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file Brooking
Brookings Institution Dinner Attendees:
Board of Trustees/Brookings Council
Aaron, Henry
Brookings Institution
Adamson Terrence
Donovan, Leisure, Rogovin, Huge & Schiller
Arnault, Ronald
ARCO
Bailey, Dr. Elizabeth
Univ. of Pennsylvania
Bates, Rex J.
R.J. Bates
Bernstein, Alan S.
Stratographic Petroleum, Inc.
Bernstein, Edward M.
Brookings Guest Scholar
Cabot, Louis W. -
Former Chairman of Brookings Board of Trustees
Carlson, Margaret
TIME
Clausen, A.W.
Bank America Corporation
Cole, Thomas A.
Sidley & Austin
Coleman, William T.
O'Melveney & Myers
Cutler, Lloyd
Wilmer, Cutler & Pickering
Dam, Kenneth
Univ. of Chicago Law School
Daniel, Ronald
McKinsey & Company, Inc.
Davidson, Kenneth
Davidson Weil Associates
Downs, Anthony
Brookings
Folger, Lee Merritt
Francis, Paul E.
Merrill Luynch Capital Partners
Fried, Edward
Brookings
Friedman, Bart
Cahill Gordon & Reindel
Friedman, Stephen
Goldman, Sachs & Company
Gordon, Lincoln
Brookings
Gray, John
AT & T
Hall, John
Johnson & Johnson
Hamburg, Drs. Betty and David Carnegie Corporation of New York
Hellman, Warren
Hellman and Friedman
Houghton, Congressman Amory
U.S. House of Representatives
Howard, Phillip
Howard Darby & Levin
Huffington, Roy
Johnson, James
Federal National Mortgage Association
Johnston, James D.
General Motors Corporation
Joseph, James
Council on Foundations
Kenworthy, Patricia
Monsanto
Kerr, Breene
Grayce B. Kerr Fund, Inc.
Leonard, Mary
Newsday
Lynn, James
MacLaury, Bruce
President of Brookings
Marks, Robert
Carl Marks and Company
Matsumoto, Hiroshi
NKK
McHenry, Donald
Georgetwon University
McKinney, Ambassador Robert
Sweeny, William F.
Mobley, Mr. Stacey
E.I. DuPont de Nemours & Company
Newman, Constance
Smithsonian Imstitution
Nutter, Franklin
Reinsurance Association of America
Okun, Mrs. Arthur (Sue)
Oppel, Richard
Knight-Ridder/Tribune
Pechman, Mrs. Sylvia
Price, James
Redmond, J. Woodward
J.W. Redmond and Co.
Rivlin, Alice
OMB Deputy Director
Rowen, Hobart
Washington Post Writers Group
Sakurai, Motoastu
Mitsubishi
Salant, Walter
Brookings
Saul, Ralph
Schick, Thomas
American Express
Seevak, Sheldon
Goldman, Sachs & Company
Smith, Marshall
Dept. of Education
Smith, Robert
Charles E. Smith and Company
Solomon, Robert
Brookings
Thompson, Richard
Bristol-Myers Squibb Company
Trezise, Philip
Brookings
Warren, Hermine
Hermine Warren Assocation
Whitehead, John
Brookings
Whitman, Richard
Digital Equipment Corporation
Wiener, Malcom
The Millburn Corporation
Worth, Douglas
IBM Corporation
Zilkha, Donald
Donald Zilka & Co.
Brookings Staff
Center for Public Policy Education
Lawrence Korb
Ann Myers
Nanette Blandin
Peter Malof
Bruce Smith
Economic Studies
Margaret Blair
Ralph Bryant
Gary Burtless
Susan Collins
Charles Schultze
George Perry
Joshua Wiener
Governmental Studies
Thomas Mann
Steve Hess
Robert Katzman
Peitro Nivola
Joseph White
Foreign Policy Studies
John Steinbruner
SusanWoodward
Francis Deng
Catherine Kelleher
William Quandt
Joshua Epstein
Robert Axtell
Guest Scholars
Carol Graham
Louis Rice
Martin Mayer
** spouses not included on list
Members of the Administration with ties to the Brookings Institution:
Administration Official
Former Brookings Affiliation
Donna Shalala
Board of Trustees
Alice Rivlin
Senior Fellow and Director of Economic Policy
Studies Program
Alan Blinder
Senior Advisor, Member of the Brookings Panel on
(CEA)
Economic Activity, Visiting Fellow
Joel Stiglitz
Member of the Macroeconomics Panel
(CEA)
Bob Litan
Senior Fellow, Economic Policy
(Dep'y Ass't Attorney General)
Studies Program
Larry Summers
Brookings Panel on Economic Activities
(Undersecretary of Treasury for
International Affairs)
Alicia Munnell
Research Assistant to Henry Aaron
(Ass't Sec'y of Treasury for
Economic Policy)
Joe Minarick
Research Associate
(OMB - Associate Director
of Economic Policy)
Elisa Harris
Sr. Research Analyst in Foreign Studies Program
(NSC - Director for Nonproliferation
and Export Controls)
Ken Flamm
Senior Fellow in Foreign Policy Studies
(Principal Deputy Assistant
Secretary of Defense for Economic Security)
Ed Dorn
Senior staff member for Public Policy Education
(Ass't Secretary of Defense
for Personnel and Readiness)
HENRY AARON
Aaron is the Director of Economic Studies at the Brookings
Institution. He is heavily published on the issue of health care
reform, and he is known for his independent views. He is a
Democrat who is slightly more liberal than Bosworth. Aaron is
thoughtful and well informed.
While he has been helpful to the Administration responding
to the economist letter on price controls, he has maintained a
constructively critical distance from the Administration's plan.
However, Aaron has also strongly criticized the alternative
health care proposals being considered by Congress. Many could
have seen Aaron as the Chairman of the Council of Economic
Advisers under a Democratic Administration.
Health Care Related Activities:
In a February 13, 1994 op-ed in the Washington Post, Aaron
blasts the Cooper plan for its lack of a commitment to
universal coverage, unspecified benefits package, and
impractical subsidy structure which would serve as a
disincentive to work for those with limited incomes. Aaron
concludes the Cooper plan "will not bear serious scrutiny."
On January 12, 1994, Aaron and Barry Bosworth testified
before the Senate Finance Subcommittee on health reform and
the competitiveness of U.S. companies. They concluded that
health reform is not likely to have a large long-term impact
on U.S. competitiveness, although the impact will be more
pronounced in the short term and will vary by company.
In his paper delivered to the American Economic Association,
"Issues Every Plan to Reform Health Care Financing Must
Confront," Aaron supports the goals of universal coverage
and cost containment. He argues for the community rating of
insurance premiums, and, while fearful of the complexity of
any mandate, supports an employer mandate over an individual
mandate.
In "Economic Issues in Reform of Health Care Financing," co-
authored with Barry Bosworth, Aaron discusses the economic
implications of expanding access to health care, slowing the
rate of cost increase, and implementing the community rating
of insurance premiums. The authors note the difficulty of a
move from experience to community rating, and the varying
affects of reform by industry.
In November, 1993, Aaron sent you a copy of his paper, "Can
the United States Reform its Health Care System." This
paper examines the prospects for health reform from more of
a political and practical perspective than an economic one.
While Aaron argues that the Clinton plan is overly
ambitious, he is more critical of the Chafee plan and other
more conservative alternatives. He concludes that a modest
compromise law can be passed in 1994 that serves as a seed
for further efforts. Aaron published a version of this
paper, called "Sowing the Seeds of Reform in 1994," in the
January edition of Health Affairs magazine.
In September, 1993, two days after the health reform
proposal, Aaron stated: "But the plan, at least in the
draft, rests on unrealistic assumed savings from cost
control. Those assumptions need to be scaled back in the
interests of realism and safety.
it is clear that most
savings would have to come from changes in medical practice.
Physicians would have to administer fewer tests, hospitalize
less often, do less surgery and prescribe fewer
medications." Aaron suggested phasing in universal
insurance. Hence, he believes, savings and new benefits
would come more slowly but more reliably.
Background:
Aaron initially joined Brookings as a Senior Fellow in 1968.
From 1967 until 1989, he taught at the University of Maryland.
In 1977 and 1978, he served as Assistant Secretary for Planning
and Evaluation at the Department of Health, Education, and
Welfare. He chaired the 1979 Advisory Council on Social
Security. Aaron was an undergraduate at the University of
California at Los Angeles and holds a Ph. D. in economics from
Harvard. He is the editor or co-editor of nine books and the
author or co-author of fourteen others.
CHARLES L. SCHULTZE
Schultze is a Senior Fellow of the Economic Studies Program
at the Brookings Institution. He was the Chairman of the Council
of Economic Advisers under the Carter Administration, and
Director of the U.S. Bureau of the Budget under Johnson.
Schultze is a traditional Democrat, perhaps more liberal than
Bosworth, but less so than Aaron. He is a deficit hawk and is
considered an expert on budget issues. Schultze appears to be
less active on health care than Aaron, Weiner, and Bosworth.
Health Care Related Activities:
In February 5, 1994 commentary for the "Nightly Business
Report (NBR) a public television business program,
Schultze argued that it is premature to conclude that the
rise in health care costs has permanently slowed. Schultze
warned that ever increasing utilization of expensive new
treatments will make it difficult to keep down costs.
According to Schultze, "We face a dilemma -- either devise
some form of control on total health care spending or keep
paying more for health care.
In commentary for NBR in July, 1993, Schultze said,
"ultimately, some form of rationing will have to be imposed
-- we cannot continue to make every high tech procedure, no
matter how expensive."
In The Washington Times on February 15, 1994, Schultz was
quoted: "My judgment is that nothing that can reasonably be
done in the way of health care reform, even if successful in
the long run, is going to control the growing cost of
medical care sufficiently to give us a desirable budgetary
picture around the turn of the century."
