[Weekly Compilation of Presidential Documents Volume 30, Number 14 (Monday, April 11, 1994)]
[Pages 706-718]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Remarks in a Health Care Roundtable in Topeka

April 7, 1994

    The President. First, thank you, Congressman Slattery, for hosting 
us. Congressman Glickman, thank you for coming. Governor Finney, it's 
always good to be with you. I see former Governor Carlin out there; 
thank you for coming. Most of all, thank you to the small business 
people who are here on this panel.
    I'd like to spend most of my time listening to these folks talk here 
and dealing with how their specific circumstances would be affected by 
health care reform, if we can pass it. But let me try to set the stage, 
if I might, for how we came to this place and how I came to spend the 
amount of time that I have, that my wife has, that our administration 
has, working on this health care issue.
    Before I became President, as I think all of you know, I was the 
Governor of your neighboring State of Arkansas for a dozen years. I grew 
up in a family with a mother who was a nurse anesthetist. I grew up 
hanging around hospitals, talking to doctors and nurses all my life, 
having a passionate interest in health care from the point of health 
care providers. As a Governor, I was forced to deal with the problem of 
health care from the point of view of people who are paying for it.
    First of all, in State Government, we had huge burdens under the 
Medicaid program, which is a shared program for paying for health care 
for poor people paid for by the Federal and the State Government. And 
secondly, my job was to try to increase the economic base of my State, 
both small and large businesses. And I watched medical inflation driving 
up medical costs rapidly.
    I spent in 1990 an enormous amount of time as a Governor, long 
before I ever dreamed I'd run for President, talking to literally almost 
1,000 health care providers personally in my State and hundreds of 
business people about the problems in the health care system and what 
could be done about it. Without going into a great deal of detail, let 
me say I reached the conclusion that we could not solve this problem as 
long as we continued to be the only advanced economy in the entire world 
that could not figure out how to provide basic health care coverage to 
all of our citizens. Every country with which we compete has figured 
this out, and we haven't.
    Now, we have the best doctors, the best nurses, the best health care 
providers, the best medical research, the best medical technology in the 
world. We also have, by far, the most bureaucratic and administratively 
costly health care system in the world. There's more paperwork in our 
system today, and it costs more to administer this system, by far, than 
any other system in the world. We also discriminate against small 
business people, farmers, and self-employed people in the provision of 
health insurance; they tend to pay more.
    We discriminate also against people based on their age or whether 
anybody in their family has ever been sick or not. We also, in a funny 
way--Jim Slattery alluded to this--we actually discourage people from 
leaving welfare for minimum-wage jobs because if you stay on welfare, 
you're covered by Medicaid, the Government program for poor people. If 
you take a minimum-wage job without health insurance, you're going to 
lower your income and put your children at risk because you lose your 
health insurance by going to work. Instead, you start paying taxes to 
pay

[[Page 707]]

