[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.
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