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FIRST LADY HILLARY RODHAM CLINTON
REMARKS TO THE BROOKINGS INSTITUTION TRUSTEES DINNER
WASHINGTON, DC
MARCH 1, 1994
DRAFT
[Acknowledgments]
It's an honor to be here tonight at an institution that has
had such a profound impact on our political landscape. For 78
years, Brookings has been a fixture in Washington and, depending
on the political era, either a thorn in the side or the wind in
the sails of many a President.
I think I'm correct in saying that the New Dealers had no
use for the place. A few decades later President Kennedy liked
you. And so did President Johnson. But Richard Nixon was SO put
off by the institution's "liberal Democrati agenda that he
prohibited his aides from talking to anyone here and
reportedly wanted Brookings burned to the ground.
Let me assure you that, as a certified wonk, our current
President has no plans to firebomb the building. In fact, this
Administration already has relied heavily on Brookings for
brainpower and manpower. Not only have we borrowed many of your
good ideas, Brookings' fellows and associates are sprinkled
throughout the government, from the Cabinet on down [Shalala is a
Brookings trustee; Rivlin et. al.].
Today our nation is engaged in a great and unprecedented
discussion about health care reform. That discussion has
flourished not only because ordinary citizens have come forth to
express their views about our health care system, but because
economists and social scientists and public policy experts have
participated in this discussion so vigorously -- and so candidly
I thank you for your enduring interest in issues vital LO
our government and our nation. Not just the work that Henry Aaron
and his group have done on health care, but also the ideas that
have germinated here on deficit reduction, NAFTA and GATT, the
break-up of the Soviet empire and so many other important issues.
GENERAL AREAS OF AGREEMENT ON HEALTH CARE REFORM
I know from reading the op-ed pages and various public
policy journals recently that there is great excitement about
health Care reform, as well as some questions about how it will
1
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be achieved.
As you know, the President's proposal was not dreamed up
overnight. It emerged after months of discussion with ordinary
citizens and health care experts. And today it continues to be
scrutinized and analyzed by some of the most respected economists
and policy experts in the nation -- including some in this very
room. That's why we're confident that the proposal is realistic
that it is built on sound ideas and sound economics
and
that it can be achieved.
The President is optimistic because there are SC many points
that everyone -- Democrats, Republicans, and even all the
economists and public policy experts -- seem to agree on.
First, that we are spending $1 trillion a year on health
care and not getting our money's worth. With SC much money
pouring into an inefficient health care system, WP have fewer
resources for investment and higher wages.
Second, that our health care system is a major drain on our
economy and a key culprit in our ballooning deficit.
Third, that the current system is broken. Today, the
incentives are backwards, stifling competition, breeding
inefficiency and encouraging waste.
Fourth, that there are substantial savings to bc garnered
from within the system.
And fifth, that we don't cover every American and are not
providing real health security to our citizens.
ECONOMIC AND SOCIAL GOALS DRIVE THE PRESIDENT'S PLAN TO PROVIDE
HEALTH SECURITY FOR EVERY AMERICAN
In thinking about these realities and about how we can
fix what is wrong without undermining what is right in our health
care system -- the President wanted to come up with a plan that
made economic sense, as well as social sense. IL wasn't good
enough simply to crunch some numbers and leave it at that. He
wanted a plan that heightened individual and collective
responsibility -- a plan in which everyone would be asked to
contribute in return for access to comprehensive, lifetime health
care.
There is widespread agreement that covering everyone is the
only way to achieve real reform. Not only 18 it morally right,
but without universal coverage, cost-shifting will continue
unabated and we'll have no hope of slowing the growth of
government programs. Worst of all, health security will remain an
idle fantasy for millions of Americans.
2
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The President's approach -- by far the most detailed. most
substantive of those under discussion in Congress -- fixes the
current structure so that we can control spending, restore
competition, end discrimination in the insurance market, and reap
additional savings through premium caps.
THE PRESIDENT'S APPROACH BUILDS ON OUR CURRENT SYSTEM OF PRIVATE
HEALTH INSURANCE
*
The President's proposal is rooted in the private sector,
with most of the financing of premiums -- about 75 percent
coming from businesses and individual households, just as in does
today.
* What is different is that his approach asks employers and
individuals who are not paying to take responsibility and pay
their fair share. In other words, no more free lunch for those
who now exploit the system.
AN EMPLOYER MANDATE IS THE BEST STRUCTURE FOR ACHIEVING UNIVERSAL
COVERAGE AND PAYING FOR THE SYSTEM
*
We have three choices of how to cover everyone:
government sponsored insurance; an individual mandate; or an
employer mandate.
*
A government system would require huge tax increases.
*
Individual mandateo would encourage employers who now
cover their employees to drop them.
*
An employer-based system makes the most sense. Nine out
of ten Americans who have private insurance today get it through
their employer. It's a system that works for the vast majority of
Americans, and that's why the President decided to expand it to
cover all of our citizens.
FINANCING OF THE PRESIDENT'S PLAN IS ACHIEVED IN THREE WAYS
There is no great mystery about how we pay for care
today. More than half of Americans' annual health care bill --
including public and private funds -- comes from employers and
individuals. They are the ones who create the jobs, work hard,
and play by the rules. And they are the ones who pay almost the
entire cost of our health care system through exorbitant
insurance premiums, out-of-pocket expenses and taxes that cover
public programs like Medicare and Medicaid.
The President's plan otters three methods of financing:
*
First: 1= asks all Americans who work and have no
3
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905
insurance, and their employers, to contribute something to their
own health care.
*
Second: It limits the growth of federal health care
programs. That doesn't mean cutting them, but reducing the rate
of increase in Medicare and Medicaid.
*
Third: It imposes a tax on tobacco. Not a broad-based
tax, but a tax directly related to improving health in this
country.
*
Alternate plans not only fail to offer universal
coverage and comprehensive benefits, they offer virtually no
credible methods of financing. They ask for cuts in Medicare and
Medicaid, which would exacerbate cost-shifting.
THE PRESIDENTS APPROACH FIXES THE CURRENT SYSTEM BY ENCOURAGING
REAL COMPETITION AND INCREASED EFFICIENCY AND ENHANCING CHOICE
* The president's plan relies on market competition between
private health plans to provide consumers with the widest
possible array of choice. That maximizes choice for consumers and
minimizes government interference. Those who want a Cadillac
won't have to settle for a Hyundai. And those who want a Hyundai
won't have to pay for a Cadillac.
*
By establishing regional health alliances -- I like to
call them buyers' clubs -- insurers will be forced to compete for
consumers and prices for premiums will be more competitive.
WE NEED COMMUNITY RATING so THAT PEOPLE WITH INSURANCE REALLY
HAVE INSURANCE.
*
Currently, health insurance 18 often discriminatory. It
is based on experience -- that is, on the consumer's expected use
of health services. That means prices are determined by one's
health status or age or even their gender. So if you're an older
American with diabetes, you're a pariah. If you're a young adult
with an iron constitution, you're the cat's meow.
*
With community rating, everyone in a group is charged
the came amount thus spreading the cost of care across the
population. Under this system, the price paid by each individual
for coverage would be the average cost of such coverage for the
population.
*
With community rating, insurance really is insurance. No
one can be diseriminated against because they have a pre-existing
condition or because of their age. And with regional health
alliances -- OF buyers' clubs -- people can shop around for the
plan that best suits their needs.
4
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COMMUNITY RATING MUST BE ENFORCED
*
There is a catch. Community rating won't work if it isn't
vigorously enforced. [We're still working on specifics of the New
York example to be inserted here!
*
Again, the President's plan is the only one that offers a
realistic approach to full-scale community rating. Alternate
plans include only minor insurance reform. Insurance companies
would still be able to exclude some people with pre-existing
conditions and would be able to market to low-risk groups and
individuals.
THE PRESIDENT'S PLAN OFFERS A BACK-UP COST CONTROL MEASURE
THROUGH THE USE OF PREMIUM CAPS
*
Premium caps are needed to build discipline and
certainty into the health care system.
*
If businesses and individuals are going to be asked to
contribute to the cost of health care and the government is going
to provide discounts to those who cannot afford their full share,
then everyone must be assured that increases in their premiums
will not rise out of control.
*
Critics charge that premium caps are unrealistic because
the rate of growth needed to reach them has never been attained
in any other industrialized nation. That misses the point. As WC
phase-in universal coverage, there will likely be a major
expansion in health expenditures -- perhaps from the current rate
of about 14.5 percent of the GDP to 16.9 percent by the year
2000. That amounts to a more rapid increase in the share of
resources devoted to health care than has occurred in any other
nation over a comparable period of time. It is AFTER that
expansion that we predict the rate of growth will slow and come
in line with our CDP.
THE IMPORTANCE OF DEBATE AND CRITICAL ANALYSIS IN ACHIEVING
REFORM
In the coming weeks and months, Congress will have the
chance to act on health care reform. This is all historic
opportunity, one that should not be undermined by political
cynicism and gamesmanship.
That's where Brookings can play a vital role. One reason we
have had a healthy debate about reform is because people at
institutions like this one have risen above the fray and have
been willing to examine public policy proposals with a rigorous
and candid eye.
At such a crucial moment in our history, this institution
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02/28/94
19:47
GRAHAM/MUSCATINE - 2024562239
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907
must continue to inject honesty and substance into the political
discourse. The fellows here can elevate the debate beyond
rhetoric. They can provide the substantive analysis that can help
all Americans -- and especially members of Congress -- make
informed judgments about which path we should follow.
As the saying goes, "Be there a will, and wisdom tinds the
way. "
We have the will. With your help, I think we have the
wisdom. And hopefully we will find the way to become a healthier,
happier nation.
Thank you.
