[Congressional Record Volume 140, Number 43 (Tuesday, April 19, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: April 19, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
          THE HEALTH CARE REFORM DEBATE--THE EMPLOYER MANDATE

  Mrs. JOHNSON of Connecticut. Mr. Speaker, the President and Mrs. 
Clinton deserve credit for bringing health care to the center stage in 
Congress. And while there is widespread agreement that reform is long 
overdue, achieving reform that constrains health care costs, preserves 
quality care and expands access for all Americans is, indeed, a complex 
challenge. The very real danger is that we will destroy the unique 
quality of our system and escalate, not control, costs.
  Because health care reform is a complex challenge, I am going to 
discuss tonight one aspect of that challenge, the employer mandate and 
its consequences. In future special orders, I will focus on the global 
budget and price controls that are fundamental to the President's 
proposal and the proposal of my colleague, the gentleman from 
California [Mr. Stark] and to other significant aspects of the health 
care reform debate and of the kinds of decisions that have to be made 
by Members of Congress.
  Finally, I will focus on the significant number of specific solutions 
to the specific problems we face that command bipartisan support and 
would have a broad and systemic and healthy impact on our health care 
system, correcting the problems we all know so well of people being 
excluded for pre-existing conditions, unable to buy affordable 
insurance, unable to have the kind of access that a great and rich 
country ought to provide her citizens to health care, preventative care 
as well as crisis care.
  We will focus on the solutions as well as on the problems. But 
tonight I want to focus on one fundamental component of a number of 
larger proposals that are being held out as solutions to our health 
care problems but, I believe, will cause such systemic problems for us 
that they should not be part of the health care debate and would be 
counterproductive, if passed.
  I want to turn my attention to the employer mandate and its 
consequences. I firmly oppose an employer mandate for two reasons: Its 
economic impact, its effect on the very structure of our economy and 
the vitality of the small business sector and, secondly, its impact on 
the central challenge of controlling health care costs.
  To focus first on the economic impact of the employer mandate, we 
think we understand this. We look at it superficially. Of course, it 
will cost jobs in the immediate future. But there is far more to the 
economic impact of the employer mandate than meets the eye.
  First, just to turn to its short-term impact, because there are a 
number of studies that demonstrate very clearly that the initial impact 
will be very significant in terms of job loss and that part of our 
population will be far more heavily affected by an employer mandate and 
the accompanying job loss than others will be.
  I want to call to Members' attention the ALEC study. ALEC is the 
nation's largest bipartisan organization of State legislatures. It has 
2,400 members. And in its study, it estimated 1 million 21 thousand 
jobs will be lost as a result of increased labor costs associated with 
an employer mandate.
  For Connecticut, accordingly to the ALEC study, 14,300 jobs will be 
lost by 1998. That is as if all of Pratt and Whitney closed or all of 
Electric Boat. That is many, many, many important, well-paying jobs.

                              {time}  2050

  To go on to other studies, the CONSAD Research Corporation comes up 
with the figure of 850,000 jobs that would be lost if the Clinton plan 
would be implemented. Twenty-three million other workers in addition, 
23 million, would see lower wages, lower benefits, and a reduction of 
their working hours. The total loss for affected workers, and these are 
people who do not lose their jobs but do lose hours and benefits, their 
total loss is $28 billion Nationwide. Of the $23 million whose wages 
and benefits would be cut, $16 million of those already have health 
insurance; in other words, two-thirds of those who will be adversely 
affected, though retaining their jobs, have health benefits.
  Of those who would lose their jobs, it is estimated that 69 percent 
had health care coverage. In other words, they had a job and they had 
health care coverage. However, we are going to fix the problems in the 
health care system by costing them their jobs and their health care 
coverage.
  I maintain that a solution that will cost as many jobs in the short 
term as the employer mandate will is not a good solution, and I would 
point out, lastly, that two out of every three employees losing their 
jobs are women, because the first jobs to go will be the lower-paying 
jobs, the entry-level jobs, and the jobs in retail and in sectors like 
restaurants. Women will suffer disproportionately from this mandate, 
losing jobs at a remarkable rate.

