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Press Briefing by Director of Communications Mark Gearan, Assistant to the President on Economic Policy Bob Rubin, O.M.B. Director Leon Panetta, Treasury Deputy Secretary Roger Altman, Council of the Economic Advisory Chair Laura Tyson

September 21, 1993

The Briefing Room

1:16 P.M. EDT

MR. GEARAN: Let me start out with giving you a road map of what we're about to do today. We have Bob Rubin --

Q: Mark, before you do that could we just get a little reaction to what's happening in Russia?

MR. GEARAN. I'm going to do that, yes. Yes. I'm going to do road map, then reaction. It's not alphabetical.

Bob Rubin, Leon Panetta, Laura Tyson, and Roger Altman, who will give a briefing on some of the questions that have been raised in terms of the financing of the health care system. They have a limited amount of time, so we'll go to them quickly.

Let me give you just a preliminary on events in Russia. We are just learning of the events unfolding in Russia ourselves at this time. We're in the process of getting more information and will be assessing it as the hours progress. We expect to have a statement later on in more detail and with more information than we're receiving at this point.

Q: So we were not informed before the action by Yeltsin?

MR. GEARAN: No. Mr. Pickering was called in with some of the other foreign ministers in advance of it.

Q: In advance of it?

Q: How far in advance?

MR. GEARAN: Soon in advance of it. It was not --

Q: Well, they're saying in Moscow less than an hour. Is that correct?

MR. GEARAN: I think that's correct.

Q: What were they informed? The details of what Yeltsin would say, or just that Yeltsin would speak?

MR. GEARAN: They were informed of the speech. Let me leave it at that. That's about all we can provide.

Q: When was the President informed?

MR. GEARAN: As the events were proceeding.

Q: Mark, what form will the statement be?

MR. GEARAN: I'm sorry.

Q: What form will his statement --

MR. GEARAN: We're waiting to see who will best respond or how we'll do that -- and whether it will be someone from the White House or Secretary Christopher will --

Q: Do you know who told the President of these developments?

MR. GEARAN: The national security staff.

Q: Before or after the National Service event?

MR. GEARAN: It was -- I'll have to confirm that. My understanding -- I think it was afterwards. Let me confirm that for you in terms of when he was told.


MR. RUBIN: Thank you, Mark. I'm Bob Rubin, the Assistant to the President for Economic Policy. We're going to discuss the financing of the health care plan, which seems to be a subject of some interest. And let me start with a few general comments, and then we'll get into the specifics of the financing.

As was true in the economic plan -- and you heard the President say this in reference to the economic plan -- he'll say the same thing about the health care plan. From the very beginning, he insisted that we take enormous care with the numbers with respect to accuracy; that we have accurate, conservative, valid numbers, and that our policy decisions be based on such numbers so that there will never be a question about our numbers.

With the economic plan and again with the health care plan, his position was that he's happy to have all the debates people want to have about policy, but he does not want to have anybody validly questioning the validity of his numbers. And it's on that -- with that mandate that these numbers were developed.

There obviously will be a debate -- a national debate on health care policy, and there will be all kinds of issues. But what there shouldn't be any debate on is the validity of these numbers. They were developed with enormous care and enormous carefulness with respect to making sure that we had numbers that would withstand any kind of challenge.

I've been involved in my own career with enormous numbers of number developing processes. (Laughter.) I guess that fits together. And I can tell you, this was an exhaustive process. HHS, OMB, Treasury, CEA, actuaries, internal within the government involved with developing the numbers. And then there were external -- accountants and actuaries reviewed the models and reviewed the development of the numbers.

I can remember early in the process when there would be disagreements and there would be debates about the numbers. And Ira's position throughout it was that we had to have accurate numbers and then we make our policy decisions and these differences will eventually narrowed and brought down to numbers that everybody could agree on.