###
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FINANCING HEALTH SECURITY
CONTENTS
Page
Talking Points
1
Financing Overview
2
Excerpts from Lewin-VHI Analysis of Health Security Act
11
Charts
Sources and Uses -- Bar Chart
Sources and Uses -- Line by Line Breakdown
Cost of Premium Discounts -- Bar Chart
National Health Expenditures Under Current Policy and the
Health Security Act: 1994 - 2000 -- Bulleted Summary
National Health Expenditures as a Percent of GDP, Under Current
Policy and Under Reform -- Line Chart
National Health Expenditures in Dollars, Under Current Policy
and Under Reform -- Line Chart
FINANCING HEALTH SECURITY
TALKING POINTS
The vast majority of funding for health security will come from building on our
current system and asking all employers and employees to take responsibility for
paying for health coverage. But additional funding is needed to protect small
businesses, provide long-term care and prescription drug coverage to older
Americans, and ensure that no American ever loses their health coverage. The
President's approach includes a cigarette tax and corporate assessment. and
savings from slowing the growth of the cost of federal health care programs.
1. Asking people who don't have insurance and companies who don't
provide it to take responsibility and contribute.
Today, nine out of ten Americans who get private health coverage get it through the
employer-based system. It's a system that works for the vast majority of Americans.
That's why the President rejected a broad-based tax to pay for a government-run
system -- deciding instead to leave our health care system rooted in the private
sector. In fact, under reform. three quarters of total health insurance premiums
will continue to come from the private sector businesses and households.
The President's approach asks those employers and individuals who aren't paying
to take responsibility and pay their fair share. This will lower costs for the vast
majority of companies who currently provide insurance and who will no longer see
their premiums rise to pay for free care for people without insurance.
2. Taxing tobacco and large corporations that form their own alliances.
This plan has no broad-based tax, but to try to encourage health in this country,
increasing the tobacco tax is an appropriate way to help discourage smoking and
therefore promote good health. And we're going to ask those large corporations that
form their own alliances to contribute to the cost of health care for everyone.
3. Slowing down the growth of spending for Medicare and Medicaid.
Every serious health reform proposal -- Democratic and Republican recognizes
that national health care reform can save money in the rate of growth in federal
health programs. Medicare and Medicaid will no longer have to reimburse doctors
and hospitals for the cost of caring for the uninsured. saving billions of dollars per
year. With all employers contributing to health care, Medicaid and Medicare will
also save on workers now covered by those programs. Upper-income people will pay
a larger share of their Medicare Part B premium. and there will be a crackdown on
the fraud and overcharges that drive up Medicare costs.
FINANCING HEALTH SECURITY
OVERVIEW
SUMMARY:
Financing for the President's approach builds on the current system
with three quarters of the total health insurance premium costs
coming from the private sector -- businesses and households -- just as
they do today.
The President's approach is the only comprehensive health
reform plan which spells out exactly what benefits will be
provided and how this reform will be financed -- with the
exception of plans that call for raising taxes on all Americans.
The process used to arrive at the financing estimates was
rigorous and has been validated by many independent sources.
The federal costs for the proposal are identifiable and clear
with significant long-term deficit reduction.
The sources of federal funding are specific and scorable.
Most importantly, the President's approach contains strong
financial protections to ensure accountability and fiscal
responsibility and guarantee that projected savings are locked
in.
I.
OUR PLAN BUILDS ON TODAY'S PRIVATE SECTOR SYSTEM:
The President's approach builds on our current private health care system.
According to the March 1992 Current Population Survey, nine out of ten
Americans who are privately insured today get their insurance through the
employer based-system this will continue. But now every employer will be
asked to take responsibility. Firms that now cover their employees' health
insurance will no longer be penalized in a system where their competitors can
choose to cut costs by not providing insurance. And all individuals will now
have to take responsibility for their share of insurance as well.
By providing discounts to small businesses and low-wage workers, the
President's approach will enable millions of Americans to contribute toward
their comprehensive, affordable insurance coverage. In fact. under the
President's health reform bill, 76% of health insurance premiums come from
these private sources and remain in the private sector.
II.
NO OTHER PLAN PROVIDES THIS LEVEL OF FINANCIAL DETAIL:
The President has provided more specifics about the plan's financing --
exactly how much the program will cost, where the funds will come from, and
how these funds will be spent than any other proposal. In fact, the
Administration is the only sponsor of a health reform plan which has
released extensive documentation detailing exactly what benefits will be
provided, how premiums and discounts were estimated, exactly where we
expect to get savings, the methodology behind predicting the federal revenues
and the anticipated distributional effects of the proposal. No other plan out
there has come anywhere close to this level of detail.
III.
EXPERTS VALIDATE OUR PROCESS OF ESTIMATING COSTS:
The health care financing analysis undertaken by the administration has
been rigorous, drawing on the best analytical talent from inside and outside
the federal government. Our methodology and premium estimates were
validated by a team of prominent, private sector actuaries from firms such as
Coopers & Lybrand, Towers Perrin, and Price Waterhouse. These actuaries
gave said our cost estimates are the "best possible" and pass a "real world
test." Although they may disagree about specific policy choices, many
independent economists and health economists agree that our process was
thorough and our estimates are both credible and achievable.
An independent analysis of the Health Security Act -- conducted by the Lewin
VHI health care consulting firm and co-authored by a former top Reagan
administration official confirmed that "the plan's financing structure works:
it meets the President's requirement of providing universal coverage, and it
does so without relying on an increase in broad-based income taxes." Robert
Reischauer, Director of the non-partisan Congressional Budget Office,
testified that the estimating process "as far as I can tell, really was done
without any bias at all, was a first-rate professional effort to get at these costs."
[Lewin, PR, 12/8/93; Reischauer Testimony, Senate Finance Committee, 2/9/94]
IV.
USES OF FUNDS - Federal Costs are Identifiable and Clear:
1.
Premium Discounts for Businesses and Families:
$151 Billion - over 5 years (1996-2000)
Discounts on the cost of insurance will be provided to three groups
who may not be able to assume full financial responsibility for their
share of their insurance premiums:
1)
businesses within the regional alliances (with 75 percent of
discounts going to small firms);
2)
low-income individuals, families and retirees: and
3)
people who have lost their jobs.
The cost of providing these discounts is approximately $110 billion
over five years. In addition, there is a 13% discount "cushion" -- $41
billion over 5 years -- built into the discount structure for
unpredictable behavioral changes that could result in an additional
demand for discounts.
Net Discounts ($151 B) = Gross Discounts ($327 B) - Offsets ($176 B)
Gross discounts -- the amount of discounts that are actually
distributed to businesses and families -- are offset by money saved by
the federal government ($104 billion -- $79 billion from Medicaid and
$25 billion from Medicare) and state/local governments ($72 billion)
when people who used to be on Medicare and Medicaid now are
enrolled in the alliances. Therefore. the total net cost to the
government is $151 billion.
2.
Medicare Drug Benefit:
$69 Billion - over 5 years (1996-2000)
The savings in the Medicare program will be reinvested in improved
benefits for seniors. For less than $10 a month, Americans eligible for
Medicare will automatically receive prescription drug coverage -- with
standard 25% Part B premium payments and a $250 deductible.
Enrollees will benefit from a $1,000 annual limit on out-of-pocket
prescription drug costs, with all costs above this amount fully covered.
3.
Long-Term Care:
$62 Billion - over 5 years (1996-2000)
Americans of all ages who are disabled will gain access to a wider
variety of home and community-based support services, making it
possible for many to continue to live at home rather than in nursing
homes. There are three components to the long-term care benefit:
(i)
the home and community-based program ($57 billion);
(ii)
state option to liberalize eligibility for nursing home care under
Medicaid / enhanced resource protection under Medicaid for
nursing home residents (personal needs allowance) ($2 billion);
(iii) tax incentives to encourage the purchase of long-term care
insurance and a tax credit for the working disabled ($3 billion).
4.
Self-Employed Tax Deduction:
$9 billion - over 6 years (1995-2000)
Today, individuals who are self-employed are discriminated against
because they can only deduct 25% of the cost of their health premiums
from their taxes, rather than 100% as all other businesses do.
Eliminating this bias against the self-employed -- by allowing a 100%
income tax deduction for the cost of their comprehensive benefits --
will bring equity to the system and encourage the formation of small
businesses.
5.
Public Health Initiatives/Veterans/WIC/New Administration:
$47 billion - over 6 years (1995-2000)
New public health spending on programs for children, for veterans, to
train nurses, and for research and development are also included in
the proposal. New funds for the Women, Infants and Children (WIC)
program will enable more mothers, infants and children benefit from
WIC through its health promotion and nutritional supplements ($3
billion). This provision also includes additional funds for academic
health centers to support research and development (net of offsets from
current Medicare funding for this purpose) ($24 billion), other public
health initiatives such as school-based clinics, health research, and
prevention-promotion programs ($7 billion), additional funds for
training Advanced Practice Nurses under Medicare ($2 billion),
additional funds for veterans' health programs ($3 billion), additional
funds for community hospitals serving "vulnerable populations", such
as undocumented persons ($3 billion), and new start-up and
administrative costs ($5 billion).
NEW FEDERAL SPENDING TOTALS $338 BILLION - OVER THE 6
YEAR PERIOD FROM 1995 - 2000
V.
SIGNIFICANT DEFICIT REDUCTION:
Over the long term. experts acknowledge that comprehensive health reform
that provides the universal access needed to control health care costs is the
single best hope for reducing the structural deficit. According to
administration estimates, the President's approach will reduce the deficit by
$59 billion -- over the six year period from 1995 to 2000.
The independent analysis from Lewin-VHI estimated that the President's
approach would reduce the deficit by $25 billion by the year 2000 and
would continue to reduce the deficit in the long-run.