  The first impact of the employer mandate will be the loss of many 
jobs. However, that is, alas, not the most serious consequence 
economically of the employer mandate. A far more powerful impact of the 
employer mandate is the impact it will have on job growth, on economic 
expansion.
  My State of Connecticut has been one of the Nation's leading defense 
equipment producers. As we suffer the consequences of defense 
downsizing, we turn to the small businesses, the medium-sized 
businesses, and urge then to grow. Our goal of every bill passed in the 
legislature and of much of the work of Members of Congress is to 
provide the resources to encourage growth.
  If at the same time we mandate health benefits on small businesses 
and medium-sized businesses, and not only a health benefit but a 
Fortune 100 plan more costly than the health benefits provided by the 
great majority of small businesses in America, we make it very hard for 
the kind of companies that are critical to the future of Connecticut to 
grow and provide the jobs of the future.
  I would like to yield at this point to my colleague, the gentleman 
from California [Mr. Thomas].
  Mr. THOMAS of California. Mr. Speaker, I thank the gentlewoman for 
yielding to me, and I thank her for taking this time, because obviously 
the argument of our opponents in this area is that you need to have an 
employer mandate to achieve universal coverage.
  In addition to that, I think the usual argument is that, after all, 
it is a continuation of our current system. I think, as the President 
said, ``That is where most people get their health care now.'' However, 
the points the gentlewoman has just made, I think, need to be brought 
into crystal-clear alignment, so that everyone understands why we are 
opposed to an employer mandate.
  Under the current system most Americans get their health care at the 
workplace, but it is under a voluntary arrangement between the employer 
and the employee. Some employers pay 50 percent, some pay 60, some pay 
70, some pay 80, some pay 100 percent, but whatever it is that the 
employer pays, it comes out of either a collective bargaining structure 
or negotiation between the employer and the employee, if it is not a 
union arrangement.
  It is not, as the gentlewoman indicated, a mandated 80 percent or a 
particular benefits package.
  How did we get into the situation in which the employer got to deduct 
the costs of health care? It has been there ever since 1913, when the 
income tax went into effect, but most people agree that World War II 
was the time when health benefits from employers expanded enormously. 
We know that wages were not increased. We had a board to make sure that 
employers could not increase wages during World War II. One of the 
things they could do for their employees was to provide health 
benefits. It was the growth from World War II by government edict, 
rather than wage increases, that was the primary impetus for putting 
the employer in the position of offering health care in the first 
place.
  When you say ``the employer mandate,'' that the employer will pay 80 
percent and the employee will pay 20 percent, that really is a fiction. 
Go back to World War II. The employer would have preferred to either 
offer a wage increase or the benefits. The government said they could 
not do that.
  Today, if in fact the employer is paying for health benefits for the 
employee, it is coming from one or a combination of three areas. 
Business pays for nothing. Either it comes out of the profits of the 
owners or dividends to the shareholders, which does not allow the 
company to grow as rapidly or diversify as much as it would want to do, 
or it comes from increasing prices on the goods and services that the 
company offers, which puts it in a negative position, perhaps in the 
marketplace, as opposed to its competitors, or, it comes from 
employees' wages.
  In most of the studies that I have seen, I think most economists will 
agree that 85 percent or more of the health care costs that are offered 
by the employer, quote unquote, actually come out of the employee's 
wages. The employee is paying for those health care costs, so to say it 
is going to come 80 percent from the employer and 20 percent from the 
employee is simply not fair. The entire amount will be borne by the 
employee.
  That is why the gentlewoman's statistics about how many jobs are 
going to be lost becomes fairly obvious.
  If the employer can agree with the employee to pay a portion of the 
health care costs, fine. However, when it is mandated on the employer, 
the employer then has to examine the employee, one, to determine 
whether or not that employee is worth the mandated cost that is imposed 
upon the employer.
  Frankly, some workers in some jobs, and especially in some 
industries, simply are not worth that additional mandate cost, so the 
employer will let them go. That is where the statistics about the 
unemployment figures are coming from.
  If in fact the Democrats and the President are going to mandate 
employer paying, they are in fact going to mandate unemployment, 
because that is how the world works.
  Mrs. JOHNSON of Connecticut. Mr. Speaker, the points the gentleman 
makes are very good. Not only will the mandate cost jobs, because it 
will not be worth paying benefits for either low-wage positions, and 
certainly many part-time positions, but others will lose wages, because 
more will have to go into benefits, and that $28 billion figure that 
represents people who will not lose their jobs, they will just lose 
wages, they will lose buying power, because more of their ``wages'' 
will go into the higher cost benefits that government will mandate.
  The other point that the gentleman made that was very important for 
people to understand is that this is not building on the current 
system.
  Mr. THOMAS of California. No.
  Mrs. JOHNSON of Connecticut. When the government says ``This is the 
package and you will pay a percent of payroll for this package,'' then 
the employer is in a very different situation than he is today. For 
example, in Connecticut we have been through very hard times. Many of 
our employers held on by their literal fingernails. Many went out of 
business. Many had to downsize.
  I was in a company recently that downsized from 85 employees to 15. 
They also downsized from a very generous health plan to a catastrophic 
benefit plan.
  If the employer mandate is passed, and those kinds of companies in a 
downturn have to continue to provide Fortune 100 benefit plans, and at 
least 9 percent of payroll to pay for it, then when those orders start 
slowing up, they will lay off much more rapidly and, frankly, they will 
go bankrupt and go out of business much more rapidly. We will not, as a 
Nation, be able to weather recessions the way we are now, because our 
employers will not only have Social Security as a fixed cost, and 
remember, originally Social Security was 1 percent of payroll, and now 
it is 15 percent of payroll. This is proposed to be 7.9 percent of 
payroll, but everyone knows it is underfunded. It will have to be at 
least 9.5 percent of payroll, perhaps higher.
  The two committees that have considered it have already expanded the 
benefit package, so to think that it is going to come out even at 9.5 
percent of payroll is to kid ourselves, and every year Congress will 
expand the benefit package, so the fact is this is going to be a big 
fixed cost, not a little fixed cost.
  it is going to be a cost that employers will be able to do nothing 
about. We want to talk about that more in terms of cost control.
  However, in terms of jobs, in terms of who is going to get laid off 
and when they are going to get laid off, in terms of a company's 
decision to expand employment, this fixed cost is going to make a big 
difference.

