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Press Briefing by O.M.B. Director Alice Rivlin and Secretary of H.H.S. Donna Shalala

June 14, 1995

The Briefing Room

1:35 P.M. EDT

MR. MCCURRY: I thought it would be useful today as we begin to examine specific elements of the President's balanced budget plan to look at some of those things that may have not gotten as much attention the first go-around. And today I think there's ample interests in the health care aspects, so I've asked Secretary of Health and Human Services Donna Shalala to be here. She's also just participated in the meeting that the President had with the Democratic senators on welfare reform and is more than happy to answer questions on that, too -- but to step back a little bit and to provide you with some context on where we are now. I'm also delighted that Alice Rivlin, the Director of OMB, is here. So I'll ask Alice to kick it off, and then turn it over to Secretary Shalala.

DIRECTOR RIVLIN: As you all know, last night the President released a budget that comes to balance over a 10-year period and that reflects very different priorities than the budgets moving through the House and the Senate at the moment. It starts from a different premise.

The Republicans start from the premise that it's very important to get to balance very quickly, by 2002, and they also want to fund a very large tax cut. Those two premises together force them into drastic cuts in Medicare and Medicaid without any semblance of health care reform, and into drastic cuts on just about everything else, including investments in the future.

The President's budget takes a very different tack. We didn't set out to balance the budget at a particular date. We looked at policies and what was sensible and reasonable and reflected the priorities of this administration, but brought the deficit down. And those policies led us to a more moderate, slower track.

The budget that we put out in February had drastic cuts in discretionary spending. But we said at the time that the budget deficit could not come down further unless we returned to the subject of health care. The President had dramatic success in bringing down the deficit in the first two years. And we have remained committed to further deficit reduction because we think it's good for the economy and good for the standard of living of average Americans to get the deficit down. And we realize that what was driving the deficit up, as you looked ahead in the so-called out years, was clearly just one set of programs -- it was the health care programs. But we also knew that addressing those programs by themselves was not a sensible thing to do.

And we keep reiterating, and those of you who followed all of us around the Hill got terribly sick of our saying that we would return to savings in the health care programs, but only in the context of health care reform. And you must have wondered when we were going to say what that meant. Well, here we are.

We have come back to the most important single initiative of the Clinton administration -- health care reform -- believing that that is an essential to the health of the nation in the broader sense; that making health care available and affordable to everybody and especially to working people is extremely important. So, in the context of this new budget, we have come back to that subject.

Our proposals in the health area offer a much more moderate reduction in the rate of growth of Medicare and Medicaid spending and, at the same time, the first steps to health care reform. We don't want to say this is health care reform. It is clearly a set of steps that will take us in the right direction. And Donna's going to talk more about what those are.

But the -- it is a very credible package of reforms that expand the coverage for the unemployed so that they do not -- aren't forced out of coverage -- if somebody loses a job, they will get subsidies for retaining their health insurance for six months, which is the period of unemployment insurance. We expand and increase the self-employed deduction. We have a series of additions, albeit modest, to what older citizens can hope for -- grants to the states for home and community-based long-term care for elderly and disabled and to making mammograms more available by reducing the co-payments; and giving a benefit that will be of enormous help to those suffering -- the families of those suffering from Alzheimer's Disease, a week's respite care.

This set of programs fits in this budget, a budget with a more moderate path to deficit reduction and the priorities that we feel are the most important for the future.

SECRETARY SHALALA: Alice has pretty much covered the outline. Let me remind you that in his letter in December to the Republican leadership, and again in the President's State of the Union speech, he indicated that he thought he had bit off more than he could chew and that we ought to come forward with incremental reforms, and that would be the context for slowing down the growth of Medicare and Medicaid.

And we have delivered in this package a first by reforming the insurance market, the portability and the renewal ability of coverage, which has been critical for every American. In simplest terms, when you change jobs, you will not lose your insurance. If you get sick, your insurance will be there for you, just when you need it most. If you lose your job, we'll help you keep affordable insurance.

For small businesses and for people who are self-employed, our insurance reforms will increase access to affordable health care. There's been a lot of discuss about the federal health care plan. What we actually propose is a separate pool for small businesses and people who are self-employed so that they have access to a range of options. It will be up to the states to determine whether they want to use the federal system or perhaps the state system. We can get into that in some detail.

For seniors, we present what we've been working on for sometime. And Bruce Vladeck is here if you have some additional questions. We expand and improve the managed care options. We already have the most successful rate of movement from fee-for-service to managed care in the history of both the Medicare and the Medicaid program.

Let me remind you that Medicaid last year had a 60 -- over 60 percent increase in the number of Medicaid recipients who moved into managed care. Medicare recipients are now moving into managed care at a rate of well over one percent a month. There is a rapid movement. There's a need for more choices for senior citizens. And in this proposal we not only propose some ways to expand and give, for instance, point of service options in HMO for the elderly but also a PPO option, an even more flexible option that will be available to Medicare recipients who are now using fee for service.

