Radical Surgery

By ADAM ZAGORIN WASHINGTON

When Ira Magaziner was still only a multimillionaire management consultant, General Electric asked him to figure out how to wring a profit from its giant TV-manufacturing unit. Many a hired gun might have sized up the problem by looking at production flow charts or pricing tables. Not Magaziner. He hit the shop floor and began taking apart TV sets with his bare hands, assessing the cost of the components, piece by piece. His conclusion: GE's profit margins could be found not in producing the set's electronic components but in building its plastic-and-wood casing and picture tube, a process that could be done most cheaply in the U.S. GE quickly shifted its TV-assembly plant from Japan to Indiana, a move that put the division in the black within two years. "Ira's not some hyperintellectual consultant who throws an incomprehensible leather-bound report on your desk," says Richard Miller, who oversaw Magaziner's work at GE. "He goes straight for the nuts and bolts, and examines every assumption from the ground up."

Magaziner is now putting that approach to work as the day-to-day manager of the Health Care Task Force, headed by Hillary Rodham Clinton, which is in the final stages of drawing a blueprint to overhaul an $800 billion industry. Last week, breaking the secrecy that has surrounded much of the task force's work, Administration officials disclosed details of the plan that they hope to unveil in mid-May. The White House proposal, which would provide basic benefits for all Americans, including the 37 million who lack coverage, emphasizes the ability of citizens to choose their own doctors. In fact, officials insist, many Americans would have more choices available to them than they have with their current coverage.

Under the plan, all Americans will be given a health-security card, which will guarantee them a standard package of benefits. Employers will be required to offer coverage to their workers and dependents, but employees will be able to select plans offered at work as well as choose options from "health alliances" that would be formed to buy coverage for local residents. "We're trying to make it a consumer-friendly system," said an official, "with much more consumer information that is understandable."

Everyone under the Clinton plan -- employers, workers and even the jobless -- will be required to have insurance and to pay something for medical coverage. People over 50 may be required to pay more, however, since they use more services. Psychiatric treatment and possibly long-term care for the elderly will be included in the plan; states that want to come up with their own health reforms will be allowed to do so. Higher taxes on a variety of products, including liquor and cigarettes, will be necessary to raise the $30 billion to $90 billion that universal coverage will cost, but politically unpopular levies on basic company-paid medical benefits seem unlikely. Insurance companies will no longer be free to deny policies to "high-risk" groups, a practice that has made it difficult for people with chronic illnesses to get coverage.

While many decisions have been made, the task force is scrambling to settle several critical issues, most notably how the U.S. will raise the tens of billions of dollars needed to extend coverage to all Americans. A sign now hangs in Magaziner's office reading, IT'S MAY 3, STUPID -- the original date by which the Administration promised to deliver its sweeping proposal. To meet the deadline, which the White House last week indicated could slip by several weeks, Magaziner often rises before dawn and is still commencing meetings at 10 p.m. As the task force's intellectual traffic cop, the gangly, rumpled business consultant coordinates its 500 experts and 34 working units as they sift through more than 1,000 competing reform proposals.

Polls show that, initially at least, the task force's elaborate new scheme will have one enormous factor working in its favor: public support. Americans consistently say they are dissatisfied with the current health-care system and are willing to pay somewhat more for an alternative that offers universal care and contains costs. "People want a bold, comprehensive solution," Magaziner says. Even so, the task force's challenge is to craft a plan that spreads the pain equitably over many interest groups -- including patients, doctors, insurers and drug companies -- so that no group can rightfully claim that it has been singled out for abuse.

In the Magaziner mode of starting from scratch, the task force is assembling a hybrid system based loosely on a principle known as managed competition. Medical consumers ranging from individuals to small companies will buy care collectively from competing networks of doctors, hospitals and insurance companies. The competition is expected eventually to bring skyrocketing medical-price inflation under control, but in the short run the task force is leaning toward a controversial plan to impose price controls. Both Magaziner and Vice President Al Gore have repeatedly mentioned such limits.

Yet price ceilings have failed miserably in the past when tried by Presidents Franklin Roosevelt, Richard Nixon and Jimmy Carter. Critics say price controls will require a huge bureaucracy to enforce them and will inspire health-care providers to concoct ways to evade them. Says Herbert Stein, chairman of Nixon's Council of Economic Advisers, with a touch of mordant humor: "If they don't permit a doctor to charge enough for taking out one kidney, he'll just take out two of them."

Another controversial element of the Clinton plan is the specter of "rationed care." The access of many Americans to treatment is already partly limited by their ability to pay. But the task force is expected to create a so-called global budget for all health care delivered in the U.S., which is almost certain to limit further the availability of specialists as well as sophisticated medical procedures. The President signaled his interest in rationing when he recently gave Oregon the go-ahead on its health-care allocation scheme, one in which officials have drawn up a list of services, such as infertility therapy and expensive treatments for incurable cancer and advanced AIDS, for which state-sponsored insurance will not provide reimbursement.

Magaziner, 45, whose official title in the White House is senior adviser for policy development, is well accustomed to dealing with radical reform. At Brown University, where he was class president all four years, he helped reorganize the curriculum. As valedictorian, he made national news by organizing a protest at which virtually the entire graduating class turned their backs on National Security Adviser Henry Kissinger to protest his role in the Vietnam War. At Oxford University, Magaziner built a friendship with fellow Rhodes scholar Bill Clinton and later founded Telesis, a highly successful international consulting firm that took its name from the Greek expression for "intelligently planned progress."

Not without intellectual hubris, the soft-spoken polymath has occasionally proved to be dead wrong. In 1983 he came up with a complex scheme to revamp the economy of Rhode Island, only to see the plan go down to defeat in an ill- prepared statewide referendum that he himself had insisted upon. In 1989 he endorsed pouring money into research on the still unproven "cold-fusion" method of producing energy.

Described by friends as possessing a mind that skitters like an ice cube on a hot stove, Magaziner relishes debate -- even with his boss. In such exchanges he scores points by drawing on an encyclopedic knowledge of policy solutions tried in various countries around the world. "I believe in letting people with strong opinions go at each other," Magaziner says of his working methods at the task force. "Hillary is so smart and so secure that basically you can disagree vehemently with each other and have a good discussion, and you wind up improving your own thinking in the process." Once the decisions of the Health Care Task Force are announced, however, Magaziner may discover that the real debate is only beginning.

With reporting by Dick Thompson/Washington