                              {time}  2100

  Mr. THOMAS of California. And beyond that, it is even the kind of 
company that one decides to form, because under current law, depending 
upon the way in which you organize your company, you get the benefit or 
not. If he is self-employed, if he has a proprietorship structure, then 
the individual who is self-employed gets a zero deduction.
  There is a question of equity here, as well. I find it ironic that 
the President, and those who support an employer mandate, are talking 
about requiring employers to pay 80 percent of the health care cost 
when the self-employed now pay 100 percent. There is no ability to 
write off any of that amount. And it seems to me that one of the first 
things we need to do is look at the inequity of the Tax Code in terms 
of corporations being able to have that.
  Mr. Speaker, I also find it ironic that the President and the 
majority leader of the Senate and now, I guess, the Education and Labor 
Committee, the subcommittee, is beginning to look at modifications to 
the President's original structure, which was the 80-20 employer 
mandate with a subsidy to both small and large business. There was a 
percentage subsidy to small business, but for large business the 
incentive was to pick up the early retirees. They have now begun to 
focus on the very problems that have been outlined by the gentlewoman 
from Connecticut.
  One, that not all wages are equal within various corporations and not 
all employees return the same benefit for hours spent. In the 
manufacturing industry, the value of an employee in the productivity is 
relatively high. In some of the service industries, it is relatively 
low, and so clearly the employment loss will be in the direction of the 
low-wage industries.
  So they have talked about structuring a subsidy to go to low-wage 
employers. They have also talked about restructuring their employer 
mandate to deal with age differentials.
  Mr. Speaker, it just seems to me that instead of trying to fiddle 
with an employer mandate, because they are so desirous of having an 
employer mandate, that what they are going to do is set up some kind of 
a jury-rigged structure that will inevitably reward some; there will be 
unintended consequences and they will have a direct impact on the 
marketplace without ever fully appreciating what it is they are doing.
  If they really want universal coverage, it seems to me that they 
could take a look at something like, for example, the individual 
mandates that the gentlewoman and I are supportive of as a concept to 
reach universal coverage. But this idea of demanding that it be an 
employer mandate, despite all of the problems of those who do not get 
their health care in the employment market, and there are many who do 
not, and all of the jury-rigged structures to try to answer the critics 
of the employer mandate, simply indicate that I believe they are 
hanging onto the employer mandate for political reasons.
  Mr. Speaker, it does not make a lot of sense in my opinion once you 
analyze it. The employer mandate is a Government mandate on the 
employer that the employee is going to have to pay, even if it means 
losing their job.
  Mrs. JOHNSON of Connecticut. And you know this issue that you bring 
up about the subsidy structure that both the Clinton plan and the Stark 
proposal provide is very important. It recognizes that small businesses 
for the most part cannot afford to provide health benefits to their 
employees and that for the most part that is why they do not provide 
health benefits for their employees.
  So both in the President's plan and in the Stark plan, they attempt 
to subsidize the provision of health benefits for small companies.
  But let us look at their subsidy program. First of all, it is 
underfunded. They allow $28 billion to fund it. Recent studies have 
shown that it will cost $81 billion. If, in fact, the subsidies are not 
available, then many small companies that by definition in the Clinton 
plan cannot afford health benefits are going to have to pay them 
whether they can afford them or not.
  But let us look at the rest of the subsidy structure. Under the 
Clinton plan, if you are a company of 25 or under employees, you have 
to have an average wage of $12,000 to qualify for that 3.5 percent of 
payroll subsidy that the President is proposing.
  Mr. Speaker, in my State of Connecticut that is a high wage but high 
cost of living State, I do not know of a single company, no matter how 
small their profit margin, no matter what fingernails they are hanging 
on by, I do not know one company that will be eligible for that 
subsidy. In fact, figuring it out, I do not see any company in 
Connecticut that will be eligible for anything less than a 7.1 percent 
of payroll.
  For a company that is not profitable, and there are lots of them in 
Connecticut now as we have downsized defense and pulled through a very 
long and tough recession, I do not see those companies being able to 
afford 7.1 percent, and the President's recognition of their plight by 
offering a subsidy program that is not funded and does not meet their 
needs is an indication that he understands they are going to go under, 
but it is an inadequate response.
  Mr. Speaker, an employer mandate is far more rigid, far more job-
destroying than the proponents are acknowledging.
  Mr. THOMAS of California. And in addition to that, as the gentlewoman 
well knows, an employer mandate is forever. The subsidies that make it 
more enticing to get in there certainly will not be there forever, and 
it will be an ever-increasing burden.
  And in addition to that, we need to remember, as we said earlier, 
that this is not a continuation of the old structure. It is an entirely 
new mandate. And because of that, even the administration has admitted, 
for example, in front of our committee that if the President's bill 
were to go into effect, there would have to be a $15 billion to $20 
billion new bureaucracy in the Department of Commerce to deal with the 
collection of moneys from the employer and the distribution and payment 
to either the health structure or some other intermediary to pay for 
the cost, because it is not a continuation of the current system.
  Mrs. JOHNSON of Connecticut. So you have a new bureaucracy in the 
Department of Commerce.
  Mr. THOMAS of California. A multibillion-dollar new bureaucracy.
  Mrs. JOHNSON of Connecticut. And the associated health bureaucracy in 
the Health and Human Services Department, HHS. That tells you that this 
is not all that easy and that it costs a lot.
  Mr. THOMAS of California. And in addition to that, because one of the 
things we have tried to do is to take a look at what States and 
companies are doing in the private sector to get some ideas about 
whether or not it works, if you take a look at the employer mandate out 
in the real world.
  For example, in Hawaii, which has an employer mandate, I think it is 
useful to take a look at the experience in the real world of people who 
attempt to utilize these concepts that we are trying to foist on all of 
the United States without a comfort level in terms of the unintended 
consequences.

  Mr. Speaker, in the spring issue of Health Affairs, spring 1994, in 
an article by Andrew W. Dick, who is a health economist in the public 
policy analysis program at the University of Rochester, NY, he analyzes 
the employer mandate structure that Hawaii has, and he comes to these 
conclusions:

       The consistent pattern that emerges from careful 
     consideration of available data is that the Hawaiian mandate 
     did relatively little in extending insurance to the 
     uninsured. While Hawaii does have high rates of coverage 
     compared with other States, this is due largely to the 
     characteristics of Hawaii's population.