The Congressional Budget Office also estimated that the President's
approach "should make ever-increasing contributions to deficit reduction
after 2004". While CBO and the Administration agree that the plan will
begin to save money by 2000, CBO estimates that much of these initial
savings will go to businesses and state/local governments. In contrast, the
administration expects these savings to initially go to the federal
government and therefore to immediately begin to reduce the deficit.
Since CBO and the Administration are in agreement on the essential
framework as well as the magnitude of the overall savings projections, the
short-term deficit issue is something that can be easily worked out as the
proposal proceeds through the U.S. Congress.
VI.
SOURCES OF FUNDS - Specific and Scorable:
1.
Medicare Savings:
$118 Billion - over 6 years (1995-2000)
The Medicare program remains intact under the President's plan, with
improved benefits and slower rates of growth of spending. Every
serious health reform proposal -- Democratic and Republican --
recognizes that national health care reform can save money in the rate
of growth in Medicare and Medicaid. But only the President's
approach reinvests these savings in new prescription drug and long-
term care benefits for seniors and combines Medicare savings with
reductions in the growth of private sector spending so Medicare
savings are not simply shifted to the private sector. In the long run,
health reform represents the most economically and politically viable
way to change the nature of our entitlement system and control the
skyrocketing growth of entitlement programs. Our plan will provide
greater health security and two new benefits for older and disabled
Americans while bringing down the cost of their health care and the
cost of the health insurance system as a whole.
The plan identifies $118 billion in specific. scorable, line-by-line
savings described by CBO Director Reischauer as "quite real and
quite achievable" which are outlined in the Medicare section of this
document. For example, Medicare will no longer have to reimburse
doctors and hospitals for the cost of caring for the uninsured, thereby
saving the Medicare program billions of dollars each year. In addition,
upper-income participants in the program will be asked to pay a larger
share of their Medicare Part B premiums. Together these reforms will
slow the rate of growth of Medicare costs from three to two times the
rate of inflation, and the savings will be directed into the new benefits
for older Americans.
2.
Medicaid Savings:
$61 Billion - Over 5 Years (1996-2000)
All credible health reform proposals currently under consideration in
the Congress recognize that, with health reform, the rate of growth of
Medicaid spending the federal health insurance program for low-
income Americans -- can be reduced. The President's approach uses
these savings used to provide comprehensive health coverage to
Medicaid recipients under the new system.
Under reform. the Medicaid program will be restructured and savings
will be achieved. There are two categories of savings:
(i)
Disproportionate Share (or DSH) Payments -- once all Americans
have insurance, the federal government can reduce the special
payments it makes to providers who today provide a
disproportionate amount of free services to the uninsured ($48
billion);
(ii)
Slower Rate of Growth of Medicaid Spending -- Future Medicaid
spending by the federal government for those populations that
receive care through the alliances that is paid by the Medicaid
program (SSI, AFDC) will grow at a slower rate of increase, as
will the rest of the health care system ($22 billion);
There are also two categories of new spending relating to the Medicaid
program: (a) additional spending for Medicaid "wrap-around services" -
- such as transportation -- that will continue to be provided to disabled
children ($5 billion); and (b) additional expenses for administration ($4
billion).
3.
Tobacco Tax and Corporate Assessment:
$92 Billion - Over 6 Years (1995-2000)
The plan will raise taxes on tobacco products, asking people whose
health costs are higher to pay more for products that increase the risk
of poor health. The tobacco tax on cigarettes is increased by $.75 per
pack (to $.99 per pack), raising $67 billion over 6 years.
The President's approach also asks those large self-insured
corporations who establish their own alliances to help pay for health
care for everyone -- for example, by contributing to the cost of academic
health centers which benefit all Americans. The corporate assessment
is 1 percent of payroll, raising $24 billion over 5 years.
4.
Federal Programs Savings:
$29 Billion - Over 5 Years (1996-2000)
The plan will lower the federal government's cost of providing health
care for federal workers by integrating them into the alliance
structure. By purchasing health care in the private sector, the
government will be guaranteed the same low rate of cost increase as
private businesses. The savings are from several sources: Veterans
Department ($19 billion); Department of Defense ($3 billion); and
Federal Employees Health Benefits program ($8 billion).
5.
Increased Federal Revenues:
$93 Billion - Over 6 Years (1995-2000)
The President's approach will raise an additional $93 billion in federal
revenues without raising a broad-based tax, although there will be
some changes in tax deductibility outside of the comprehensive
benefits package. There are several components to these savings.
(i)
As employers' health care costs -- which are currently tax-
preferred -- decrease, more employer funds will be channeled into
taxable avenues such as increased wages for existing workers and
new hires, increased profits, greater shareholder dividends, etc.
Initially, premiums under reform will be 10.5 percent lower than
they are now because, with universal coverage, firms that insure
their workers will no longer be overcharged to cover the costs of
those who are uninsured but still receive care. The new
incentives to increase competition and encourage cost
consciousness on the part of both consumers and providers will
continue to lower health insurance costs over time. This re-
channeling -- expected to translate primarily into an increase in
taxable wages -- is estimated to raise $28 billion over 6 years.
(ii) increased revenue from removing health insurance from currently
tax-preferred "cafeteria plans" mechanisms used by employers
today to provide their employees a variety of benefits on which to
spend their pre-tax dollars ($31 billion);
(iii) dedicated revenues for academic health centers ($18 billion);
(iv) other conforming tax changes largely affecting the self-employed
($4 billion); and
(v) contributions made by businesses, and upper-income retirees, for
health coverage for their early retirees ($12 billion).
6.
Reductions in Debt Service:
$4 Billion
Lower deficits will lead to savings in federal interest payments on the
federal debt.
VII. RESPONSIBLE, CONSERVATIVE FINANCIAL PROTECTIONS:
Several mechanisms have been included in the plan to ensure accountability,
fiscal prudence, and credibility.
13% Discount "Cushion":
We have been careful in estimating the funds needed for discounts, basing
our estimates on sophisticated models built from very specific information
about factors such as worker's earnings, numbers of workers in firms at
certain sizes, etc. However, there are some behavioral changes, both positive
and negative, that are difficult to quantify in a program of this magnitude --
such as creative accounting by businesses to qualify for additional discounts.
For these reasons, the President's approach has a built-in 13% "cushion" -- of
$41 billion over 5 years -- as a safeguard for these unknowns. giving us even
greater confidence in our estimates.
Entitlement Caps on Discounts - Fiscal Accountability:
The plan sets a limit on the amount of funding for discounts that is
automatically appropriated. We felt an open-ended entitlement left the
federal budget and the American taxpayer vulnerable to unpredictable cost
increases in the future. The health reform program must pay for itself, and
the costs must be clear and predictable. However, we are confident we have
been conservative in estimating the needed funds for discounts so that this
cap will never be reached. As just one example, we overestimated the
demand for discounts for businesses, families, and retirees in order to be as
conservative as possible. Then, we ran sophisticated models to test how the
system would respond to extreme hypothetical situations. For example, an
unexpected 2 percentage point increase in unemployment -- with millions
more suddenly qualifying for discounts would require an additional $4
billion a year. In 2000. the cushion is $12 billion three times the funds
necessary for this extreme situation. In addition, any funds that are not used
in one year can be carried over to the next year so that a contingency reserve
will build over time.
If it appears that the entitlement cap might be reached, the Secretary of HHS
must notify the President and the Congress immediately. Within 30 days,
the President must submit to Congress a report containing specific legislative
recommendations for actions which would eliminate the shortfall and this
report will be considered by Congress under an expedited procedure. These
provisions reflect the President's strong commitment to financial
responsibility.
Premium Caps - Backup Cost Control Measure:
We strongly believe that -- regardless of how quickly or how firmly
competitive reforms take hold we need to build some discipline and
certainty into the health insurance system. This is essential to assure
businesses and consumers that their health insurance premiums will not
continue to spiral out of control year after year, and that the federal
government will not be allowed to increase spending without accountability.
The President's approach reinforces the private marketplace and the
competitive system with a fail-safe limit on health care premium increases.
This targeted, selective limit will be used only if the average premium across
all plans exceeds the alliance's premium target; it cannot be triggered by one
or two extreme plans. We are confident that these limits will not be reached.
If triggered, however, these limits will apply only to those plans in the
Alliance that exceed the target. Plans and providers that propose excessive
rate increases will be required to adjust their premiums downward or face
stiff financial penalties (to automatically "rebate" the portion of the premium
which exceeds the alliance's premium target).
LEWIN-VHI ANALYSIS OF HEALTH SECURITY ACT
Selected Excerpts
" the plan's financing structure works: it meets the President's requirement of
providing universal coverage, and it does so without relying on an increase in
broad-based income taxes." [Lewin, PR, 12/8/93]
"This report validates the logic of the plan's financing..." [Lewin, PR, 12/8/93]
"There is no smoke and mirrors here." [Lewin, AP, 12/8/93]
"The Lewin-VHI analysis also shows that American families as a group are
the major beneficiaries under President Clinton's health care reform
package..." " [Lewin-VHI Press Release, 12/8/93]
"The 'magic' in the administration's plan, is community rating. This is quite
simply a return to the way insurance use to work before insurers competed to
avoid risk." [John Sheils. author of Lewin study, PR, 12/8/93]
"[Lewin] has concluded that the proposed funding system for President
Clinton's national health plan is basically sound." [Washington Post, 12/9/93]
"If the question is whether they can finance this program with the revenues
they will get under their plan, the answer is yes, and they will still end up with
$25 billion for budgetary deficit reduction." [Lewin, Washington Post, 12/9/93]
"An independent analysis of the Clinton health plan concludes that it can
cover everybody without a broad-based tax increase and still reduce the
federal deficit." [AP, 12/9/93]
" the Lewin report concluded that older people stand to gain the most from
the Clinton plan, particularly the 55-64 age group." [Knight-Ridder, 12/8/93]
Chart 4-1. FINANCING THE HEALTH SECURITY ACT
(TOTALS: 1995-2000)
DOLLARS IN BILLIONS
500
$ 397
$ 397
DEBT
SERVICE $4
DEFICIT REDUCTION $59
400
OTHER REVENUE EFFECTS $93
CUSHION $41
300
FED'L PROG. RECEIPTS & SAVINGS $29
PREMIUM DISCOUNT $110
TOBACCO TAX AND CORP.