Finally, let me make one more comment on the process, itself. This was an exhaustive process of debate and discussion. We had endless meetings amongst ourselves, and then with the President. Well, the ones with the President weren't endless, but we had endless meetings amongst ourselves and a goodly number of very lengthy meetings with the President. We all the ability to state whatever it is we wanted to state. There were healthy debates, there were lengthy debates, there were real differences of opinion just as there were with the economic plan. The groupings would be different over each issue. We had one grouping on one issue, another grouping on another issue. And out of it all came a plan, as was true in the economic plan, that all of us felt was a good plan and that realized the purposes that the President started out with, which was to develop a way of reducing or eliminating the enormous excess expenditure, which is I think unquestionable in our health care system, and then utilize those savings to fund the realization of his objectives. And that's what this plan is all about.

With that, let me turn it over to Leon Panetta, who will get much more involved in the specifics of the numbers.

DIRECTOR PANETTA: Let me again, preface these remarks by trying to compare a little bit of this to the economic plan. I mean, the fact is with the economic plan, there were models that were in place over the years. We had very good estimates about various proposals, either on the tax side or on the cut side, that have all been estimated before. There are economic consequences that have pretty well been estimated. So we basically had models in place that made us much more comfortable, obviously, with the numbers that we're dealing with.

In this instance, we're dealing with an unprecedented effort at reform of the entire health care system in this country. And the problem we had from the beginning is obviously to develop models that could estimate the impact of that kind of broad reform with regards to health care. What happens when you suddenly pick up almost 60 million Americans who are uninsured or under-insured, and bring them into a health care system? What are the costs of that? What is the impact on the health area? What are the behavioral consequences of bringing people into that kind of system? Then determining the cost impact, not only on business, but on employees, individuals as well as the health industry, as well as the Treasury. So, obviously, those were the questions that we had to develop approaches to if we were going to try to develop the most accurate numbers that we could develop in the reform plan.

Over the last six months, we have basically been involved in trying to develop that kind of modeling system. We've had representatives from OMB, from Treasury; economists who have been part of that, HHS, the various actuaries that are involved with health care issues generally have participated in that effort. And so at the conclusion of that, we tried to develop the most credible and conservative kind of estimates of the impact of health care reform as we could. You have to look at again, what -- if you develop a basic benefit plan, what does that look like? What are its impacts? What are the characteristics of the people that we're dealing with? What are the households that we're going to be impacting, employers, employees, and obviously just the whole cost issues.

After six months, we believe we've developed I think the most sophisticated models in the business of analyzing health care costs. They are the best in the business. There aren't any others, really, out there. And that was our problem. But I think that as a result of the work that we've done, we've got the best in the business. And so the estimates that we have here, I believe, are credible and I believe, again, can be defended when we present the plan itself to the Congress.

Like the economic plan, I think it's important to understand that people can question the policies, they can question the politics. And, obviously, that's a process we're going to go through after we've presented the plan to the Congress and to the country, and that's legitimate. But if, in fact, we can get all of these elements passed by the Congress, then we believe we can hit these numbers.

Now, let me speak a little bit about the specific numbers that we're working with in terms of the elements of the program and the financing for those elements. Let me begin with a very important promise here that I think a lot of people are losing sight of. The most important premise that we're operating with is that most of the money comes from where the money now comes from to pay for health care, which is the contribution by employers and individuals into a premium process to pay for their health care plans. That process is still there. That premium base is still there. People who are now paying for health care will continue to pay health care premiums. So that is a base that's there and that is going to continue to be funded through the premium process.

With regards to the federal side of it, let me describe what those elements are, because that's where legitimate question can be asked: how is the federal government then going to pay for those benefits? Again, I want to condition all of this to say that it's subject to continuing adjustments. We're still looking at these numbers and there will be, I think, minor modifications in the final numbers that appear in the bill. But right now, the numbers that I'm going to present to you are estimates between largely 1995 and the year 2000. Some of these numbers basically will ratchet-in, depending on the particular program that you're looking at.

On the new benefits, let me describe the new benefits that will be part of the program. The new benefits include a longterm health care program for the elderly, and that program largely targets on home health care, community-based health care for seniors. The estimate on that is about $80 billion.

Q: Over?

DIRECTOR PANETTA: That is between -- it ratchets in starting in I believe 1995 -- '96, and goes to the year 2000.

Q: Is that an annual number?