  That is, a federally mandated program will impact differently in 
different States. It is not the mandated aspect that has gotten Hawaii 
up to the high 80's in terms of its employees covered. It is the 
inherent characteristics of the Hawaiian population, which obviously 
would not be present in many other States in terms of congeniality, 
homogeneity, a feeling of isolation on an island, ``we all have to pull 
together'' kind of concepts, all of these account for that high number, 
far more than the mandated aspect.
  He then goes on to say that many persons who categorically qualify 
for coverage under the law remain without insurance coverage, 
indicating that there may be a significant problem of noncompliance 
with the mandate.
  So not only do you have a bureaucracy, not only do you cost the 
American people duplication of a bureaucracy to support the program, 
but you also find out that you are going to have an enormous 
noncompliance problem that, of course, will cost additional billions to 
try to deliver the product that you said was going to be delivered by 
an employer mandate.
  Mrs. JOHNSON of Connecticut. The gentleman's point is very well 
taken. It is worth noting that Connecticut, with no employer mandate, 
has almost the same percentage of its population covered between 
employer-provided benefits and publicly provided benefits, and we are 
now in the process of doing a careful analysis in our big cities where 
the majority of our uninsured live as to who is uncovered and why they 
are not covered and what we can do to get them coverage and get them 
into the system.
  Mr. Speaker, we are within 1\1/2\ percent of Hawaii. I know that 
through this kind of analysis of our cities and of our own specific 
community-based problems that we can solve our access problem without 
the down side of an employer mandate, which in a State that depends 
entirely for its future on growth in mid-sized businesses and young, 
new venture capital businesses, cannot afford to discourage job growth 
by increasing the cost of hiring.
  Mr. Speaker, I want to point out just one little aspect of the impact 
on economic growth of this mandate on women, because it is very 
significant. Just as women are going to take the brunt of the firings, 
most of the job loss is going to be among female employees. So women 
are going to be specifically and disparately impacted by the 
discouragement of economic growth that the employer mandate provides.
  Mr. Speaker, in recent history, in recent years, women have founded 
far more small businesses than have men. In fact, last year they 
founded 8.5 percent more small businesses than men. They are well over 
the 50 percent mark.

                              {time}  2110

  This is because women in America are very well educated now. They are 
very energetic. They also feel the glass ceiling that exists in so many 
companies, and so as they gain experience, they look to go out and 
start their own business, become their own CEO, become their own 
management force, and in doing this, they have to take all the risks, 
make all the capital investments of founding a business.
  To make it then harder for them to expand their business by carrying 
the much higher cost of a Fortune 100 benefit plan on top of a salary 
is to materially compromise their ability to not only found their own 
business but, more importantly, to expand it and to grow it and to make 
it the vital force that in America those kinds of ingenious small 
businesses have traditionally been.
  Do not mistake the fact that an employer mandate will significantly 
disadvantage women in the workplace and will discourage the very most 
important economic opportunity that women in America have now, and that 
is to found their own business, expand their own business, and reap the 
benefits of their abilities and their education and their own energies.
  So the employer mandate not only will cost jobs but it will hit at 
women disparately, and for that reason I think it is a bad idea.
  Mr. THOMAS of California. If the gentlewoman will yield further, 
there are additional problems with the employer mandate, because at the 
very time we have a ``problem in the health care area,'' we see the 
private sector and States beginning to respond. We see new and novel 
ways of not only offering insurance but delivering health care as well.
  I know we have talked at some length in other forums about the 
medisave concept, the idea especially of young people who do not find 
now attractive a $175 or a $200 a month insurance premium, because, 
frankly, they are buying not only more insurance than they want but 
more insurance than they need, and we have talked about creating a 
package that would provide a core catastrophic premium for them, and 
then the dollar amount that would ordinarily go into other insurance 
programs would be put into an account that would accumulate tax free to 
spend for incidental medical costs with the idea that if they are 
young, if they do take care of themselves, if they practice preventive 
medicine, that money could be rolled over the next year and added to 
the medical account, so year after year they could accumulate some 
savings, and in essence wind up self-insured.

