WASHINGTON -- Sen. Daniel Patrick Moynihan caused heads to turn recently when he branded as "fantasy" the $267 billion in savings that President Clinton is projecting from lower health-care costs by the year 2000 under his health reform plan.

Supposedly, the savings would accrue to the federal and state governments, businesses, and individuals as a result of nationwide caps on insurance premiums for basic health benefits, and spending caps on the Medicare and Medicaid programs. And the savings would occur, the White House says, even as coverage is extended, for the first time, to everyone.

Moynihan, renowned for his grasp of history and quick wit, could be entirely right.

Economic forecasters say it is nearly impossible to predict the impact of such a massive restructuring plan, which would directly affect one-seventh of the economy and indirectly affect much of the rest. It is only recently that the government developed a computer forecasting model that can deal with the plan's complexities.

Moynihan's critical assessment deserves as much scrutiny as the administration's hopeful forecast.

The White House is maintaining that its savings projections are a fantasy only if the status quo on Capitol Hill and in the health-care business -- where costs have been increasing at more than twice the rate of inflation for years -- prevails.

Even with the plan's caps, the White House is projecting that health-care spending throughout the economy will grow from $1 trillion next year to $1.5 trillion in 2000. By then, health-care spending will consume 17.3% of Gross Domestic Product. Without the controls, health care would grow to 18.9% of GDP, the White House projects.

As the President has conceded, even if his plan is enacted, health care will still end up costing nearly twice as much in the United States as it costs in any other nation, including those where health care is universal.

Is that merely wishful thinking and fantasy?

White House officials point out that some of the biggest skeptics of the plan are members of Congress who have repeatedly resisted attempts to limit inflation in federal health programs to a maximum of 9% a year versus a projected growth rate of 12%.

The officials say Moynihan actually had in mind those mostly liberal opponents and the powerful health interest groups behind them, when he said that the hoped-for savings are only a "fantasy." Moynihan is really saying, they contend, that the stiff measures needed to get health-care costs under control will not pass Congress.

Strong resistance certainly is to be expected from members of Congress who view attempts to control health-care spending as assaults on the poor and elderly. And cost controls would be a bitter pill for the industry to swallow, even with the major market expansion that would come with universal coverage, additional long-term care under Medicare, and prescription drug benefits.

The criticism from some Republican quarters is perplexing because in recent years Republicans have been the most vocal advocates for federal controls on health costs.

Sen. Pete Domenici, R-N.M., the ranking minority member of the Senate Budget Committee, has proposed spending caps only a bit less stringent than the administration's as the best way to balance the budget. Yet last week he assailed the savings assumptions under the Clinton cap plan -- savings that the President says would be used to finance universal coverage and to reduce the deficit.

"What happens if the White House cost containment figures are wrong? Even Finance Committee chairman Pat Moynihan said the White House's containment figures are ~fantasy'. We'll have to find the revenue to cover it," Domenici lamented.

Virginia Republican Thomas J. Bliley also challenged the plan's "unprecedented cuts in the Medicare and Medicaid programs," and he questioned whether the health-care industry could make do with yearly cost increases of less than 1% above the inflation rate.

The critics are certainly right that enactment of the Clinton plan would be a gamble. But whether it's a fantasy or not depends on whether you believe that one industry -- even one as important as health care -- can be restrained from eating up nearly one in every five dollars that we collectively produce and earn.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.