WASHINGTON -- The National Governors' Association yesterday endorsed the major roles and responsibilities that would be given to states under President Clinton's health reform plan, but questioned aspects of the plan that might expose the states to financial pressure.

"The governors support the state-federal partnership that is incorporated into President Clinton's plan," said Raymond Scheppach, the association's executive director, in testimony before the House Energy and Commerce Committee's health and the environment subcommittee.

"It provides the strong federal structure that is essential for true reform, yet there is ample flexibility so that states can develop and implement a delivery system that will work in both urban and rural settings and under diverse socioeconomic conditions," Scheppach said.

States are "large enough to gain the economies of scale and yet small enough to tailor the system to the unique needs" of their regions, he said.

The governors' group particularly approved, with small modifications, Clinton's proposals to give states responsibility for establishing regional health alliances to pool consumer purchasing power, as well as for certifying health provider plans and setting up guaranty funds to bail out any insolvent plans.

Both the guaranty funds and the regional alliances would have open-market borrowing powers under the Clinton legislation, but the Treasury is denying tax-exempt status to any such borrowings. The governors' group did not comment on the borrowing provisions of the plan.

One concern raised by the state group is that the tight caps the administration wants to place on premium increases by the health alliances each year, combined with caps on overall federal subsidies to the alliances, could put financial pressure on the states.

"If the federal government fails to set reasonable limits in the first several years, states will be left with the responsibility for correcting the damage done to providers, networks, and the availability of health care," Scheppach said.

He appeared to be referring to the role states would be given under the plan to bail out insolvent providers if the alliances are unable to pay doctor and hospital bills because their premiums and subsidy payments from the federal government fall short.

To prevent that, Scheppach urged caution in setting premium caps in the early years of health reform," and recommended that Congress establish budget "targets" instead of caps on premiums.

The governors' group also expressed concern that the new longterm community care program created under the legislation might not be adequately financed and could the leave the states holding the bag. "The proposed federal funding is significant but limited, while the state financial exposure may not be limited," Scheppach said.

The National Conference of State Legislatures, unlike the governors' association, did not endorse specific major aspects of the Clinton plan, but said it generally supported a state-oriented system like Clinton's.

The legislatures' group told the subcommittee said giving the states regulatory authority over the regional alliances was "appropriate," and suggested that the proposal could be strengthened by giving only the states the authority to exempt large employers from the regional alliance system. The Clinton proposal allows the federal government to approve such exemptions.

One concern raised by the legislatures' group was the provision of the Clinton plan that caps state-paid premiums to the alliances at 7.9% of payroll only in the year 2002, rather than immediately as it does for private employers. The group estimated that more than half the states, mostly in the south, would exceed the 7.9% cap, and because of that, they would have to pay $1.2 billion more in premiums by 1997.

The National Association of Counties also endorsed the Clinton health plan at the hearing, but said it was unfair that the premium cap would not apply earlier to state and local governments.

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