August 2, 1992 PRESIDENT BUSH'S PLAN FOR COMPREHENSIVE HEALTH CARE REFORM "[M]y plan will preserve what works and reform what doesn't. We stand at a crossroads. We can move forward dramatically to reform our market-based system or we can force ourselves to swallow a cure worse than the disease." -- President George Bush State of the Union Address January 28, 1992 Summary: The Need for Change and the Objectives of Reform o Our Nation's health care system is at a crossroads. Change is needed. Most Americans appreciate the fact that America has the highest quality care in the world, but many citizens are worried that they cannot afford that care. o President Bush understands these concerns and has laid out a health care reform plan that will make quality care accessible by making it affordable. For families worried about the rising cost of care, the President's plan provides financial help for those who lack insurance and attacks the sources of increasing costs. o Three principles govern President Bush's approach to health care: 1. Health care insurance must be affordable; 2. Care must be available; 3. America must retain the highest quality health care in the world. o President Bush's reform plan puts these principles to work: reducing the concerns of working Americans about the cost of health insurance and improving access to care for all Americans. o At the same time, the President believes that health care reforms must be accomplished in a way that does not impede economic growth and cause working Americans to lose their jobs. American families need new security from health costs; however, they also need the security that comes from a growing economy that creates jobs. Unlike the Democrats' plans, the President's health care reforms will neither sap economic growth with new taxes, nor stop job creation. o Any real health care reform must preserve and build on the present system's strengths, especially the high quality care and incentives for breakthrough technologies that make America's health system the most innovative and dynamic in the world. Unfortunately, both the play-or-pay or national health insurance proposals backed by most Democrats, would threaten the availability of quality care. o The Democrats' health schemes would, in essence put federal bureaucrats in charge of health care, letting them decree from Washington the availability of different treatments and the overall quality of care. This centralized government control of health care would mean long waiting periods for routine surgery, as in Canada, and less room for individual decision making. o The President firmly believes that working Americans and their families should not have so personal an issue as health care controlled by federal bureaucrats. Rather, the President's plan is based on choice -- letting Americans decide for themselves which health plan they want. The President's plan preserves choice for all Americans, and gives choice to low- and moderate-income Americans by providing tax credits that will enable those families to afford basic, quality care. President Bush's Comprehensive Plan: Key Features o The President's plan addresses the two major problems facing the U.S. health care system -- the inadequate access of too many working Americans to quality care and the increasing cost of health care coverage. o President Bush's plan would make available to moderate and low income families a transferable health insurance tax credit or tax deduction (up to $3,750) to cover health insurance costs. The credit or deduction will be available to those without insurance and to those whose employer contributes less than $3,750 towards the cost of an insurance plan. When fully implemented, approximately 95 million Americans would receive financial assistance. o The President's plan would eliminate the problematic "job- lock" that keeps Americans from moving from one job to another for fear that their new employer's plan has pre-existing conditions clauses that will leave them without needed coverage. o The President's plan would increase working Americans' access to care by helping small businesses to buy coverage for their employees. Small businesses would be grouped into new Heath Insurance Networks (HINs) available to pool resources and risks -- lowering the cost of care for employers and expanding the availability of care for employees. o To contain health care costs, the President's plan calls for: -- Medical malpractice reform to end needless lawsuits that drive up insurance and drive out needed doctors; -- Expanded use of coordinated care to better pool resources and diagnose conditions, encourage preventive care, and use the least costly, most effective treatments; -- Reducing administrative costs by more than 25 percent through reforms of the insurance market and automating paperwork. Innovations in the way health care is provided will put 21st century technology to work in eliminating costly paperwork. This will include electronic billing for providers and electronic benefit cards for policyholders. o Under the President's plan consumers would have greater access to information that will help them decide which health insurance policy is best for their needs, as well as information which will help them decide where they can get the best treatments at the least cost. Greater consumer knowledge in these areas will go a long way toward controlling overall costs by limiting the influence of doctors and insurance companies who have an interest in raising costs. o In recognition of the clear advantages of aggressive prevention activities, the President's FY93 Budget places a major emphasis on preventative care with an increase of nearly $4 billion. o Finally, President Bush's plan encourages States to implement coordinated care Medicaid programs to increase the efficiency of care delivered to the poor, while helping States to redesign their entire health care systems to benefit everyone. Advantages of the President's Plan o The President's health care plan is comprehensive. It will control rising costs, extend coverage to working Americans facing costly premiums, and improve