with providing federally mandated Medicare programs under Clinton's plan. The states may have to pick up the tab for those programs, he said, if federal dollars are not sufficient to finance Medicare programs and if the costs cannot be passed onto employer-based insurance plans.
Without additional funds, the state-sponsored health alliances may be forced to ration health care, Fuller said. Rationing refers to the withholding of health-care treatment deemed too expensive.
Many states, including Minnesota, Florida, Texas, and Kentucky, already have or are working on their own health-care reform plans. Fuller said that some state reform plans could face challenges if Congress is not willing to grant them exemptions from the federal Employee Retirement Income Security Act. The act prohibits regulation of employer-sponsored benefit plans and also prohibits the imposition of taxes on those plans to cover the uninsured, Fuller said.
Fuller pointed out that the Clinton plan is silent on the issue of care for illegal aliens and other undocumented persons, which is often paid for with state and local government funds.
"Clearly, the administration's premise that charity care will disappear under reform is in error, once undocumented populations are considered," Fuller said.