  If you mandate insurance and if you mandate a benefit program tied to 
the employer paying for it, you really kill off all of the incentive 
and inventive ideas that are going on now, because it is basically 
going to be a cookie-cutter job. You are not going to see the 
creativity put forth by the employers, and you are going to see, ``What 
is it, all right, I will pony up,'' and you do not get the benefit of 
the synergism of people thinking about how to solve a problem anew, and 
that is the real danger of a Government program plugged into a required 
mandated employer pay. It is the same old thing, when we need new and 
novel ideas.
  Mrs. JOHNSON of Connecticut. We often talk about the job loss 
associated with the employer mandate, but this is, in my estimation, 
the most serious and most deadly consequence of an employer mandate.
  By turning health benefit costs into a set percent of payroll 
dictated by the Government, you prevent employers from having any 
impact on health care cost control, and that is the biggest problem. 
That is the biggest challenge. That is what health care reform is all 
about.
  And we see the power of employer action in today's world because so 
many employers have done so many creative things to control costs.
  Health care costs are rising in the private sector at about 6\1/2\ 
percent, and in the public sector they are still rising at 13 percent.
  Now, our colleague, the gentleman from Michigan [Mr. Hoekstra], here 
has done a lot of work in his district on this very issue, and I yield 
to him on the subject of cost control.
  Mr. HOEKSTRA. I thank the gentlewoman for yielding.
  Last summer you had the opportunity to come to western Michigan and 
take a look at many of the innovative and exciting things being done in 
west Michigan to control health care costs.
  But before we talk about what is going on in west Michigan, I would 
just like to relate that the gentlewoman is on the Committee on Ways 
and Means and has been heavily involved in the health care debate. I am 
on the Education and Labor Committee, and we have been heavily involved 
in the health care debate, and specifically on cost containment.
  Coming from the private sector and coming to Congress 15 months ago, 
I was excited to tackle a very difficult job, a challenging issue that 
is a nationwide problem. And I thought that maybe we will take some of 
the same types of approaches in Congress that I am familiar with in the 
private sector.
  When you have a serious challenge and a great opportunity, what do 
you do? So some of the questions I asked of the witnesses that came in 
and testified about health care, specifically a number of the proposals 
put forth by the President, I had the opportunity to ask some 
questions.
  I tried to get answers to what I thought were three very basic 
questions that would help me better understand the condition of health 
care in this country today, the proposals that were being made, and how 
they would help address the problem in the future. I think these are 
three questions that not only should I have an answer to, but I think 
the American people should have an answer to, and I can tell them that 
after going through the process for 9 months we do not have answers to 
three very basic questions.
  In the business world, when you go into a marketplace, you start 
attacking and trying to solve a new customer problem, one of the things 
that you do is you benchmark. You benchmark off of the best 
corporations that are currently solving that customer problem, and you 
benchmark off of what the customer wants and what the customer needs.
  So I asked the question: If we are proposing this new health care 
program, and I am assuming that we have done a lot of investigation 
around the country, who are perhaps the 10 best corporations, the 10 
best regions, whatever way you want to break it down, but who are the 
10 best at addressing the health care crisis in terms of cost 
containment? You know, tell me who they are. Are they Rochester, NY? Is 
it Minneapolis? Is it Hawaii? Who are they so that I can go and I can 
study those 10 to get a better understanding by what you mean the 10 
best, the 10 most successful? Is it because they deliver quality? Is it 
because they have the best cost containment, you know, the best 
customer service? But in your view, the 10 best programs. So who are 
the 10 best?
  That question has not been answered.
  The second question then obviously also cannot be answer, but it is 
one that we also need to answer. If those are the 10 best and you have 
had the opportunity to define them according to your criteria, how does 
your program benchmark versus these 10? What does your program have in 
it that is based on what the common characteristics of these 10 
programs are? We have not been able to get the answers to either of 
those two questions.
  The third question then comes in: You are proposing a significant 
takeover of health care by government. So we again apply the same 
question: If government is going to take an increasingly active role in 
health care, explain to me which other Federal programs you are 
monitoring or you are structuring the health care delivery system on.
  Mrs. JOHNSON of Connecticut. I think the comments the gentleman makes 
about benchmarking are very important. Let us talk about that company, 
Prince, in Michigan, if we can, and then I would like to come back to 
the issue of benchmarking.
  Because I think, in our own way, at least I certainly have been 
involved in benchmarking, and I would like to share that with you.
  Mr. HOEKSTRA. OK; great.
  There are a couple of corporations in west Michigan, one of them 
Prince Corp.
  They supply. They are an automotive supplier, a fiercely competitive 
business, and a number of years ago they recognized that they could do 
a couple of things with health care costs. They could treat health care 
costs as a fixed cost and probably have the same competitive, you know, 
it would not improve or detract from their competitive position.
  But as they saw health care costs rise, they said, ``We need to 
proactively go after this segment of our cost structure, and if we can 
be innovative,'' and that is what we are going to lose if we get an 
employer mandate and the Government takes over, we are going to lose 
the innovation, invention, and creativity.
  They said, ``If we go after the significant portion of our costs and 
go after it aggressively and creatively, perhaps we can take what many 
companies view as a fixed cost, and we can view it as a variable cost. 
We can gain a competitive advantage and get a larger portion of the 
market. We will be more successful. We will create better and more 
secure jobs.''