access to quality care for all Americans -- without raising taxes. o The President's plan eliminates "job-lock" giving working Americans the security to move to another job without fear of losing insurance coverage for themselves and their families. o The President's plan will help small businesses provide health insurance to their employees by making it easier for them to compete in the insurance market. Unlike Democratic plans, these reforms will neither impose costly new mandates nor require new tax increases. o The President believes that the price of health care reform must not be costly regulation, reduced economic growth and fewer jobs. Rather, health care reform can and should work alongside efforts to spur economic growth. The President's plan achieves this goal. For example, in making it easier for small businesses to provide affordable health care, the President's plan will reduce small business' labor costs and facilitate new job creation. o President Bush's plan rejects government-run health insurance schemes that will require massive new tax increases on all Americans. The President is opposed to creating a whole new area of federal control and bureaucracy. Working Americans, he believes, are best able to decide for themselves and their families which doctors to see and which insurance plans to buy. o The President's plan will control health care costs which have been worsened by the unrestrained growth in government health programs and uncontrolled medical malpractice suits. Ensuring Affordable Health Coverage o The President's plan will make health care accessible by making insurance affordable. Under the President's plan, millions of American families would be able to deduct all of their health insurance costs, up to $3,750 annually. This deduction, which would be available to every American family earning $80,000 or less, would help 95 million Americans each year. o The President's plan will also guarantee access to health insurance for middle-income working families and individuals through a health insurance tax credit. The tax credit would cover health insurance costs up to $1,250 for individuals, $2,500 for married couples, and $3,750 for families of three or more. o If this credit were in effect today, a family of four earning $30,000 would be able to deduct (or receive a credit) up to $3,750 in health insurance costs -- fully 12% of taxable income. In 1990, private health insurance costs averaged $1,181 per capita. Thus, with the President's deduction of up to $3,750, virtually all Americans who lack insurance -- including individuals, couples, and families -- can have their health insurance costs covered by the President's deduction. o The President's plan will also help self-employed individuals, who until now have only been able to deduct one-quarter of their health insurance costs. Under the President's plan, the self-employed will now be able to deduct 100% of their health insurance costs, or receive the applicable tax credit. Levelling the Playing Field for Small Businesses and Consumers o Until now, small businesses have been at a competitive disadvantage in the insurance marketplace. The President's plan encourages small businesses to form Health Insurance Networks. These HINs will encourage small businesses to pool resources, enabling them to purchase low cost, high quality health insurance. The President's proposal also exempts insurance sold through HINs (as well that sold outside of HINs) from costly state-imposed mandates and excessive state premium taxes. o The President's plan ensures that states will develop packages of basic benefits, and will guarantee that similar businesses buying similar insurance policies pay comparable premiums, regardless of how sick their employees are. No longer will small employers find that one sick employee or one employee with a sick child makes insurance unaffordable. Improving Access to Care for the Under-Served o The President's plan would expand services in under-served rural and inner-city areas. President Bush's budget expands funding for Community Health Centers, Migrant Health Centers and the National Health Service Corps to increase the availability of prenatal and preventive care. The funding increased 42% from FY1989-FY1993 for the Centers, with $684 million proposed for FY1993. The Corps' budget increased by 150% during the same period with $120 million requested for 1993. o The lack of available services in rural and inner-city areas is due in no small part to abusive medical malpractice suits. Reducing these lawsuits and premium costs will bring more physicians and preventive care to under-served communities. To accomplish this, the President has proposed a Medical Malpractice Reform bill which could lower premium costs in rural areas and inner-cities by removing incentives to file huge damage claims. Unfortunately, though an entire year has passed, the Democratic-controlled Congress has still not acted on this important legislation. Retaining Quality Health Care o Americans enjoy unparalleled access to sophisticated diagnostic and therapeutic technology that can make the critical difference between health and disability or life and death. The Democrats' health plans, which would result in unnecessary governmental price regulation and rationing of health care services, could retard the continued growth in new technologies by U.S. companies. o The President's plan reinforces our commitment to advances in biomedical research that can improve the quality of health care while saving billions in health costs. Preventive Care and the Culture of Responsibility o The President's plan is designed not only to reduce the cost of care, but also encourage preventive care -- an investment in quality of life and in lower health costs. For instance, every dollar invested in the workplace for blood pressure screening and counseling programs could save two dollars in health and labor costs. o To support the President's focus on prevention, his budget for FY1993 totals nearly $9 billion. Initiatives by the President include a 52% increase in funding for breast and cervical cancer screening. o