ASSESSMENT $92
SELF-EMPLOYED TAX
200
DEDUCTION $9
MEDICAID SAVINGS $61
MEDICARE DRUG BENEFIT $69
100
MEDICARE SAVINGS $118
LONG-TERM CARE $62
PUBLIC HEALTH/ ADMINISTRATION $47
0
SOURCES OF FUNDS
USES OF FUNDS
NOTE: These estimates were calculated using the economic assumptions in the 1995 budget. Estimates released in November 1993 were based on economic
assumptions in the 1993 Midsession Review. Numbers may not add due to rounding.
01/26/94
ref. 1GRAPH95.BUDCHAP4-A
Financing the Health Security Act
27-Jan-94
Uses of Funds (billions of dollars)
Fiscal Years
1995
1996
1997
1998
1999
2000
95-99
95-00
Veterans, Public Health, New Administration, and Other
3.0
5.2
9.6
8.9
10.0
10.3
36.7
47.0
26
Veterans Health Care Investment Fund
1.0
0.6
1.7
0.0
0.0
0.0
3.3
3.3
27
New Public Health Initiatives
0.4
1.1
1.6
1.3
1.2
1.1
5.6
6.7
28
New Spending on Acad. Health Ctrs. and Grad. Med. Educ.
0.3
1.8
3.8
4.9
6.2
6.5
17.0
23.5
29
Advance Practice Nurses (Medicare)
0.0
0.2
0.4
0.5
0.6
0.7
1.6
2.3
30
New Federal Administrative and Start-Up Costs
1.3
0.9
1.2
0.9
0.6
0.6
4.8
5.4
31
Special Supplemental Food Program (WIC)
0.0
0.5
0.6
0.6
0.7
0.7
2.4
3.1
32
Vulnerable Population Adjustment
0.0
0.1
0.3
0.7
0.8
0.8
1.9
2.7
Long-Term Care
0.0
5.1
8.8
12.2
16.0
20.1
42.1
62.2
33
Home Based Care for the Disabled
0.0
6.0
10.2
13.9
18.2
22.8
48.3
71.1
34
Medicaid Offset
0.0
-1.5
-2.4
-2.9
-3.5
-4.1
-10.3
-14.4
35
Liberalized Medicaid Eligibility & Personal Needs Allowance
0.0
0.4
0.5
0.5
0.5
0.5
1.9
2.4
36
Tax Incentives for Long-term Care
0.0
0.2
0.5
0.7
0.8
0.9
2.2
3.1
37
Medicare Drug Benefit
0.0
6.9
14.0
15.0
16.0
17.2
51.9
69.1
38
100% Tax Deduction for Self-Employed Health Insurance
0.5
0.6
0.9
1.7
2.5
2.8
6.2
8.9
Discounts
0.0
5.8
17.5
41.8
44.3
41.8
109.3
151.1
Discounts -- Net of Cushion
0.0
4.5
13.6
31.4
31.7
28.8
81.1
109.9
Total Discounts
0.0
10.2
31.6
82.7
100.0
103.0
224.4
327.4
39
Employers (net of cushion)
0.0
3.0
9.2
23.7
28.4
28.7
64.4
93.1
40
Non-retired Households (net of cushion)
0.0
4.4
14.0
36.8
45.0
46.7
100.2
146.9
41
Retirees -- low income discounts (net of cushion)
0.0
0.7
2.1
5.5
6.7
7.0
15.0
21.9
42
Retirees -- added discounts (net of cushion)
0.0
0.4
1.4
3.7
4.5
4.8
10.1
14.8
43
Out-of-Pocket
0.0
0.3
1.0
2.6
2.7
2.8
6.6
9.4
44
Cushion
0.0
1.3
4.0
10.4
12.6
13.0
28.2
41.2
Offsets Made Possible by Health Reform:
0.0
-4.4
-14.1
-40.9
-55.7
-61.2
-115.1
-176.3
Medicaid
0.0
-3.4
-12.1
-34.9
-47.7
-53.2
-98.1
-151.3
45
States' Required Maintenance of Effort
0.0
-2.0
-6.4
-18.1
-22.4
-23.4
-48.9
-72.3
Discontinued Medicaid Coverage
0.0
-1.4
-5.7
-16.8
-25.3
-29.8
-49.2
-79.0
46
Basic Benefits
0.0
-1.3
-5.2
-15.2
-22.9
-26.9
-44.6
-71.5
47
Wrap-around Benefits
0.0
-0.1
-0.5
-1.6
-2.4
-2.9
-4.6
-7.5
46
Medicare Offset for Employed Beneficiaries
0.0
-1.0
-2.0
-6.0
-8.0
-8.0
-17.0
-25.0
Total Spending
3.5
23.5
50.9
79.4
88.8
92.2
246.1
338.3
47
Deficit Reduction
11.0
3.2
-6.9
-4.8
18.2
37.7
20.8
58.5
TOTAL
14.5
26.7
44.0
74.7
107.0
129.8
266.9
396.8
Financing the Health Security Act
27-Jan-94
Sources of Funds (billions of dollars)
Fiscal Years
1995
1996
1997
1998
1999
2000
95-99
95-00
Medicare
2.1
9.0
14.3
22.1
31.6
39.2
79.1
118.3
1
Part A Savings
0.0
3.3
7.0
12.0
16.4
20.4
38.7
59.1
2
Part B Savings (including interactions with premiums)
1.9
2.4
2.6
5.2
8.6
11.4
20.7
32.1
3
Parts A and B Savings
0.2
1.5
2.2
2.6
4.2
5.0
10.8
15.8
4
HI Tax Extended to all State & Local Government Employees
0.0
1.6
1.6
1.5
1.5
1.5
6.1
7.6
5
Income Related SMI Premium -- gross receipts
0.0
0.2
0.9
0.8
0.9
1.0
2.8
3.8
Medicaid
0.0
0.8
3.5
9.2
20.1
27.1
33.7
60.8
6
Cash-Eligible Beneficiaries in Alliances
0.0
0.3
1.2
3.7
6.6
9.7
11.8
21.5
7
Reduced Disproportionate Share Hospital Payments
0.0
1.0
3.7
10.4
15.2
17.4
30.3
47.7
8
Less Supplemental Services for Children
0.0
-0.1
-0.4
-1.1
-1.6
-1.6
-3.2
-4.8
9
Payment Lag, Administrative Savings, and Other Changes
0.0
-0.4
-1.0
-3.8
-0.1
1.6
-5.2
-3.6
Other Federal Programs
0.0
0.4
1.2
6.9
9.8
10.9
18.3
29.2
10
Veterans Affairs: Third Party Payments
0.0
0.6
1.7
4.4
5.8
6.1
12.4
18.5
11
Defense Department Health (a)
0.0
0.1
0.2
0.7
0.8
0.8
1.8
2.6
12
Federal Employees Health Benefits
0.0
-0.2
-0.7
1.8
3.2
4.0
4.1
8.2
Tobacco Tax/ Corporate Assessment
12.0
15.0
16.2
16.2
16.1
16.1
75.5
91.6
13
Tobacco Tax
12.0
11.3
11.2
11.1
11.0
10.9
56.5
67.4
14
Corporate Assessment
0.0
3.8
5.0
5.1
5.1
5.2
19.0
24.2
Other Revenue Effects
0.1
0.8
8.4
20.0
28.8
34.5
58.1
92.6
15
Exclusion of Health Insurance from Cafeteria Plans
0.0
0.0
5.3
8.1
8.7
9.3
22.1
31.4
16
Effects of Mandate, Cost Containment, and Discounts
0.0
0.1
0.9
4.4
9.3
13.7
14.7
28.4
17
Dedicated Revenues for Academic Health Centers
0.0
0.5
1.6
4.3
5.5
5.8
11.9
17.7
18
Assessment on Employers for Retiree Discounts
0.0
0.0
0.0
2.4
4.3
4.7
6.7
11.4
19
Anti-Abuse Rule -- Certain S Corp. Shareholders
0.0
0.2
0.5
0.5
0.5
0.5
1.6
2.2
20
Modify Tax Treatment of Certain Health Care Organizations
0.0
0.0
0.1
0.2
0.2
0.2
0.5
0.7
21
Reporting Penalties -- Non-corp. Ind. Contractors
0.1
0.1
0.1
0.1
0.1
0.1
0.4
0.5
22
Modify Tax Treatment Retirement Funding Accounts
0.0
0.0
0.0
0.0
0.1
0.1
0.2
0.3
23
Recapture Retiree Discounts High-Income Recipients
0.0
0.0
0.0
0.0
0.1
0.1
0.1
0.2
24
Incentives for Health Providers in Shortage Areas
-0.0
-0.0
-0.0
-0.0
-0.0
-0.0
-0.1
-0.1
25
Debt Service
0.3
0.6
0.5
0.2
0.6
2.0
2.2
4.2
TOTAL
14.5
26.7
44.0
74.7
107.0
129.8
266.9
396.8
(a) Under the proposed legislation, the Secretary of Defense is to decide when the military system will be coordinated with national health reform. This table shows
the estimated budgetary effects on the Department of Defense if the military system were to be fully coordinated with national health reform by FY 1998.