DIRECTOR PANETTA: That's the total number for that period of time and it ratchets in.

Q: Four years?

DIRECTOR PANETTA: Five-year numbers.

Q: Does it start low and grow? I mean, that's --

DIRECTOR PANETTA: Essentially, in this area it ratchets in and it starts to escalate in terms of the costs.

On the Medicare drug benefit, it's the same over that period of time. That's about $72 billion. That basically provides for drug benefits to those on Medicare with a deductible, small deductible. That's $72 billion.

The third piece of it is that there are public health care investments that are part of this, in which there are targeted increases, particularly for rural clinics and community clinics that try to serve those at the low income levels. And there will be about -- in addition to that piece, there are start-up costs for the basic system itself that will come to $29 billion over that period of time.

We will be providing a 100 percent self-employed deduction for those who pay in, those who are self-employed with regards to their payments. They'll have a 100 percent deduction. That costs $9 billion.

And then lastly is the largest portion here, which are the discounts for subsidies, as they've been called, to businesses and the employees at the low income level who would qualify. And the price tag on that is $160 billion. And that's the one, very frankly, that continues to -- we need to continue to scrub that number, because we need to analyze just exactly who's going to receive those subsidies as we work through the plan. But that's -- $160 billion is the estimate right now. So that the total cost we're looking at of the new benefits that will be provided by the federal government are $350 billion.

How do we pay for this in terms of trying to make sure that each of these is covered? The first area, obviously, deals with the two principal health care programs that are the costliest at the federal level: Medicare and Medicaid. And let me preface this by saying that, again, all of you know that we're dealing with programs that, in terms of the federal budget, are escalating at double and triple the costs. We're looking at taking these programs from roughly three to four times the rate of growth in the economy down to about two times the rate of growth. So we're basically trying to reduce the very high level of growth that we're seeing in these programs.

On Medicare, we're looking at about $124 billion in savings over that same five-year period. These savings will be specific. We're not talking about a cap. As you know, there's often times been a discussion in the Congress about setting some kind of arbitrary cap with regards to these expenditures. We are going to present specific proposals to achieve these savings. An example of some of those proposals would be requirements for additional co-pays, competitive bidding with regards to medical equipment, some lab coinsurance requirements. These are proposals that have been in the mix in terms of the discussions on Medicare savings as long as I've been involved in the budget process. And we are selecting, we think, they policies that make sense, both from a substantive point of view as well as a savings point of view.

The same thing is true on Medicaid, which will be $114 billion in savings over that period of time. Most of that will come from a reduced cost on the disproportionate share, which is basically what we now pay hospitals that are the targeted hospitals that serve an excess number of individuals on Medicaid. We think we obviously will be able to reduce that disproportionate share provision as a result of the other elements of health care reform.

The second area is the savings that we hope will flow, and we were confident will flow from the fact that other federal programs that serve people, people will be moving gradually into the health care system itself, into the alliances, and we estimate that we will get savings from veterans programs, from Department of Defense programs, and also, obviously, from the federal employee health programs where we now cover all of those costs, federal employees will be part of the new health care system. We expect savings there of about $47 billion.

The fourth area of savings relates to our ability to move away from tax-free benefits, which we now provide in large measure, obviously, through deductions in which we cover health care payments. Our hope is that obviously as we reduce the cost of those payments, that not only will we reduce the amount of benefits we have to provide through the tax system, but in addition, we will incur some additional revenues from those who receive profits and additional wages as a consequence of that. And that's a pretty fair estimate that we generally use. It's a little bit like looking at a mortgage deduction, and as you reduce interest rates obviously the consequence of that is to produce more money to the individual which then becomes subject, hopefully, to additional taxes flowing to the federal government.

The estimate there is $51 billion, what we estimate in that area. And this one that we, again, in terms of our own process we're trying to nail down with Treasury and with OMB looking at these numbers continually.

The last area is sin taxes. Sin taxes are approximately $105 billion. The final decision on the exact elements of that have not been decided, but --

Q: You're kidding.