About half of the 2.2 million deaths which occur in the U.S. every year are potentially preventable, as are many of the illnesses that afflict millions of Americans. To address this, the President's health plan covers prevention activities such as: -- Vulnerable populations at high risk of preventable disease; -- Primary care availability to disadvantaged or geographically isolated Americans; and -- Measures to encourage healthier lifestyles. Controlling Excessive Growth in Health Care Costs The President's plan will bring the spiralling costs of federal health care programs under control in a number of ways: o Administrative Costs: Standardized claims procedures and reduced paperwork will reduce administrative costs. In December 1990, the Health Care Financing Administration finalized its HCFA-1500 claim form, which is used for physician and outpatient services, and wide acceptance is expected. Similar efforts have led to near universal acceptance of the UB-82 as the standard form for inpatient hospital bills. Such uniformity can particularly help small businesses, for whom administrative costs consume as much as 40% of overall insurance costs. The pooling of small businesses into health insurance networks (HINs), or group purchasing associations, will reduce administrative costs for small group coverage by an average of 40 percent. o Applying Private Sector Cost Controls: The President believes that the private sector is capable of developing many new ways to reduce costs, including new coordinated arrangements between insurers and health care providers. The President believes government programs should learn from such private sector innovations, and apply them to reduce government costs. This can include the use of coordinated care arrangements such as preferred provider organizations, health maintenance organizations, and point of service plans that allow individuals to choose between PPO and HMO options. o Medical Malpractice Reform: Defensive medicine, the practice of ordering numerous expensive tests or prescribing expensive treatments to avoid the possibility of a medical malpractice suit, has fueled growth in health insurance premiums. The President's plan includes a comprehensive liability reform plan that will move cases out of court and eliminate the effect of unjustifiably large jury awards, which raise premium costs and encourage defensive medicine. By restoring insurance affordability, the President's plan will also increase access to care in poor and rural areas now under- served due to the threat of large malpractice awards. o Removing Costly Regulation: The President is proposes to eliminate current federal rules which restrict the use of private sector initiatives such as coordinated care, as well as ending costly benefit mandates imposed by states. Problems With Alternative Approaches o The Canadian health care system, typical of a government-run national health care system, suffers from basic structural flaws that are bound to lead to long term problems with cost, access, and quality. -- Patients must endure long lines and wait for surgery and access to advanced technology. High quality care is rationed by limiting physician access to new, life-saving technologies. In British Columbia, for example, it takes an average of 6 months to get a coronary bypass, 3.5 months to get a tonsillectomy, 4 months to get a hysterectomy. For speedy and quality care, many Canadians simply go to the United States. -- Neither providers nor consumers have incentives for efficiency or to control costs. Under Canada's National Health Care System, costs are growing faster than in the United States. -- Instead of making their own choices, consumers under the Canadian model are forced to rely on government bureaucrats to make their health care choices. -- A Canadian-style plan would require from $250 billion to $500 billion a year in new taxes. o The play-or-pay approach would require employers to provide private insurance for workers and dependents, or pay a payroll tax of 7 to 9 percent of wages to fund public insurance for their workers and dependents. Upon enactment, 59 million privately-insured Americans would fall into the public plan and as employers chose the artificially-cheap government plan. Play-or-pay would quickly lead to most Americans being in a government-run health plan. -- This approach would hurt workers by increasing unemployment and forcing employers to cut wages to offset mandated costs. Play-or-pay is, in effect, a tax on wages. The 7 to 9 percent payroll tax that a play-or-pay health plan requires would result in a pay cut of $1,680 a year for the average 30-year old male high school graduate, currently earning $24,000 a year in wages, and a pay cut of $1,260 a year for the average 30 year old male high school dropout, currently earning $18,000 a year in wages. -- An Office of Management and Budget study concluded that a Clinton-style play-or-pay health care plan would cause as many as 700,000 jobs to be lost. An independent study by CONSAD Research Corporation showed that 9.1 million jobs would be put at risk as employers inevitably would shift the burden of such mandated costs to their employees lowering wages or costing jobs. -- Many businesses that have low profitability and are engaged in highly competitive markets may fail as a result of the payroll tax increases needed under play-or- pay. Small business would suffer disproportionately. -- Play-or-pay is structurally unsound and would cascade into a form of national health insurance. This mandate would give rise to a vast new federal health insurance program, four times as large and unwieldy as Medicaid and inadequately funded. -- Play-or-pay is not self-financing and would increase costs for government over and above the new payroll tax receipts. A federal subsidy would be needed in addition to the 7 to 9 percent payroll tax to fund the gap between payroll tax receipts and actual costs; this gap likely would grow rapidly. At least $37 billion per year in additional taxpayer-financed subsidies would be required in the first year to adequately fund the public plan. # # #