Chart 4-2. COST OF PREMIUM DISCOUNTS
DOLLARS IN BILLIONS
(TOTALS: 1995-2000)
$327
300
CUSHION $41
OUT OF POCKET $9
200
FAMILIES $169
$176
MEDICARE $25
$151
STATE
EARLY RETIREE $15
MAINTENANCE OF
100
EFFORT $72
NET $151
BUSINESS $93
MEDICAID $79
0
GROSS
OFFSETS
NET
NOTE: These estimates were calculated using the economic assumptions in the 1995 budget. Estimates released in November 1993 were based on economic
assumptions in the 1993 Midsession Review.
01/26/94
ref. 1GRAPH95.BUDCHAP4-B
NATIONAL HEALTH EXPENDITURES UNDER CURRENT POLICY AND THE
HEALTH SECURITY ACT: 1994 - 2000
Absent comprehensive reform, health care would consume 17.5 percent
of GDP, or $1.653 trillion, in the year 2000. [Charts I-A and I-B]
Under the Health Security Act, health care will consume 16.9 percent of
GDP, or $1.597 trillion, in the year 2000. This is $56 billion lower than
if there were no comprehensive reform. [Charts I-A and I-B]
Under the Health Security Act, there will be a short-term increase in
national health expenditures. Between 1995 and 1998 national health
expenditures will consume 0.1 percent to 0.2 percent more of GDP than
they would have without comprehensive reform. By 1999, health care
will consume a lower percentage of GDP under the Health Security Act
than if there were no comprehensive reform. [Charts I-A and I-B]
Over the entire period from 1994 to 2000, savings will exceed addition-
al expenditures by $37 billion. [Chart I-B]
2
NA. ONAL HEALTH EXPENDI RES AS A PERCENT OF )P
Under Current Policy and the Health Security Act: 1994 - 2000
18%
&
Without Reform*
17.5%
+
With Reform
16.9%
17%
16.6%
+
16.9%
t
16.7%
Percent of GDP
16.1%
16.4%
16%
15.6%
15.9%
15.4%
15.0%
15%
14.9%
14.5%
14%
1994
1995
1996
1997
1998
1999
2000
Chart I-A
SOURCE: Administration Estimates.
3
*
CBO baseline with Administration's economic assumptions.
NAT.ONAL HEALTH EXP_NDITURES IN DOLL .RS
Under Current Policy and the Health Security Act: 1994 - 2000
$1,700
Without Reform*
$1,653
+
With Reform
$1,517
$1,597
$1,500
$1,407
$1,492
to
Dollars in Billions
$1,392
$1,300
$1,290
$1,275
$1,179
$1,168
$1,100
$1,072
$1,069
$982
$900
1994
1995
1996
1997
1998
1999
2000
Chart I-B
SOURCE: Administration Estimates.
* CBO baseline with Administration's economic assumptions.
4
BROOKINGS INSTITUTION
Questions and Answers
February 28, 1994
TABLE OF CONTENTS
I.
FINANCING/MANDATES
Why an employer mandate?
Are government discounts uncapped entitlement?
What will happen when the cap is hit?
II.
ALLIANCES
Why do you need these big, regulatory alliances?
Why are these alliances so bureaucratic?
Why are they not voluntary?
Why not competing alliances?
Why require all companies with fewer than 5000 employees to join?
III.
SAVINGS / PREMIUM CAPS
Can you squeeze so much savings from the system?
Won't new technology just keep increasing prices anyway?
Can managed care can really lower costs?
Are the premium caps unachievable?
Isn't health care inflation coming down by itself?
IV.
CBO
Differences in deficit estimates
Decision to put health premiums on the budget
V.
MISCELLANEOUS
So much uncertainty that freeze companies from hiring
Do self-insured companies lose incentives to bring down costs?
Role of National Health Board
Long-range cost estimates of Medicare program
Early retirees
Incentives for firms to spin off low wage workers for discounts
BRT decision to support Cooper
BROOKINGS INSTITUTION
Questions and Answers
February 28, 1994
I.
FINANCING / MANDATES
B:
Why do you need an employer mandate?
A:
Let's start with the President's bottom line: guaranteed private insurance
for all Americans.
While there is more than one approach to universal coverage, building on the
existing employer-based system makes the most sense. 9 out of 10 people
who have private insurance get coverage through their job. Except for the
very smallest firms -- those with 5 or fewer employees -- the vast majority of
firms in the U.S. offer their workers health benefits. And many of these
smallest firms say that they would provide if they could afford it. Our goal is
to bring those now getting a free ride into the system -- to lighten the load of
those now providing insurance -- and to aggressively control costs to make
insurance affordable for even the smallest firms.
Requiring all employers to contribute builds on what works, and is a proven
means of reaching universal coverage through the private sector. The state
of Hawaii has had a universal system based on an employer mandate for
nearly 20 years, and the results are impressive: the unemployment rate is
one of the lowest in the nation, small business creation rates have remained
high (the number of employers grew almost 200% from 1970 to 1991), and the
rate of business failures in Hawaii remained less than half the national
business failure rate.
Every other state that has passed legislation or looked seriously at this issue
universally agrees that an employer mandate is the best and most expedient
route to full coverage. Two of the three states that passed comprehensive
reform legislation last year Oregon and Washington state -- passed
legislation based on an employer mandate. The third state, Florida, passed a
managed competition plan that set up alliances and health plans, and
Florida's governor Lawton Chiles has said that the missing piece that will
bring universal coverage to Floridians is a national system based on the
President's plan.
Combining the goal of universal coverage with the firm belief that
health care can and should remain in the private sector means
employers have to be involved in providing their workers' insurance.
Brookings Institute
Page 2
Q:
Aren't the government discounts in your proposal just another
uncapped entitlement?
A:
No. The Health Security Act provides discounts on the price of insurance for
small businesses and low-income people. And the amount of discounts
provided was said to be sufficient by an independent study done bv Lewin-
VHI. But the plan also sets a limit on the amount of these discounts that can
be spent automatically. We felt an open-ended entitlement left the federal
budget vulnerable to unpredictable costs in the future, and that was not an
option. This program must pay for itself, and costs must be clear and
predictable. If the amount specified for discounts -- plus a 15% cushion -- is
spent, Congress has to review the discounts and take action. This trigger
represents the President's strong commitment to fiscal responsibility.
That said, we are confident we have been conservative in estimating the
needed funds for discounts. These estimates are based on sophisticated
models built from very specific information about factors like family income
data, numbers of firms at certain sizes and wage-rates, etc. Some behavioral
changes -- both positive and negative -- are difficult to quantify in a program
of this magnitude. This is why we have also specifically built in a cushion for
these unknowns, giving us even greater confidence in these estimates.
Q:
What will happen when the cap is hit and there's no money left?
A:
That's very unlikelv. We believe that there are enough protections within the
system to prevent us from ever reaching that point, including early warning
mechanisms that allow alliances to take action before problems even arise.
Our plan is based on the most responsible financing possible and on very
conservative assumptions. As just one example, we overestimated the
demand for discounts for small businesses and low-income families in order
to be as conservative as possible. In addition, we have a 13 percent "cushion"
about $41 billion to cover unexpected costs. We ran sophisticated models
to test how the system would respond to extreme hypothetical situations. For
example, an unexpected increase of two percentage points in unemployment -
- with millions more suddenly qualifying for discounts would require an
additional $4 billion a year. In 2000, the cushion is $12 billion three times
the funds necessary for this extreme situation, and any funds that are not
used in one year can be carried over to the next year so that a contingency
reserve will build over time.
Brookings Institute
Page 3
So, the system is designed to prevent the kind of situation you're talking
about. We believe the financing is solid and the early warning system will be
effective. But, if Congressional action is needed. it will be taken. It could
mean limiting the amount of money spent on discounts or it could mean
raising additional revenue. The important thing is that Congress and the
President will have to re-examine the system. identify the problems. and
decide what to do. They cannot just let federal health spending increase
automatically as it has in the cases of Social Security, Medicare and
Medicaid. This mechanism ensures that type of accountability and fiscal
responsibility that the American people demand from their government.
II.
ALLIANCES
Q:
Why do you need these big, regulatory alliances?
A:
The issue really isn't how many alliances there are or how big they should be,
the issue is how to best bring about the changes to the insurance market that
almost everyone agrees are necessary. And all the major plans -- Cooper,
Clinton, Chafee-- think some type of group purchasing is the best way to do
that.
Today's insurance market is fragmented and overly bureaucratic, filled with
different companies, agents, marketers and underwriters selling different
plans with different benefits, exclusions, co-pays and deductibles. Insurance
companies are in the driver's seat today and they compete by selecting only
the healthiest people possible to insure. Small groups and individuals have
no bargaining clout, and as a result are often charged the highest prices, get
the worst benefits, or can't buy insurance at any price.
Under reform we want to consolidate the buying power of small and mid-
sized employers. increase choices for consumers, and limit health cost
increases for consumers and small and large employers. That's the idea
behind the alliance.
Alliances allow you to have one set of rules all private insurance plans follow,
not several hundred insurers each setting their own rules. They allows
businesses and families the broadest range of choices possible regardless of
how much money they make. what company they work for. or whether
they've ever been sick. And it returns insurance to what it was meant to be --
spreading risk over a whole community of people and charging everyone the
same price for insurance. regardless of their age or their job or their health.
Brookings Institute
Page 4
Alliances also enforce consumer protections making sure every person is
provided with a choice of plans and good information about each plan to help
them decide: making sure anyone unhappy with their insurance can switch to
a different plan each year without penalty; making sure all health plans meet
tough quality standards and provide all covered services; and guaranteeing
that insurance premiums only go up by a certain amount each year.
An increasing number of employers in both the public and private sectors
have used similar approaches with positive results. The state employee
health programs in Minnesota, California, and Wisconsin have done this, as
have large companies such as Xerox, Digital, and GTE.
Q:
Why are these alliances so bureaucratic? The last thing we need is a
big government bureaucracy.