                              {time}  2120

  In the long term, as that segment of our economy becomes more 
competitive, we will be more competitive on a global basis. So they 
went after it. What they said is, ``What we need to do is to change the 
behavior of the people within our corporation. We need to change their 
health habits because we recognize that somebody's future long-term 
health care costs are heavily dependent on the behaviors that they 
participate in today. If they do not exercise, if they eat wrong, if 
they do not have the periodic health care checkups, they are going to 
be at risk for significant health care costs in the future.''
  So they said, ``We are going to try to change behavior. We are going 
to put in place a wellness program.'' So they have invested significant 
amounts of money in a wellness center, they have put in educational 
programs. It is for the entire family. They are changing behavior.
  Mrs. JOHNSON of Connecticut. Let us give a more vivid picture of 
this. This company has built a beautiful facility. They have 24 full-
time people who do nothing but manage health benefits, provide exercise 
classes, stress management classes, wellness activities for the whole 
family. They do some other things, too, which I have kind of forgotten 
the detail of. But they do an enormous amount. They run three shifts, 
so there is always people in the facility, always people taking part.
  Mr. HOEKSTRA. What they are doing is they are educating their 
employees not only to help their business, to control costs, but more 
importantly they are improving the lives of their employees by having 
their employees understand how to live healthy lives. They are 
controlling their costs in the last 4 to 5 years, providing--not 
cutting back on benefits. You talk about companies that are controlling 
health care costs and the critique always is, ``Well, they cut their 
benefits.''
  Prince, again this word we do not use in Washington, they have 
benchmarked their benefits against the quality employers in west 
Michigan. Their benefits package is competitive. Their costs are 
anywhere from 20 to 40 percent lower, offering the same benefits 
because their experience curve has shown that their health care costs 
are going to be lower because of this changed behavior.
  One more thing: The other thing they have done is they have gotten 
their employees to be consumers, understanding the long-term benefits 
but also being purchasers of health care. So they have changed the 
framework, rather than getting health care for free, they are now 
becoming more knowledgeable consumers, understanding what health care 
costs are and understanding how they can impact them and lower them in 
the long term.
  Mrs. JOHNSON of Connecticut. And working together, it is my 
recollection this company is now providing the same comprehensive 
benefits to their employees as their competitors but at a savings of at 
least 20 percent in spite of the fact that they have built this 
building and paid 24 full-time people to run the program.
  Over and above the cost of the capital investment and the investment 
in personnel, they are still saving 20 percent on their health care 
costs.
  Mr. HOEKSTRA. That is absolutely true.
  The irony now is, again when you are not benchmarking off the best, 
what are we benchmarking off of? We are benchmarking off of mediocrity. 
We are on the path today of benchmarking 14 percent of our gross 
domestic product off of mediocrity. It would be one thing if we were 
benchmarking off the best and say we are going to give people the 
opportunity to go to the best and the mark we are setting is the best; 
but we are benchmarking and we are locking this country into mediocrity 
today. It is going to be deadly.
  Mrs. JOHNSON of Connecticut. I think that will be the effect of the 
employer mandate coupled with the global budget and premiums in the 
President's bill, but at this point I think what we need to focus on is 
that there are solutions out there that are based on the right kind of 
benchmarking. You mentioned Prince.
  But over the years I have served on the Committee on Ways and Means, 
we have had many, many companies testify to the really remarkable, 
creative, innovative things they have done to reduce their health care 
costs. And their primary message to us has been, ``Look, we can 
integrate the delivery of services, we can eliminate duplication of 
testing, inappropriate care, we can get our employees involved in 
prevention and in wellness programs, we can do all that and we can do 
that with other private sector businesses. But unless Government begins 
to cooperate and to turn around its own health care programs so its 
people participate in the same way our people do, we cannot turn around 
systemic health care costs in our society.'' And you see that today.
  Now that kind of initiative, that kind of innovative approach the 
gentleman has discussed with Prince in Michigan is now far more common, 
reducing private sector health care costs come down. That is the rate 
of medical and patient cost cutting down rapidly, whereas in the public 
sector where we have taken none of those initiatives, where we do not 
even reimburse under Medicare for preventive coverage, never mind any 
participation in any kind of managed care system, health care costs are 
still escalating at the 12 percent level.
  So, if you look at what is going on out there that is going right--
and many of us in the Congress have tried to do that over the last few 
years and that is why we have come to the kinds of solutions that we 
support because we know we can do it right--and you contrast that with 
Government's experience with mandated benefits, then you can see a 
benchmark in the mandate area and a benchmark in the innovative 
competitive area, and the result is very clear. In the mandate area, 
remember we have long extensive experience. States have mandated health 
care benefits for many years.

  In Connecticut, the mandated health care benefit, the Government 
mandated benefit program, in other words, the health care plan governed 
by State mandates, is so unaffordable that any business that possibly 
can has self-insured. In other words, they have gone around this 
mandate policy because they cannot live with it. They have gone around 
and self-insured, and then have their own innovative, creative 
approaches to control costs and thereby have been able to provide very 
good benefits at a very reasonable cost.
  The one sector of the market that has no access or very little access 
to affordable care are the small businesses that have to buy the 
mandated health benefits governed by State mandates, and that also have 
to tolerate the high marketing costs in that sector and the high 
administrative costs.
  But we have a whole track record of mandated benefits and the track 
record demonstrates that Government mandates and mandates and mandates 
without regard to costs and finally either forces you out of business 
or, in this case, people into self-insurance.
  Now, if the Federal Government does that--and remember, already the 
President's mandate has grown from basic to Fortune 100, and each 
committee it has gone through has expanded the mandate, and that is 
only two committees out of a number. And this is only the first year. 
But it makes you realize that Fortune 100 is just where we are 
starting. Every year the mandate will be expanded. Every year the costs 
will expand on the business community. And finally under Government 
direction costs will make business noncompetitive. But by the time we 
get there, they will have no power to reduce their costs.
  At least in today's world they have the power to say, ``Hey, stop, we 
are not going to do this anymore. We are going to find new ways,'' and 
they have found new ways and we need to support them in health care 
reform in the innovation, the creativity that has produced more 
wellness programs than Government ever thought of, that has produced 
more early intervention, more prevention, more cost-effective health 
care programs than anything in the Government sector.
  Mr. HOEKSTRA. I think the process we are going through, we are going 
to start marking up a chairman's mark on Thursday.
  Mrs. JOHNSON of Connecticut. The gentleman is on the third committee 
that is going to do this. The Committee on Ways and Means wrote a bill, 
and we marked it up, and it has gone to full committee. Now, the 
Committee on Education and Labor, as a whole committee--is that 
correct?
  Mr. HOEKSTRA. We are actually starting in subcommittee.
  Mrs. JOHNSON of Connecticut. In subcommittee, okay. The gentleman is 
going to mark up a bill starting this week.
  Mr. HOEKSTRA. Right. Today at noon we got an 800-page chairman's 
mark, which is not the President's bill, it is not any of the other 
bills that have been introduced. But it comes on our desk and says, 
``Here is 800 pages. Why don't you read it, and on Thursday we will 
start marking it up.''
  It would be very interesting to see--we talk about wellness programs, 
and that is something that has worked very well in west Michigan--but 
what other programs are there around the country in small and medium-
size businesses that we have not heard about or are not included in any 
of these marks?