As Alice indicated, there are some wonderful parts to the proposal. The Alzheimer's respite care for families, which would allow families to charge to Medicare one week in which they could get off, and it builds on the First Lady's leadership for breast cancer for waiving any cost-sharing for mammograms. Right now those who don't have secondary insurance in Medicare, only 14 percent of them are going to get mammograms. We want to increase that percentage. We really have a very serious problem in this country in convincing older women to get mammograms. And we believe that cost is part of that, and we have fixed that with this proposal.

And, finally, to expand home and community care. Long-term care advocates will be very pleased that we have put into this proposal part of what we had in the President's more comprehensive proposal and that is a long-term care piece, a grant system given to the states to get long-term care off the ground in some states and to give it more energy in other states.

In all of these proposals, we have the elements of health care reform, the most critical elements. We do some cost containment, we slow down the growth of the two most important programs, we focus particularly on beneficiaries and protect beneficiaries. Let me remind you there are no beneficiary cuts in the Medicare program .

In the Medicaid program, because we've gone to a per-person camp, we increase the incentive so that states will not eliminate people from their Medicaid program. But we do get some slowing down of the growth in the Medicaid program.

These proposals increase the number of Americans that have insurance and that keep their insurance. It slows down the number of people lose their insurance through a series of insurance reforms, and expands the number of people who get insurance at the same time by trying to do something about the small business market. It has all of the elements that we've been talking about in a more general way in specifics, and we believe does the one thing that we were anxious to do, and that is to protect beneficiaries as part of our overall strategy. And it also does what we've been wanting to do from the beginning, and that is to help to slow down the growth of the public part of health care costs in this country.

We'd use a scalpel, not a sledge hammer. We believe these cost reductions are possible, and at the same time, we think we've made a genuine improvement in both the insurance markets and the availability of health insurance to Americans.


Q: Are all of these proposals an outgrowth of the First Lady's plan? And why do you think they will be more sellable now?

SECRETARY SHALALA: I think what we've said and what the President said very carefully is that we cannot -- that we were not successful doing a more comprehensive health care plan, but there are some things that we have consensus on. We have consensus in this country on insurance reforms. We have consensus that we want to protect workers who might lose their insurance when they change jobs. We have consensus that we need to help small businesses. So where we have consensus, we have moved forward in a more incremental approach.

Rather than speaking directly about the President's previous health care reform plan, all of these proposals come our of the discussions that we had in health care reform and they have been reformulated in a more incremental approach, but simultaneously, they reaffirm our commitment to slow down the growth of health care costs.

Q: Do you have any estimates on how many people might be able to avoid losing their insurance, how many people might get insurance, any statistics to quantify what you're talking about?

SECRETARY SHALALA: Well, actually, we do and I could give them to you in a minute. My two million number that I was given --

DIRECTOR RIVLEN: About four million people would be eligible for the subsidy.

SECRETARY SHALALA: What we're talking about -- you know now -- Judy Feder, why don't you come up here for a minute. What we're -- what you know now is that we have a COBRA program in this country that allows you to keep your insurance if you change jobs as long as you pay for it.

What we're going to do is cover people who lose their insurance, who would be covered by COBRA, or who lose their insurance that aren't covered by the COBRA program. And for those that are low income, who can't afford to keep their insurance while they're looking for a job, we're going to give them some subsidies so they can keep their insurance.

Now, for working Americans, particularly for low-income working Americans, who have had insurance as part of their first job, but then lose their job, being able to continue to cover their families with insurance while they're running around trying to find a second job is absolutely critical. And this is what this program does.

Q: Corporate plans will have a certain time that they run out after -- are you going to change that?

SECRETARY SHALALA: That's right. This is a six month -- this is a six-month subsidy.

Q: That's for the unemployed. But when you talk about portability, most people think that means that if I leave company X and I want to stay on with their insurance plan, I can stay in it forever.

SECRETARY SHALALA: That stays. That stays.

Q: Is that right?

ASSISTANT SECRETARY FEDER: That stays. It's now -- it's 18 months under current law.

Q: It doesn't -- you wouldn't change that?

ASSISTANT SECRETARY FEDER: We wouldn't change that. This is an additional protection.

Q: So you're not really changing the portability, you're -- what's the change in portability here?

ASSISTANT SECRETARY FEDER: COBRA, first of all, isn't available -- necessarily available to everybody. It's also not necessarily affordable. And what we're saying to people is that when they -- to everybody, anyone in this country who has had coverage in a job, if they lose that job and go on unemployment insurance, and their income deteriorates, they are eligible for a subsidy to assist them in purchasing coverage. And that it not an opportunity that people have. And many people, a minority of people, take advantage of the COBRA because the premiums are so high. So we're making it more affordable for anyone.