A:
The last thing we want is big government bureaucracies, and that is exactly
why we rejected a government-run plan. What we designed instead is a plan
that calls for the minimal amount of new government needed to ensure that
the market is providing real choice, real quality and real competition that
serves the consumers and not the health care industry at the expense of the
rest of us. We expect most alliances will be run by groups of local businesses
and consumers. They will not be run by the government. Alliances are
purchasers, not government regulators. We expect the alliance will function
on a budget of about 2% of premiums reflecting savings that will result
from the consolidation of administration, marketing, and purchasing for all
companies within the system.
Alliances replace thousands of small inefficient purchasers of insurance
(small and mid-size employers) with one larger, stronger, more sophisticated
buyer that's able to wield bargaining power to get better value and offer
much more choice to individuals. People will continue to get their care
through private health care plans.
Q:
If alliances are so wonderful, why are they not voluntary?
A:
One of the fundamental ways that we are going to fix our system so that we
get both savings and quality is to create a health care system where
competition takes place on the basis of the price and the quality of the
product and services provided and not on which insurer is best at risk
selection. Our plan creates a competitive, private market system where the
incentives encourage competition on cost and quality and not on becoming
the best at excluding those who are sick, or who might become sick.
Brookings Institute
Page 5
If the alliances were voluntary, or if there were several competing alliances
in one area, we would just be recreating another system where there would
be incentives for competing on the basis of risk selection instead of quality. If
alliances were voluntary, employers with younger, healthier populations
might all be enticed by the "risk-selecting" insurers offering attractive prices
to go outside the alliances (at least until their employees got older or sicker)
to purchase insurance leading to a new form of competition on risk
selection. This would leave older and sicker people vulnerable to high prices
and limited choices within the voluntary alliance. One alliance can offer
consumers a full choice of plans at a range of prices. It guarantees security,
maximizes choice and competition. and minimized the incentives for risk
selection.
Follow-up: Why not competing alliances?
One alliance can offer all individuals the full range of choices of health plans.
That's what people are buying a health plan, not an alliance. The only real
difference between alliances could be the price of plans -- which would be
based largely on risk-selection, the very thing we are trying to get away from.
Then we would need to have another agency risk-adjusting between
alliances.
Q:
Why are all companies with fewer than 5000 employees required to
join alliances? The Cooper plan has a 100 employee cutoff? Isn't
there a compromise?
A:
Most of the innovative strategies to control costs in the business world have
come from firms with over 5000 employees because they have enough
participants to get reasonable rates. As the alliance becomes smaller, it
becomes harder and harder to offer a wide variety of choices and to keep
prices down through competition. There's no question: the larger the
alliance, the better their bargaining power. And its tough to think about
enforcing the insurance reforms everyone thinks are necessary without a
central way of doing it. Without that, there is almost nothing that can be
done to prevent insurance companies from continuing to pick and choose
whom to cover, offering the best prices to the healthiest people and refusing
to cover sick or old people all together.
Still, there are legitimate issues to be worked out on the size of the alliance,
and we expect this will be a significant point of discussion in the committees.
What is important is that all businesses have the clout to bargain for good
prices, and that insurance reforms are real and enforceable.
Brookings Institute
Page 6
III.
SAVINGS / PREMIUM CAPS
Q:
What makes you think that you can squeeze so much savings from the
system?
A:
I realize we may be more optimistic about the amount of savings that we can
get from the current system than many people in this room. I respect that. I
can only tell you about the hundreds of people that my husband and I have
spoken to over the past few years. Every doctor, every nurse, every patient --
everyone who comes into contact with today's health care system -- will tell
you that there is an incredible amount of waste and excess and inefficiency.
Dr. C. Everett Koop, who was Surgeon General under President Reagan,
thinks that there is over $200 billion in waste that we can eliminate by
reforming the svstem. This explains why our international competitors
spend so much less than we do on health care while insuring all of their
people with richer benefits than the average American currently has.
For an example in the United States, look at the Mayo Clinic in Minnesota. It
provides some of the highest-quality care in the country and has kept the
growth in its costs down to 3.9% a year. Look at the California Public
Employees Retirement System a working health alliance which had costs
increases of 3.1% last year compared to 13.2% for California as a whole.
Study after study shows inexplicable cost differences -- between two hospitals
in the same state, between two bordering regions, from one city to the next --
that have nothing to do with the quality of care or with the results. If we
have more and better information about the cost and results of different
kinds of treatments. as the President's plan calls for. then we can examine
more of these discrepancies, and figure out how we can save money and
provide better quality care.
So I say: instead of going to the American people and imposing broad middle
class taxes, as some suggest, let's try and save some money from the current
system. Other countries have done it, individual states have done it, and we
can do it as well.
Q:
How can you control rising health care costs when one of the main
reasons costs increase is due to technological change that saves
people's lives?
Brookings Institute
Page 7
A:
History has shown that technological change responds to market incentives.
Our current system encourages producers of new technologies to charge
whatever the market will bear. in an environment that lacks cost-sensitivity
on the part of both providers and consumers. No wonder costs are
skyrocketing out of control.
Better technology can lead to either higher or lower spending depending on
whether the new technology is more expensive than the therapies that it
replaces. For example, if a drug that cures Alzheimer's is cheaper than the
cost of caring for a person in a nursing home, the new technology actually
reduces health care costs. If the drug costs more than a nursing home --
which often happens in our current system because manufacturers know
people are willing to pay a high premium for these products costs will
increase. Our plan increases the incentives in the system for cost-effective
technologies that increase the quality of care while decreasing costs.
Our plan encourages competition on quality and price, and increases the cost-
sensitivity of both providers and consumers. We provide better information
and give individuals the opportunity to choose plans that provide the best
care at the lowest price. In this newly-created competitive environment, I
would expect that there would be a race to provide the best therapies at the
lowest cost and technological change would reflect the presence of these
new incentives.
Q:
There have been many reports that states with a high percentage of
the population in managed care have had the same increases in
health costs as states with very few of their citizens in managed care.
So why do you think that managed care can really lower costs?
A:
We believe that managed care can significantly lower costs, but not in a
fragmented insurance market operating on a blank check.
Today, managed care entities can take advantage of the greater efficiencies
brought about by more integrated delivery of care and better attention to
primary care, and can operate at costs far lower than traditional insurance
plans. However, in a market with little or no price sensitivity and no cost
discipline, managed care entities "shadow price" pricing their insurance
premiums at just below those offered by traditional insurance plans.
In other words, even if an HMO can deliver health care and make a good
profit by charging $200 for a monthly premium, if their only competition is a
fee-for-service plan charging $400. the HMO might charge $375 and still
attract many enrollees.
Brookings Institute
Page 8
When managed care is combined with incentives to committee on both
quality and price. costs can decrease dramatically. The experience of groups
like CalPers and the Minnesota Public Employees system shows that
managed care entities bidding for business against aggressive competitors
price significantly lower than they do for the rest of the market. Florida is
now seeing that same phenomena at work as they begin to take bids for their
health alliances.
Q:
What do you say to the charge that your premium caps in the Clinton
bill are so tight that no nation on earth has achieved them?
A:
The critics who claim that the rate of growth needed to reach the
administration's premium caps has not been attained in other industrialized
countries, and is therefore not realistic, are missing the point. As the U.S.
phases-in universal coverage, the administration predicts a major
expansion in health expenditures rising above where they would have
been without reform. Under the administration's proposal, health
expenditures as a percent of GDP are projected to increase from 14.5% of
GDP in 1994 to 16.9% in 2000. Far from being unattainable, this is a more
rapid increase in the share of resources devoted to health care than has
occurred in any other country in a comparable time period. It is only after
this substantial increase that we predict the rate of growth to slow and come
into line with our GDP an essential goal if we are ever to control long-term
deficits and maintain our international competitiveness.
Other industrialized countries such as Germany and Japan have been
successful at keeping their rate of growth in national health expenditures in
line with their rate of growth in their nation's GDP. At the same time that
their costs have been kept under control, the quality of their health care has
remained high. Both countries guarantee comprehensive insurance to all
their citizens with health outcomes that are in many cases better than the
U.S. For example, from 1981 to 1991, Japan's GDP grew at an average of
5.5% while its national health expenditures grew at an average of 5.4%.
Even with our premium caps, we predict that in the first five years of reform,
our national health expenditures will expected to rise by 8.5% while GDP will
rise by 4.4%.
Q:
It seems like health care inflation is coming down by itself, so do we
really need to do so much?
Brookings Institute
Page 9
A:
Although recent reports have indicated that medical inflation did not rise as
quickly last year as it has in the past this is, by itself, no reason to let our
guard down. First of all. historically, every time comprehensive health
reform has loomed on the horizons, those who profit from the waste and
excess in the health care system have curbed their excessive prices for a time.
The most graphic example came during the Carter administration, when the
White House was pushing a hospital cost containment bill and crafting a
proposal to extend health coverage to all Americans. The annual increase in
inflation-adjusted national health spending slowed from 5% in 1978 to 1% in
both 1979 and 1980. When President Carter's proposals died, health
inflation skyrocketed back up to 5% in 1981 and by 1983, inflation-adjusted
health spending was growing at 7% a year.
You should also note that medical costs are still rising two to three times as
high as other prices. The average employers' cost for health care benefits
rose by 8% last year exceeding by far the 2.5% to 3% overall rate of
inflation. And more than two thirds of companies with over 200 employees
reported that their health care costs rose last year. And, this does not even
include small companies, whose annual costs rise significantly more than
those of large companies.
IV.
CBO
Q:
What is your response to the CBO analysis? Wasn't there a huge
discrepancy between your estimates and CBO's on the deficit?
A:
The fundamental premise of the President's approach to health reform is that
we can guarantee private insurance to every American and still reduce the
amount the nation spends on health care. The Congressional Budget Office
completely validated that premise.