                              {time}  2130

  Mr. Speaker, as my colleagues know, I think about what we have to do 
on Thursday. I have to propose an amendment to this chairman's mark 
allowing for wellness programs. Right now there is no allowance for a 
wellness program within the corporate structure or the Government 
program and so on.
  Mrs. JOHNSON of Connecticut. And remember it is very significant that 
they have no provision for wellness programs because, if wellness 
programs are not in, then they are not part of the mandated plan, and 
they will have to be paid for by additional insurance or simply by the 
company. So, I say to my colleagues:

       If you don't put wellness in, you're not going to get that 
     tremendous growth of wellness programs that private sector is 
     already producing with enormous impact on both quality of 
     health in America and costs.

  Mr. HOEKSTRA. And wellness is just--a wellness program is just one 
element of innovation in health care that is in many ways sweeping the 
country. Has it gotten and solved all the problems? No. But is it on 
the right track, and is there more hope for getting the health care 
problem, crisis, whatever my colleague wants to call it, under control 
by setting a broader government framework in a direction by changing 
malpractice, by changing the tax laws and those types of things, or by 
Government mandating programs, mandating benefits? And remember now for 
wellness programs I do not think we will be successful in committee.
  Mr. Speaker, it will be very interesting to see exactly what the 
response is in our subcommittee. Will our subcommittee recognize the 
success that wellness programs have had around the country, or will 
they say, ``No, that type of innovation does not fit within our plan; 
I'm sorry it's not part of it. We can't deal with it.''
  My expectation is disappointing to say because, as my colleague 
knows, it is not only Prince Corporation. Steel Case Corporation in 
Grand Rapids just outside of my district just completed a major study 
with the University of Michigan. I think it was a 2-to-4-year tracking 
study of how to get health care costs under control. It was not by 
mandating benefits and mandating behavior. It was by changing behavior, 
getting people to focus on their own health, getting people to be 
conscious of health care. Steel Case has launched a significant 
wellness program. All these initiatives are going to be stopped. 
Corporations will have no incentive to control or encourage wellness 
programs because there will be no economic benefit back to them. They 
will lose their competitive position because, if they try to do these 
types of----
  Mrs. JOHNSON of Connecticut. In other words, the companies the 
gentleman is describing are investing real dollars in health care cost 
control, in prevention, and wellness, and getting their employees 
involved, and early intervention and all those things to make for 
better health and controlling the costs of health care, and all of 
those investments would essentially have to be withdrawn because their 
payroll tax for health care would be the same as the payroll tax in the 
company down the street who did not make any investment at all, and 
over time they would be forced to redirect their dollars from investing 
in health care cost control to R&D, or something like that, because 
there are no investments they would make under the employer mandate. it 
would not make any difference in the cost of their health care because 
the cost of that company's health care would be a percent of payroll 
based on the adjusted average premium, not of their employees even, but 
in the area. So companies would finally, because they could not get any 
benefit from their investment in wellness, would finally cease to make 
it, and that is what is so sort of sad about the employer mandate. It 
clamps down on the innovation, on the creativity, on the millions of 
little people in America who in the end address the problems that face 
them and do it in a creative, and effective, progressive way, and we 
would squelch all that and replace it with a federally set benefit 
package with a percent of payroll funding it.
  Mr. Speaker, it is really frightening to think about the consequences 
because the consequences are, if the private sector is cut out of the 
challenge of cost control, the responsibility and the power for cost 
control will shift entirely to the Government, and the Government's 
track record in cost control is, frankly, pathetic. In the V.A. System 
the Government's form of cost control has resulted in veterans in my 
district having to go to New York City from the northwest corner of 
Connecticut for a hearing test in order to get a hearing aid. The 
Government has control of costs, but at an extraordinary price of 
access. I do not want to substitute that kind of cost control approach 
for the creative, innovative cost control approaches that we see, not 
just in the big companies, but also in the little companies.
  One of our colleagues here today told me on the House floor that the 
firemen were in his office. Now most firemen's health benefits are 
collectively bargained. Well, this group of firemen has gotten the 
right to have a Medisave account, and they were thrilled with it 
because now they had catastrophic coverage. They had $3,000 to cover 
whatever they needed unto the catastrophic level, and anything they did 
not spend of the $3,000 they got to roll over into a retirement 
account. They loved it. Under an employer mandate they would not have 
that option. They would not choose to be powerful consumers in the 
market, to use that $3,000 by calling up the doctor and asking, ``What 
do you charge because now it matters to me.''
  Mr. HOEKSTRA. Yes. Lots of innovation going on. I think my colleagues 
have to take a look at we are trying to solve a complex problem. It has 
a very human impact, and we have to ask the question:

       When you're thinking of needing a creative solution, you 
     want innovation to address a complex problem, you want a good 
     management structure. When you put those things in place, or 
     you put those words describing a process, and then you want 
     quality control and cost control, who do you think of?