DIRECTOR PANETTA: Whose kidding? (Laughter.) No, I'm not kidding. They have not been decided. We're looking obviously at cigarette taxes, and whether we go beyond that, or how much the cigarette taxes will be is still being discussed.

Q: How can you come up with $105 billion figure without knowing precisely what is involved?

DIRECTOR PANETTA: Well, there are proposals that are on the table and we estimate that we have to look at somewhere between $100 billion to $105 billion in order to make these numbers work. And that's what needs to be done.

Q: How big does the cigarette tax have to be without some other kind of taxes in order to come up with that amount of money?

DIRECTOR PANETTA: Well, if you're just looking at cigarette taxes you're probably looking at somewhere around $1 a pack. But if you were doing less on cigarettes then you've got to make it up elsewhere.

The total number on that from what we estimate in income is $441 billion from what I've just described, meeting a cost, as I said, of about $350 billion, and that is what leads us to a hoped-for deficit reduction of around $91 billion over that period of time. And that's particularly important from my perspective because I think I've often argued that if you're going to get the deficit down further you've got to be able to get this kind of return on health care.

Now, let me just conclude by saying that as always, you know, when you're putting numbers like this together based on the models that we've developed, the numbers fit just as they did in the economic plan. But just as what we faced in the economic plan, obviously, there will be political implications of a continuing consultation process with the Hill, the concerns that are raised on Capitol Hill as we go through the process, and that will obviously require some adjustments as we work through the legislative process.

Secondly, there is going to be a continuing assessment on the numbers themselves. We are currently in the process, between OMB and Treasury, over these next two weeks, where we are going to be scrubbing all of the numbers I've just presented to you. And we do not expect -- I should make clear -- we do not expect any major changes from that process, but there may indeed be some adjustments that will have to be made as we again revisit these numbers.

I think the President's goal is to begin this process. And this is the beginning of the process of the debate on health care reform in this country. He has presented -- and I think it was his intention and the First Lady's intention to present a bold plan for health care reform to the country. But like any smart negotiators we know that there are going to be bargaining that's going to have to be done with the Congress. We're going to face a number of special interests who are going to force us to fight this battle. And our view is that it's much better to start with a bold approach as we begin that process.

DEPUTY SECRETARY ALTMAN: I'm so happy to be here that I'm compelled to be brief. Secretary Bentson would have been doing this instead of me, except that he is in New York, on his way to speak to the Economic Club of New York tonight.

As Leon alluded, Treasury has responsibility for estimating the revenue issues, the revenue impacts of this plan. The sin taxes, the revenue effects of the mandate, the self-employed deduction, and the others. I simply want to say that we're using the same Treasury estimating model and the same methodology that was used in the economic plan and that is always used to assess possible changes in tax policy or legislative initiatives.

We are continuing to scrub these numbers. It will be a couple of weeks before we finally finish doing so, together with OMB and others. There may be some moderate changes before the final details are released. But I'm confident that the numbers we do release will withstand the scrutiny -- which will be very tough -- that, of course, they'll be subject to.

I think we've been very cheered so far by the congressional reaction. A lot of us have been up on the Hill for the last couple of days in various workshops, which have been extraordinarily well attended, I might add. Extraordinary how many members of Congress have come for hours on end. And they've all said, among other things, even some that aren't happy with the plan, that we've put forth the most-detailed and the best-researched health care plan that's ever been put on the table by a lot.

As Leon said, the congressional process is just beginning. It will take quite a few months, there will be undoubtedly changes in the proposal that we put forward and we welcome that process.

The only point I'd add in addition is that in the event that anyone does point out a true flaw in our numbers -- can prove to us that they're off, well, then, of course we'll adjust them. And we'll adjust them on the cost side. In other words, if it turns out that people convince us that something we've estimated at X will cost more than that, well, we'll reduce costs in some other area. What we will not do, beyond the sin tax proposal that will be made shortly, what we will not do, is to propose any further changes on the revenue increasing side, on the tax side.

I think Laura's next.