for the health insurance of the people who didn't go to work.
    These are things that are present in our system that you don't find 
in other systems. In addition, a lot of people who pay health insurance 
just pay too much. This plant here, for example, where we are, as is my 
understanding, has offered health insurance to its employees since its 
beginning; with the price of health care going up has had to ask the 
employees to share the costs. I do not know what they pay, and I have 
not even discussed it with our host. But I'll bet you anything that on 
average, they pay more than they fairly could because here's what 
happens: The people who don't have any health care coverage in this 
country, if they get sick, will eventually get health care. But they 
tend to get it when it's too late and too expensive. They show up at the 
emergency room, and the hospital does one of two things. They either 
pass the cost along to all the rest of us who have insurance, and we pay 
it in higher rates, or they eat it, and they get in more trouble.
    I was in a rural hospital in North Carolina a couple of days ago 
with Mr. Bowles, who is from North Carolina, as you can see, and the 
hospital folks there told me one-half of all their emergency room bills 
were from people who had no health insurance who just waited until they 
got real sick and showed up at the door, couldn't pay. And they were 
either going to reduce the quality of care at the hospital or pass the 
cost along to everybody else in the area who had health insurance.
    So, is this a national problem? Yes, it is. At any given time in 
America, 39 million Americans don't have health insurance. During any 
given year, 58 million Americans will be without health insurance at 
some time during the year, out of a total population of 255 million. 
Eighty-one million of us, more than one in four, live in families where 
somebody has had a preexisting condition: a child with diabetes, a 
father with a heart attack, a mother who's had cancer. And we either pay 
higher rates or we can't get health insurance, or we've got a job with 
health insurance but we can never change jobs, because if we change 
jobs, nobody will insure us because someone in our family has been sick. 
One hundred and thirty three million of us, a majority, are insured with 
lifetime limits. So if, God forbid, we should have a child with a 
pronounced and prolonged chronic problem, we could run out of health 
care coverage just when we need it most. None of these conditions exist 
in the countries with which we are competing for the economic 
opportunities of the 21st century. Only the United States has somehow 
not been able to figure out how to provide health care security to all 
of its people.
    Now, if we want to do that, we have some options. But none of them 
are simple or easy. If this were simple or easy, somebody would have 
done it already. What are our options to cover all Americans, to stop 
the cost-shifting, to allow small business people and self-employed 
people and farmers to buy insurance on terms that are comparable to what 
those of us in government or big business can get, and to stop 
discrimination against people who have had somebody in their family 
that's sick or who are older workers? What are our options?
    I would argue that we only have three. We can do what some other 
countries like Canada do; we could have a Government-run system. We 
could have private doctors and hospitals, but we could abolish insurance 
and substitute a tax and just pay for health care. The only part of our 
system today that's like that is Medicare and Medicaid for poor people. 
But the elderly program for Medicare is the thing that's most like that 
here. That's the way everybody gets their health care paid in Canada.
    We could, instead of that, just build on the system we've got, keep 
a private system with private insurance, private health care providers 
but organize it in a way that bad insurance practices would be abolished 
and that small business people and self-employed people could get a 
break by being in buying pools that would enable them, kind of like a 
farmer's co-op, to buy on better terms. Or we could say, it's too hard, 
somebody will be discomforted by this, and we're not going to do 
anything. Now, that's an option. But that option means--I just want you 
to know what that option means.
    If we do nothing, if we don't go to universal coverage, the 
following things will hap- 

[[Page 708]]

pen: More Americans will continue to lose their health insurance; 
medical inflation will continue to make less and less coverage 
available, especially to small business. And I want you to know what's 
going to happen to your Government, at a time when we need more money to 
invest in education, training, new technologies, and the jobs of the 
future. The budget I asked Congress to adopt this year cuts defense and, 
for the first time since 1969, cuts discretionary domestic spending, and 
the only thing that goes up is Social Security by the cost of living and 
health care costs by 2 and 3 times the rate of inflation. Pretty soon, 
you're going to be paying all your money to the Federal Government to 
pay interest on the debt and more money for the same health care because 
we are cutting defense, we are cutting investments in discretionary 
domestic areas.
    So I would argue that doing nothing is not an attractive option. I 
would argue that we shouldn't have a Government insurance system when we 
have a private insurance system now that is working pretty well for 
people who can take the maximum advantage of it. That's why I argue that 
what we ought to have is guaranteed private insurance for all Americans. 
Eighty percent of the people without health insurance in this country 
live and work in families. Ninety percent of the people who have health 
insurance, private health insurance, get it through their place of work. 
So the question is, should there be some system through which the people 
who don't have health insurance now or who have very minimal health 
insurance that doesn't amount to anything get an adequate insurance 
package through their place of work? I think the answer to that is yes, 
and that's why I'm out pushing this program.
    So let me just say, my program rests on five principles: Guarantee 
private insurance. Give the people who are insured, that is, the 
families who are insured, a choice, and give it to them every year, not 
just once but every year, of how they get their health care, either 
through fee-for-service medicine, just picking their doctor and paying; 
through a health maintenance organization; or through some other way of 
getting it. But we guarantee three choices to everybody every year. We 
would outlaw unfair insurance practices. I've already mentioned them, 
cutting people off because they've had somebody in their family sick, 
for example. We would protect the Medicare program for elderly people 
and not fold it in, because it works and most senior citizens like it. 
And we would do this--we would guarantee private insurance by using the 
workplace, because that's where most people get their insurance now, by 
requiring employers and employees to contribute to health insurance.
    Now, would that mean that some people would pay more than they do 
now? Yes, it would. It would mean that people that don't pay anything, 
for example, would have to pay more. But keep in mind, all those folks 
are benefited by the present system we have. It's just like the roads 
you drive on. We all benefit from the hospitals, from the medical 
research, from the doctors, from the nurses, from the work done at the 
Kansas Medical School. We all benefit from it. And when we get sick, 
we're going to take advantage of it whether we can pay for it or not. 
But if you want to stop cost-shifting and allow small business people 
and self-employed people to buy on competitive terms, you have to find a 
way to make sure everybody's covered from the beginning and everyone has 
some responsibility for what they do.
    Our figures--we'll talk more about it with each of these examples 
here--show that over half the American people would pay the same or less 
money for the same or better insurance if our plan passed just as it is 
without any modification, because so many people in the small business 
sector are paying exorbitant rates for limited health insurance.
    We do a lot of things to help small business. We already increased 
the expensing provision, as Erskine Bowles said, from $10,000 to $17,500 
a year on the income tax. For people who are self-employed, we extend 
the deduction, which is now only 25 percent for self-employed people, 
totally unfair for medical premiums, to 100 percent. These things will 
help to alleviate it. Furthermore, there are discounts for businesses 
that are quite small with limited profit margins and low average wages 
to try to keep the cost down. So we'll talk about all that by going 
through some of these specific examples that are here now.