  If the answer is:
  ``You know, I really think that that describes the Federal 
Government,'' then I think this, as my colleague knows, the President's 
health care plan, is exactly what they want.
  And I say to my colleagues, if you think--when the gentlewoman 
mentioned those kinds of words--if you think, boy, you know, that's 
kind of like an Apple computer; that's the kind of person I want, 
Steven Jobs; I want him solving the health care crisis--he is not with 
Apple anymore--but that's the kind of energy and innovation that I want 
going after the health care crisis in companies around the country, you 
know a guy that started with a vision of going after the goliath in the 
computer industry, IBM, and solved it with a novel, creative approach, 
and 20 years later, you know, is a giant in the computer business.
  That is why this country has so strongly endorsed and embraced a free 
market concept, because that is where the power of creativity, and 
innovation and problem solving comes in, and I say to my colleagues, if 
you believe, like I said, when you use those words the Federal 
Government, you know, if that's what you think about--there is a great 
plan out there: Federal Government will take over 14 percent of the 
gross domestic product. Then Tax Freedom Day, the day we stop sending 
our dollars to the Federal Government to pay for everything they 
provide us, will move from somewhere in July to somewhere in August or 
September, and so, you know, the American people will be working 9 
months instead of 7 months for everything that the government provides 
us----
  Mrs. JOHNSON of Connecticut. As my colleague knows, in future special 
orders we are going to talk about other aspects of health care reform 
bills that have been proposed both by the President and by Members of 
Congress. I am pleased to say that there are lots of specific proposals 
that directly address themselves to the kinds of problems we all know 
about, and I firmly believe that this Congress has the ability and the 
will to put on the President's desk a bill that will prohibit insurers 
from excluding people for preexisting conditions.
  That is a proposal that I introduced in 1991. My Democrat colleague 
then in the Senate, now Secretary of the Treasury, Secretary Bentsen, 
introduced it in the Senate a couple of months later. It has broad 
bipartisan support. We could have done it in 1991. We could have done 
it in 1992. I certainly hope that we will at least in 1994 prohibit 
insurers from excluding anyone with preexisting conditions, that we 
will guarantee to everyone in America that, if they pay their premiums, 
they can have--they can be assured that they can renew their insurance 
for modest changes in premiums. We can return predictability, fairness, 
to the insurance market, and with it give all those who have insurance 
now the confidence that it will be there when they need it and that it 
will be affordable.
  We can also fix the small business market for small companies and 
individuals who currently do not have a way of buying affordable 
insurance, and we can open up access through a number of proposals to 
ensure that everyone in America has universal access to high quality 
care. We can do those things, and I hope this year we will have a bill 
on the President's desk that will do all those things. But I hope that 
we will not do them at the cost of jobs in our economy, that we will 
not do them at the cost of reducing the ability of small businesses to 
grow because that is always what has always made America's economy 
unique, different, vital, responsive.

                              {time}  2140

  That is what has made us a land of opportunity, that you would go 
into business for yourself, that it was fairly easy to hire people. If 
you had a good idea and were smart at marketing, you could expand. We 
don't want to squelch that energy, that opportunity, that has made our 
country great.
  We also do not want to run the risk that in the name of health care 
reform, we destroy the very inventiveness that currently is controlling 
health care costs. And if we do what I call payrolltizing health care 
costs, if we turn health care costs merely into simply a set cost of 
doing business, another payroll tax to be paid, something that no 
matter what you think, you cannot control it, then people in America 
will stop thinking about it, because they will not be able to control 
it, and the only group that will be responsible for controlling health 
care costs will be Government. And we have always done it with a blunt-
edged instrument. We cut spending and we do not care about the 
consequences, or we fix prices. And every single government program, 
fixed prices, global budgets, has cut access and reduced quality of 
care.
  There is no need, when we are such an inventive, able country. And 
you see that in all the companies, large and small, that are impacting 
their own health care costs because of their own actions, which can 
still make a difference as to what level of health care costs they have 
to shoulder as an employer. That is what has made both the quality of 
America's health care system unique and our economy uniquely vital.

  Mr. HOEKSTRA. We have to recognize that what we are doing in health 
care in 1994, while we are concerned with what health care will look 
like in 1995 and in 1997, in reality what we are doing is we are going 
to be creating the framework and the systematic forces that will drive 
what health care will look like in the year 2005 and 2010.
  If we take creativeness and inventiveness out of the system, what 
will health care look like in 20 years? What do Medicare and Medicaid 
look like 30 years after those programs were put in place? They are 
working for the customer, but they are not working for the providers. A 
provider gets 40 to 60 cents for every dollar of service they provide. 
Where are VA hospitals 20 or 30 years after perhaps being a quality 
solution? They are no longer delivering the results.
  So what changes are we going to make in 1994, that will lay the 
framework for the best health care system in the year 2010, versus just 
taking the short-term approach to say we fixed the problem because we 
can now say everybody gets the same program from the government?
  Mrs. JOHNSON of Connecticut. Of course, the good news is, and I thank 
my colleague from Michigan for joining me tonight, I appreciate it very 
much to talk about the implications of the employer mandate. Because 
the bad news is that the employer mandate is still a proposal that is 
alive and well, even though its impact on the economy would be very 
negative, and its impact on the central issue of controlling health 
care costs would be very negative.
  But the good news is that there is truly bipartisan initiatives that 
could address all the kinds of problems that we know exist out there 
and foster the kind of individual private sector initiative that we see 
working, not only to control health care costs, but working to actually 
improve the quality of health care in America and improve the level of 
wellness and health in the holistic sense that Americans have access 
to.
  So in future special orders, we will take on some of the other 
complexion aspects of this debate, and also some of the opportunities 
for solutions that, frankly, we could pass in a month or two, if we 
focused in on those positive initiatives for which there is real 
bipartisan support.
  I thank the gentleman from Michigan for joining me.

                          ____________________