MS. TYSON: I will just end by reaffirming or emphasizing, the comments made by Bob Rubin at the beginning. The process by which these numbers was developed was a process which was exhaustive and inclusive. The CEA and other agencies of government were involved in the process from the very beginning. We did not just rely on internal experts, however. We consulted a wide variety of external experts on all aspects of the health care system. So it really was, as the First Lady has correctly said, an unprecedented process in terms of inclusiveness, exhaustiveness and precision. So I don't think there really is any question about the numbers.

Now, it's been reported in a number of places that I have raised questions about these numbers and that the CEA has raised questions about the numbers. That, in one sense, is true and in one sense is misleading. It is true in the sense that it is the role of the CEA to raise questions. We love to raise questions, that's one of our jobs -- we raise questions. The reports are misleading because they seem to indicate often that our questions were not answered. That is not correct. Our questions have been answered. They have been answered as part of this exhaustive process. So, for example, if we raised a question about Medicare and where the Medicare savings would come from, there are now precise, specific policy proposals backing up the Medicare savings.

So the process has been unprecedented and exhaustive and, I believe, has moved the information base on how the current health care system is functioning and what we heed to do forward by an order of magnitude relative to anything anyone knew when we started. So I think one should, at this point, welcome debates about policy and welcome debates about politics. But really, the numbers, it seems to me at this point, are not really debatable. They came from a very credible process and a very exhaustive process. And that's really all I wanted to say.

Q: Despite the fact that you insist that there aren't going to be new taxes, we have a poll out today that says 80 percent of Americans still believe that that's how it's going to be paid for.

DIRECTOR PANETTA: Well, interestingly enough, we ran into the same problem with the economic plan. I mean, obviously, everybody felt that when you debate any kind of revenues or indicate that even if there's going to be sin taxes, that people automatically assume that somehow there's going to be some sort of broad-based tax. And, as we pointed out in the economic plan, 80 percent of that affected those of $200,000 and above. I think people are beginning to understand that now. And as we go through the debate on this, I think people will also understand that there is no broad-based tax here.

Now, again, having said that, the premium is here. Let's make clear that the premiums that people are paying now, that most of the money in this process for this health care reform, is going to come from the same area that it comes from now, which is businesses and people paying taxes on health care. That needs to be made clear now, because I think there's a sense that there's these other taxes. It's based largely on the premium base.

Q: You presumably realize some savings from the elimination of cost shiftings since everyone is now included. Under which number, or numbers, is that included? Where is that number reflected?

DIRECTOR PANETTA: You're basically in the -- I think it's going to be in the reductions. While the reductions in federal programs will probably be part of that, I think the Medicare to the extent -- I mean, we're going to be doing specific savings on Medicare, so you --

Q: I know, but that's going to affect nearly -- that cost shifting is paid for by all the private consumers of health care insurance. Presumably there will be a saving to them of some untold sum of money. What is the sum and where is it reflected here?

DIRECTOR PANETTA: Okay, we think that when the plan is fully implemented, that there's about $25 billion in uncompensated care that's currently embedded in what private insurance and what private payers pay. That is, everybody gets coverage so that money will go away over time. So the dollars are really reflected in the premiums that we are estimating. So they're not specifically shown in this line item here that the Director has talked about. But rather, if you reduce uncompensated care, the premiums that people will have to pay for health insurance, those costs will fall.

Q: Do you really think that you're going to see $91 billion in deficit savings at the end of five years? Do you think that these models clearly estimate people's behaviors?

DIRECTOR PANETTA: I don't think -- no, it's not a problem of the models. I think that if we achieve these kinds of savings with regards to these kinds of costs, then I think we can produce that much in savings in terms of deficit reduction. I mean, that's our goal. Our goal was basically to start with making sure that we achieve deficit reduction over this period.

Obviously, I have to tell you -- as I think we found out on the economic plan, where our investments were vulnerable, I think the deficit reduction number is going to be vulnerable on Capitol Hill. The large question for Capitol Hill to answer is do you want to achieve this much in terms of deficit reduction, or do you want to lessen the amount of deficit reduction and lessen the hit in terms of some of the other programs. You're going to see some trade-off here.

Q: In terms of trade-offs, it was so difficult to get to the $57 billion in Medicare savings. What makes you think you're going to reach $124 billion?