SECRETARY SHALALA: This has been a long-term desire of people in the health policy business to try to find a way to make more secure what happens to someone as they lose their insurance and change jobs. And a lot of our proposals focus on working folks.

Q: Could you define how the preexisting condition legislation would work assuming that you would propose legislation on this?

SECRETARY SHALALA: What we would do is ban any preexisting conditions from blocking anyone from being able to buy insurance in this country.

Q: But you can charge more?

SECRETARY SHALALA: You can charge more. And we will have a recommendation on the price. As you know some states currently do something on the pricing, states that eliminate preexisting conditions. And we will have a recommendation on the pricing on preexisting conditions as part of our proposal.

Q: Secretary Shalala, in formulating the scaled back, more modest health care reform proposal, was the First Lady involved actively in this repackaging? And was Ira Magaziner involved?

SECRETARY SHALALA: The answer is, yes, all of the people who have participated in health policy discussions were involved. It was an effort of OMB, the White House, the NEC and HHS. And let me point out this was not a crash program. That we have been working on this for a number of months and brought it together as part of the President's initiative.

Q: If you were going to take over seven years about $175 billion out of Medicare and Medicaid and you're going to take it away from providers and not the beneficiaries, won't providers be reluctant to treat people or won't the quality of care suffer as a result? You're taking the money from someplace.

SECRETARY SHALALA: We don't think so. There are a couple of reasons for that. Number one, we have always believed that there are some efficiencies that can be built into the system. That was part of our discussion in our first health care reform proposal. Second, the private sector has been negotiating for sometime to get deeper discounts themselves. And they've done very well.

We believe that the public sector ought to be able to do some of that, too. And we have been bringing down and slowing down the growth of the health care system for the last couple of years. And you can see it in our new baselines, which have actually brought down, I think, by $200 billion what was projected before. So we think we've gone through with the scalpel. We have some of the usual suspects when we get to the details. We have three or four different ways in which we're going to make proposals when we sit down at the table with our Republican counterparts. But we believe that with a scalpel there are some things that can be done that will not affect the quality of care.

Q: Will doctors be asked to treat these people for less, ultimately?

SECRETARY SHALALA: Well, for less -- that is, the growth in health care will be coming down. They're now treating private sector patients for less. And will they have less than what they expected if they looked at the projected rates of growth in the health care system? The answer is yes. But we want to make sure what we're answering is, we believe we've left sufficient money in the system and sufficient growth for high-quality care as long as a lot of the changes that are taking place in the system, in terms of utilization and efficiencies continue to take place.

Q: How much will the health for the unemployed cost? Could you give us a little bit more detail on that?

SECRETARY SHALALA: Who's got the sheet?

Q: Do you have paper on this? Do you have more detailed paper on the proposals?

SECRETARY SHALALA: I can tell you what the subsidies are -- $14 billion.

Q: Is that a one-year figure?

SECRETARY SHALALA: No, that's over seven.

Q: And would it be an entitlement?

ASSISTANT SECRETARY FEDER: We'll provide it to the -- for people who are on unemployment insurance.

Q: Block grant to states then?

ASSISTANT SECRETARY FEDER: It is a guarantee -- states would manage it in the way they chose for people who qualify for unemployment insurance.

SECRETARY SHALALA: But it's based on our projects of how many people we think would take this up and use it.

Q: A means test or --

SECRETARY SHALALA: Yes, it's a subsidy.

ASSISTANT SECRETARY FEDER: It's a sliding scale subsidy.

Q: What is the overall cost, including Alzheimer's respite care, the mammogram -- the overall --

SECRETARY SHALALA: Alzheimer's and respite care we're estimating at $3.4 billion. And the mammogram -- that's the -- mammogram co-payment waived.

Q: Over what period?

SECRETARY SHALALA: Seven -- everything is over seven.

Q: Could you please flush out a little bit what you plan to do with the big hospitals and how big the hits will be that they will take?

SECRETARY SHALALA: No, I think that -- I think that what I want to say about the package of things that we're going to do is when we sit down for our negotiations, we'll be laying out two or three different kinds of options. And I don't want to get into the specific places right now where we're going to -- where we're going to recommend that we think that either there could be cuts or some slowing down.

Q: Is this all part A or part B?

SECRETARY SHALALA: It's Part A and Part B because, as you know, there are some provider payments in Part B.

Q: One of the things you mentioned in the GOP cuts was that they would hammer rural and inner-city hospitals in particular.


Q: How are you're proposals going to be any different?