In fact, the CBO determined that, between the years 2000 and 2004, we
will be able to guarantee private insurance to all Americans while
spending $413 billion less on health care. That's $413 billion that can go
to higher wages for American workers, money that businesses can invest and
use to create jobs, and increased savings.
The CBO and the Administration agree that the President's approach will
save money. In fact, the two estimates of savings in national health
expenditures are very close. The difference between the Administration and
the CBO analyses is that CBO predicts that these savings will initially go to
businesses and state/local governments. [con't]
Brookings Institute
Page 10
In contrast, the administration expects these savings to initially go to the
federal government and therefore to immediately begin to reduce the deficit.
The $133 billion "difference" in the CBO and the Administration deficit
estimates -- which is described as "small potatoes" by the CBO Director itself
-- is a result of these differing assumptions. Nonetheless, the CBO too
projects long-term deficit reduction.
This issue clearly can be resolved. Since we are in agreement on the
essential framework, the deficit issue is something that can be easily worked
out as the proposal proceeds through what will be a very substantive process
in the U.S. Congress. We stress that the President's health reform
proposal will pay for itself and reduce the deficit.
Q:
What is your response to the CBO decision to put the health premiums
on the budget?
A:
We agree with CBO that the full operations of the reformed health system
should be prominently displayed in one place in the budget. It is important
that the public be able to see not only the federal contributions to the health
system, but also corporate, private, and state contributions displayed
together. We disagree with CBO, however, regarding the treatment of
premiums for private health insurance as government receipts. Government
receipts are received by the government. Premium payments for private
health insurance under the Health Security Act should not be government
receipts any more than payments currently made by employers to private
insurance companies on behalf of tens of millions of Americans are
government receipts. Thirty-nine states today have requirements that their
residents purchase auto insurance. The resulting payments between these
people and their insurance companies are not counted as part of state
budgets, nor would anyone expect them to be.
V.
MISCELLANEOUS
B:
I am worried that there is so much uncertainty that it will freeze
companies from hiring more people just when the economy might be
picking up.
Brookings Institute
Page 11
A:
I think that uncertainty has hurt job growth in this country for some time --
in large part because this nation had no economic plan and employers did not
know how fast health care costs would continue to rise or how much the
deficit was going to increase. Now this administration has already passed
the largest deficit reduction plan in history, and long-term interest rates are
at historic lows reflecting more certainty about a stable economy in the
future. The economy has created more private sector jobs under the first 8
months of this Administration as it did during the last four years. And our
health care plan will ensure that health care spending will be under control
and predictable as well.
Controlling health care spending is probably the best thing that could happen
to the American economy and to American workers. Right now skyrocketing
health care costs are bankrupting American businesses and weakening our
ability to compete in the global marketplace. How are U.S. car companies
expected to outsell Japanese competitors who spend $550 less per car to cover
their workers? How are American workers supposed to boost their
productivity when they show up to work sick because they can't afford to see
a doctor? Reforming health care and reining in costs will be a real plus for
American business. And it will produce a more productive, more flexible
American workforce and encourage not discourage employment.
We know that as we take this next step in regaining control of our economic
destiny and create more certainty in the market through health care reform,
there will always be naysayers who make wild accusations and
misunderstandings. But with the vigilant help of the people in this room --
people will come to see that what we are doing is reasonable, just as they did
with our economic plan.
Q:
My company self-insures and this gives us a great economic incentive
to take good care of our employees and bring down our costs. Why are
you taking these incentives?
A:
We compliment the companies that have recognized that it makes good
economic sense to keep workers healthy rather than just pay for their care
once they're sick. The incentives to keep workers healthy will not change
under our plan. Healthy workers are, in most cases, productive workers. If
employers to be competitive in today's marketplace. they have incentives to
increase productivity and minimize employee's sick leave. Regardless of any
new system put in place, employers who feel that they save money for their
companies by taking extra steps to ensure that they have healthier. more
productive workers and less absenteeism will still have that incentive.
Brookings Institute
Page 12
In addition. we're adding these incentives to the whole system by
guaranteeing that all plans will cover a broad range of primary and
preventive services that few insurance plans companies cover today.
Companies will no longer be forced to pick up the slack for benefits package
shortfalls, because every one of their workers, no matter which plan they
choose, will have full coverage of screenings, physicals and other preventive
services to help keep them healthy.
Q:
I'm uncomfortable with the idea of a National Health Care Board.
A:
Well if we were creating a board like some opponents of reform have
described, I would be uncomfortable with it too.
People who have opposed reform have seized on the National Board recently,
exaggerating both its size and staff to mis-characterize it as a huge
bureaucracy. The Board will set broad national guidelines for quality and
then get out of the way and let states craft health care solutions that respond
to their individual situations.
Limited to a small permanent staff, the National Health Board will oversee
the state health plans and guarantee that they meet federal standards,
update the standard benefits package, ensure that the quality of medical
care doesn't suffer, and assure that the nation's health care needs are being
addressed.
The Board will consist of only seven individuals, appointed by the President
for staggered four-year terms. Recent reports have exaggerated the National
Board's "enormous new federal bureaucracy" with "thousands of Washington
bureaucrats." It has always been the position of the administration that if
the Board has 100 employees, it will be many too many.
Q:
How do you respond to those who seek to cast doubt on your long-
range cost estimates - claiming that when the Medicare program was
enacted, it was estimated to cost about $9 billion in 1990 but ended up
costing $66 billion - 7.5 times that amount?
A:
First of all, we have built the potential of unexpected costs into our models.
Our plan is based on the most responsible financing possible and on very
conservative assumptions. As just one example, we overestimated the
demand for discounts for small businesses and low-income families in order
to be as conservative as possible. In addition, we have a 13 percent "cushion"
about $41 billion to cover unexpected costs.
Brookings Institute
Page 13
Secondly, we ran sophisticated models to test how the system would respond
to extreme hypothetical situations. For example, an unexpected 2% increase
in unemployment with millions more suddenly qualifying for discounts
would require an additional $4 billion a year. In 2000, the cushion is $12
billion -- three times the funds necessary for this extreme situation, and any
funds that are not used in one year can be carried over to the next year so
that a contingency reserve will build over time.
Another example is our use of a very conservative inflation estimate -- even
more conservative than CBO's assumption. CBO's mid-session inflation
figure was 3.1%, while we used an estimate of 3.5%.
Q:
On early retirees, why do you provide this huge subsidy to employers
and then take back all the money with an "assessment"? Isn't that
just a new tax?
A:
Not at all. Here's how the policy works. Right now, more and more companies
are being forced to drop benefits for early retirees. We thought it was
important to protect working Americans from losing the benefits they've
worked hard for all their lives. So when reform is fully implemented at the
end of this decade, early retirees will become eligible for discounts requiring
them to pay only the portion of their insurance premium that they paid as
employees. We added two provisions to protect the federal budget and be as
fiscally prudent as possible. This policy will generate substantial savings for
many employers who now cover the health care costs of early retirees. In
order to recover some of this windfall to employers, employers who benefit
from this policy will be required to pay a portion of the savings -- the amount
they would have otherwise paid -- for a three year period. In addition, these
discounts phase out for retirees with an annual income higher than $100,000
for an individual, or $125,000 for a couple.
Q:
Didn't the CBO study say that there was a large incentives for firms
to out-source or spin off their low wage workers to qualify for
additional discounts?
A:
We realize that this is a possibility, and have put provisions in the legislation
specifically to prevent firms from "gaming" the system to maximize the
discounts that they receive. In the event that some firms find ways to
reorganize and increase their discounts in spite of our efforts to prohibit them
from doing so, our discount "cushion" should sufficiently cover these
additional discounts ensuring that our financing estimates will hold over
time.
Brookings Institute
Page 14
Q:
What does it mean that the BRT rejected you and threw their support
behind the Cooper plan?
Obviously we are disappointed that the BRT didn't include guaranteed
private insurance for every American as part of their starting point for health
care reform, particularly since businesses now insuring have so much to gain
through universal coverage.
We are certainly heartened that many prominent members of the BRT policy
group, including American Airlines, (check with Marylin) and others have
said they squarely support the President's direction for health care reform --
universal coverage, real cost control, reduced bureaucracy and increased
choice.
On background:
It's also important to note that the BRT and the Chamber
both oppose central elements of the Cooper/Grandy plan, most
notably capping the deductibility of employer-paid health
benefits. Saying you support Cooper except for the tax
cap is like saying you support single-payer except for
the government's role.
[Meeghan Prunty, 456-2832]
COMPARISON OF ALTERNATIVE APPROACHES'
Crisis vs. No Crisis
Our approach is based on the fact that American families and businesses are
facing a health care crisis.
Others have adopted the insurance company/Republican line that a crisis does
not exist. They don't understand how Americans live.
Guaranteed Private Insurance vs. Continued Insecurity
Our approach guarantees private insurance for every American that can never be
taken away.
Other approaches don't protect families from the threat of losing their insurance
or solve the problem of rising costs.
People In Charge vs. Insurance Companies In Charge
Our approach puts individuals and small businesses in control of their health
care choices.
Other approaches allow insurance companies to continue picking and choosing
whom to cover, how much to raise your rates, and when to drop you.
Comprehensive Benefits vs. Bare Bones Benefits
Our approach guarantees a comprehensive benefit package, including preventive
care and prescription drugs, with low deductibles.
Other approaches provide for a bare bones package with high deductibles.
Benefits Spelled Out in Law vs. Benefits To Be Determined Later
Our approach sets down in law the comprehensive health benefits that must be
provided to every American.
Other approaches leave it to a government board to decide what benefits people
should get; they want you to buy a pig in a poke.
Good For Seniors vs. Threatening To Seniors
Our approach preserves Medicare, adding new coverage for prescription drugs
and more long-term care options.
Alternatives threaten Medicare, cutting its growth but providing no new benefits;
they see Medicare as a bank to pay other bills.
*
This does not apply to the single-payer proposal.