DIRECTOR PANETTA: As long as I've dealt in the budget process, every time we've dealt with Medicare and Medicaid savings, I have heard all of the expressions of fear -- that the hospitals are going to close, that the doctors are going to go out of business, et cetera, et cetera, et cetera. And it hasn't happened. The fact is that there are tremendous cost increases that are taking place in the Medicare and Medicaid program. We know that. We see that in the budget. And I think as a result of that, we have been able to outline a whole series of very specific proposals that from a policy point of view I think makes sense.

Now, you're asking me really what I think is more a political question than a substantive question, because sitting in that room people are always nervous -- do we want to cut Medicare this much? Can we cut Medicaid this much? But ultimately, if you can justify the policies based on substance, then I think we can come very close to these numbers. And that's going to be the test.

Q: Mr. Panetta, can I ask you a question about -- you started your account by saying that the bulk of the money was, of course, going to come from where it now comes from -- from the private sector. And yet, what all of you have said addresses only the public portion of this. We need to give the American people a picture of the whole thing. Could you tell us what the private portion of this is going to look like? And it would be very helpful if it was year-by-year what the business sector is going to pay, what the household sector is going to pay, and what you either think they're going to save or net -- have to pay to make this system work?

DIRECTOR PANETTA: Oh, Ken? (Laughter.)

MR. THORPE: We didn't pass that out? (Laughter.) Of course, we're -- as we continue to go through this, we focus first in terms of our -- first step of an estimate is to try to get a handle on what the federal and state and local piece of this is. And we're in the process right now of doing exactly what you've asked. As you've seen from your documents, that's -- I'm sure that you've read through. We do have a table in the back that looks at the change in national health expenditures under the proposed plan. We will, during the course of the next several weeks, be developing exactly what you're talking about -- a sector-by-sector impact during that time period.

Q: That chart at the back is entitled National Health Expenditures. Is that the chart you're referring to?

MR. THORPE: Right.

Q: It appears to show that in the first three years of this, if I understand how to read it, that the private sector in aggregate is going to bear -- one year it's $23 billion in extra costs, the next year it's $50 billion in extra costs, the next year it's $30 billion. And only in the very end of the five-year period are you going to see it -- the savings, in effect, be greater than the costs. Is that true? In essence, the private sector is going to bear increased costs during the early years?

MR. THORPE: No, we think that due to the fact that we're covering $37 million under uninsured and we're providing comprehensive benefits not only to that population but to individuals that don't have as comprehensive benefits -- that is, you can see from the chart that for the first two or three years that the amount of spending in the system will rise slightly. But by 1998 -- I don't have the figures with me. It's in the back of your --

Q: The point is that the private sector is going to bear --

MR. THORPE: No, that's total spending -- public and private. What we don't have and what you could not infer from that chart would be the specific public-private impacts which we are still working on.

Q: Ms. Tyson, could you tell us whether or not the proposal will increase --

MR. THORPE: I don't have the figures with me.

Q: Mr. Panetta, could you tell us --

DIRECTOR PANETTA: Could I -- Andrea, let me just add another point that I think is important on the Medicare and Medicaid aspect of this. Normally, the cuts in Medicare and Medicaid have usually been done for the sake of deficit reduction in the sense that you basically are doing it as part of an economic plan. In this instance, you're doing it as part of comprehensive health care reform with a long-term health care element as well as a drug benefit element. And I think that gives us a little better arguing point with regards to those that are concerned about who's going to be impacted by that.

Q: Mr. Panetta, one of the central features of your plan is cost controls on the growth of insurance premiums. How can you convince the public that their services aren't going to be held down, constrained, rationed by the doctors and hospitals as they're living under these insurance caps at a time when you're trying to cut inflation and health care in half?

MR. THORPE: Well, again, we think that if you take -- again, you can't just look at the cost containment piece. I think it's important to look through and look at the plan in its entirety. Because what we're proposing in the health reform proposal is really comprehensive change in the delivery system. We believe that there are substantial administrative savings in hospitals and physicians, as well as insurance companies that we've talked about. We've talked a little bit about reductions and uncompensated care that's sitting out there.