SECRETARY SHALALA: What I said in my testimony was the size -- the sheer size and scale of those cuts would have an unbelievable affect on rural hospitals and on inner-city urban hospitals. And one of the reasons that the President -- that we were extremely careful in terms of the size of what we did, and we had careful discussions with the President, is because we wanted to be careful about not putting out a business, every rural hospital in America and every urban, public hospital.

There is no question that when you start slowing down the growth of health care below what you think projected costs are, there is going to be some pain. But the sheer scale of what the Republicans proposed was what I was responding to in my testimony.

Q: These proposals seem very similar to what Republicans proposed last year at the beginning of the health care debate, and what the administration said was unworkable in part because they don't do anything to address costs and access -- as you said, it's Cadillac health care and you can't afford it.

SECRETARY SHALALA: I would argue just the opposite. And that is that what we do here is we secure, number one, those who currently have health insurance in this country to make sure they don't lose their health insurance. That we somewhat expand access to health insurance at least incrementally in some proposals. That we were extremely careful as we went through to identify Medicare, managed care reforms that we believed would improve the quality of managed care and, in the long run, save us money.

For instance, within this is our new waste, fraud and abuse initiative, Operation Restore Trust, which I expect sometime in the next couple of months to have some announcements on because we've really gone after Medicare fraud in the system. As well as the kinds of efficiencies we think we'll be able to get by introducing PPOs. We also have, as part of this package, new pricing approaches that we're going to test for managed care. Right now we're doing something fairly straightforward. We're taking 95 percent of whatever the fee for services in a region. We're going to go out and try some competitive bidding and some other approaches.

So, there are a bunch of things we've put in here as well as stabilizing the number of people who have insurance in this country.

Q: Won't the administration submit these ideas in the form of legislative proposals?

SECRETARY SHALALA: Some will and some will go to the table with us. For example, the legislation on Operation Restore Trust, our rates, fraud and abuse proposal, will go up to the Hill this week.

Q: How will payments to doctors, hospitals and nursing homes be controlled?

SECRETARY SHALALA: I can't do that because we're not going into detail on the specific package of cuts. We will be going -- they will track -- let me say generally, I expect them to track what's going on now with the private sector to some extent. But we will be taking these to the table as part of our negotiations.

Q: -- when you go to the trust fund, Dr. Shalala?


Q: What percentage of these savings will go to the trust fund?

SECRETARY SHALALA: We will -- we will increase the number of years to the trust fund until the year 2005. The Republicans add a couple more years with pretty devastating cuts.

Q: The percentage of the total savings that will go to the trust fund -- you can't tell how many dollars you're talking about?

SECRETARY SHALALA: Well, but the important question is how many years are we adding onto the trust fund. Are we pushing out the number of years out, and that's being pushed out to the year 2005.

Q: If the President's proposals were adopted, at the end of 10 years, what do you estimate the rate of growth for both Medicare and Medicaid spending would come down to?


MR. VLADECK: Well, I don't know that offhand. It would still be in excess of enrollment growth --

SECRETARY SHALALA: Bruce, why don't you come up -- Bruce Vladeck, the head of HCFA.

MR. VLADECK: In part because we're talking about a bundle of options rather than a specific set of proposals, we can't model that out exactly. But I think if you -- if you take the $79 billion in Part A cuts that the President has spoken about, and to do the arithmetic, it's about a one percent reduction in the growth rate of Part A expenditures. The percentage reduction on the Part B side is slightly smaller. But, again, it's also -- I forget what those way longtime out-years are. Basically we've been talking in Medicare about growth and enrollment, plus medical care price inflation, plus about three percent a year over and above the sum of those two. And this takes about a percent off of that.

Q: What negotiations are you talking about? Has anybody agreed to negotiate with you on anything?

SECRETARY SHALALA: Well, I was assured that if the President would put his proposals on the table, that we would be able to have a health discussion with the Republicans. We have now put much more detail and the outline of what we're prepared to talk to our Republican counterparts about on the table. So I look forward to being able to talk about taking some significant steps to secure health insurance for Americans and to begin to bring down both the public costs, but more importantly, to make certain that more Americans have health insurance and feel secure with that health insurance.

Thank you.

Q: Are you going to the Hill now?

Q: Can we ask Director Rivlin a question? Director Rivlin?

DIRECTOR RIVLEN: Is that the question? No, I'm going to talk on National Public Radio right now. But there will be discussions on the Hill starting this afternoon and, I think, continuing for a very long time.

Q: Can you give us some idea what they're like? I mean, what is this, the start of real --

DIRECTOR RIVLEN: We don't know yet.

Q: Are you going to be meeting with the leadership or with the budget committees? Who are you going to meet with?

THE PRESS: Thank you.

END 2:03 P.M. EDT

William J. Clinton, Press Briefing by O.M.B. Director Alice Rivlin and Secretary of H.H.S. Donna Shalala Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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