And one thing I think that will be useful to do is that if you look at the dollar savings, don't look at the percent changes, but actually look at the dollar savings in the private sector associated with what we're proposing. And if you look at what we think is going to happen in the system in terms of cost conscious selection of health plans, administrative savings, reductions in uncompensated care, moving toward a delivery system that is no longer an open ended, uncoordinated delivery system. It is really something to focus on much more effective and we believe, not only cost effective, but better quality medical care. That any one of those, individually or serially, will develop and create the types of underlying cost reductions that the plan is talking about.

Q: But you and Mr. Rubin can stand here today and assure people there will be no rationing of care under this Clinton package?

MR. RUBIN: Let me try as a nonprofessional to take a shot at that. Having sat through, I guess it's six or seven months now of meetings with enormous numbers of health care professionals on, as you know, a very complex subject -- when you hear them come through all this, I think where you come out is it sounds from what they've said -- let me put it differently. I came away persuaded having listened to them, that this thing ought to work, that the odd ought to be very, very high that there is very substantial excess expenditure in the system. And you compare the 14 percent of GDP that we spent on health care with less than 10 percent in any other developed country, and I think it sort of validates that notion. And it ought to be possible to create a plan that does that without creating untoward effects.

But if there are problems there is a contingency in these numbers, number one. Number two, as you know, it's going to be phased in somewhat gradually so the first dates, hopefully, will come in '95, and they will continue to come in through '97. So if you start to see problems you can correct course.

And thirdly, and I find personally most importantly, there is tremendous flexibility in this system and there is tremendous flexibility within each state to adjust the system as it goes along. So I think you have, in effect, a self-correcting mechanism if problems develop.

Q: Laura, can you comment on the job impact, what your models have shown in terms of --

DR. TYSON: We're actually going to have a briefing on that issue on Thursday. We'll talk about the employment effects on Thursday. Secretary Reich will -- we are trying to sort of have a discussion today of financing, and a discussion on Thursday of --

Q: What is the hold up in figuring out how the sin taxes are going to be apportioned and are there discussions going on with, for example, representatives from tobacco states as you're figuring out how these taxes are going to be apportioned?

DIRECTOR PANETTA: I think it's -- you know, it's obviously -- the issues are on the table with regards to the elements of sin taxes. The one question is this corporate assessment and whether or not we will look to this corporate assessment for additional revenues as part of that package. And that -- frankly, it's that element that's being evaluated right now. We have not come to any conclusions on that. But depending on whether or not you include that element, that tells you a lot about what you do then on the sin tax.

Q: How much might that produce, the one percent corporate assessment?

DIRECTOR PANETTA: I mean, again, it depends on how many corporations are going to be impacted, and that's something we're analyzing right now. Because it depends to some extent on which ones are dropping out of the process and which ones stay in the process.

Q: The goal was to --

Q: Can we just clear up the payroll tax?

DEPUTY SECRETARY ALTMAN: We're not going to give you an exact number, because we're continuing to refine that. But it's not a huge number in the context of this plan. You have to make certain assumptions about which businesses opt into the alliances and which businesses, 5,000 and over, employees may opt out and so on. But it's not a gigantic number.

Q: There may be no decision on alcohol tax by tomorrow night, is that correct?

DEPUTY SECRETARY ALTMAN: I don't know the answer to that. Someone asked that question earlier about when the sin tax decision was going to be made.

Q: Are you deliberately not deciding to not ignite the lobbyists more?

DEPUTY SECRETARY ALTMAN: I heard somebody say the President's upstairs having a drink and a cigar and would make that decision shortly. (Laughter.)

Q: You said the President's goal was to have a situation where people could argue politics and policy, but not about the numbers. It hasn't been hard for people here to find economists and politicians who are arguing about the numbers. What is the problem? Where is the disconnect?

MR. RUBIN: Let me take one shot at that and let other people take another shot at it. You know, when you read the reports and then you speak to some of the people -- and I've done both -- I think there is a bit of a muddling here. And I think sometimes when people talk about concerns about the numbers, they're really talking about the politics or they're talking about the policies. And I think if you take somebody and you say, okay, you've said you have concerns about the numbers, what do you really mean?

Usually, at least in my experience, it has turned out to be either they simply need more information, or they're really raising a question about political feasibility or policy impacts. And that, I think, is -- to an awful lot of it.

Q: Well, to what extent did you --

MR. RUBIN: Can I make just one more comment? These are very complex calculations. I've heard a lot of it developed, and I'll tell you -- and I've had a lot of experience in developing numbers -- these are very complex numbers developments. And I think what's going to happen over time is, people who have serious questions about numbers as opposed to policy or politics, they'll sit down with the people who developed it, and I think they'll come out satisfied on the numbers.

Q: To what extent did you factor in political feasibility in creating your models?

MR. RUBIN: Well, numbers are one thing and political feasibility, I think, I would argue, a separate one.

DIRECTOR PANETTA: There is no model you can develop for that. (Laughter.)

MR. RUBIN: Leon has a perfect model for political feasibility, and he comes out with -- (laughter) --

Q: obviously, there are policy assumptions that are going into the numbers. I mean, you seem much more optimistic than a lot of independent experts about how quickly waste can be gotten out of the system, for example. I mean, those assumptions are built in --

MR. RUBIN: Those assumptions are in here, as we said. You've got an interactive process with OMB, Treasury, HHS, you've had outside actuaries and outside accountants, and enormous numbers of them, and they've come out and concluded that these kinds of savings can be achieved in these kinds of time periods.

Q: Mr. Altman, you said in your remarks that if you were convinced your numbers were wrong, you would make adjustments on the spending fight, not the revenue side. Does that mean if Senator Moynihan is correct, that it's not politically possible to achieve this level of Medicare savings, that would put at risk these proposals for new long-term and drug benefits for seniors?

DEPUTY SECRETARY ALTMAN: No, I didn't say that. I didn't say that at all. I simply said that if anyone can prove to us that there are flaws in our estimates of the costs of this, I mean, really prove it, which I doubt, I strongly doubt, as I mentioned earlier -- we would make adjustments on the cost side. We would --

Q: You're talking about a technical thing, you're not talking about --

DEPUTY SECRETARY ALTMAN: Well, if someone could prove to us that we've underestimated the cost of X or the cost of Y, you know, really win the argument --

Q: But it's all based on predictions of future behavior of all kinds.

Q: You're saying --

Q: what would you cut, then --

Q: which is kind of an interesting standard, isn't it?

DEPUTY SECRETARY ALTMAN: -- in some other area the costs to offset that. All I'm trying to say is, we would not turn to the revenue side of the equation.

Q: But would that affect the core benefit package then?

DIRECTOR PANETTA: Let me mention -- you've got -- all of the pieces are here now. And, obviously, there's going to be some adjustment on these pieces as we go through the political process and as we go through, obviously, the discussions with regards to the accuracy of the numbers and what have you. But there are key pieces now that you can work with here.

If we decide, for example, that we want to do a phasein, a longer phase-in on this, we have some phase-in already built into the process. That's something obviously that can be looked at. It doesn't mean you're reducing the benefits; you're reducing the benefits in the short term for some, but in the long run everyone's going to get the same benefit.

But we have the ability now with the plan that we're working on to give us the flexibility to make those kinds of adjustments without impacting on the basic principles that the President wants to present in the health care plan.

Q: Given the record of economic modeling over the last 10 or 12 years, don't you approach the modeling of this entire sector of the economy with some humility?

DIRECTOR PANETTA: Humility and trepidation.

Q: Can you tell us, is there any reaction from the President on the Moscow coup?

MR. GEARAN: In terms of events in Russia, we have no further reaction to that.

Q: The President did not react at all?

MR. GEARAN: We'll just leave it at that. We'll keep you posted whether there will be a further statement.

END1:55 P.M. EDT

William J. Clinton, Press Briefing by Director of Communications Mark Gearan, Assistant to the President on Economic Policy Bob Rubin, O.M.B. Director Leon Panetta, Treasury Deputy Secretary Roger Altman, Council of the Economic Advisory Chair Laura Tyson Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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