[[Page 709]]

    The main thing I want to say is, we can discuss the details of this 
plan and whether you think all the details are right. But I do want to 
make it clear that if you say there should be no mandate and we 
shouldn't abolish private health insurance and replace it with a tax the 
way Medicare's funded, then we're arguing for continuation of the 
present system, never getting to the point where we cover everybody, 
having the most administratively expensive system in the entire world, 
more money on paperwork, less money on health care, and having this 
problem get worse. There are no simple, easy answers. We have to try to 
take the best answer for America.
    So having said that, let me start and ask--I don't know that it 
matters where I start, but I'll start with David Porterfield, who owns a 
flower shop in Topeka. Where are you, David? Tell us what your situation 
is, how many employees do you have, and what's your situation.

[David Porterfield explained that he once provided health insurance for 
his small staff of employees, but due to the high hospitalization and 
medical costs for an employee, the insurance rates tripled, and he could 
no longer afford to offer the coverage. Through his efforts to find 
another insurance company, he learned that, because he is in the florist 
industry, which often has many employees who are suffering from the AIDS 
virus, many insurance companies have ``red lined'' florist businesses 
and will no longer provide policies for them.]

    The President. I'd like to make an observation about this, if I 
might, because you see this quite a lot. Both cases--you have someone 
who has got a serious health problem, a diabetes problem, with a small 
business, it blows your rates up, and you can't afford to keep your 
coverage; or a certain industry gets red lined, a certain business. If 
you look at it today from the point of view of the person in the 
insurance business, trying to be responsive and trying to still make a 
profit in the American free enterprise system, if you insure people and 
they're in fairly small pools, and one person has a huge medical bill, 
that can wipe out the whole profit in the insurance policy in the small 
pool. If you have one or two AIDS patients in a small pool, the same 
thing can happen.
    Now, the reason that I think that what we're trying to do is so 
important to small business people is this: What we're trying to do is 
to create the conditions that existed in the beginning. When health 
insurance first started, when Blue Cross first got started, insurance 
was just what you would normally think. All of us were put in a big pool 
and paid roughly the same rates, and it was for the people that got 
sick. And we all bought insurance against getting sick, in the same way 
you buy insurance for life insurance. And the premiums are set based on 
the probabilities, but everybody is sort of treated the same at a 
certain point in time. Well, what's happened now is, we're the only 
country in the world with 1,500 separate companies, writing literally 
thousands and thousands of different policies, so that people are in 
smaller and smaller pools. And sometimes the administrative costs and 
the profit margins against the premium is enormous.
    What we need to do is to go back to community rating where you would 
be put into a very large pool, so if you had one patient, one employee, 
who turned out to be a diabetic, that problem would be spread over a 
very large number of people. And the insurance business would, in 
effect, have to make money the way grocery stores do, a little bit of 
money on a lot of people, instead of a sizable amount of money on a few 
people where you can't afford the risk of having even one person who's 
real sick and the policy becomes nonprofitable.
    This is key. We cannot do this and be fair to small business and 
really do it unless we go to community rating and all of us can share 
these risks. I think it's very important.
    I'd like to go to David Hoffman, if I might, now to make the point 
in another way with somebody who kept insurance and had to pay an 
enormous premium for it or at least did until recently. Would you talk, 
David, about your experience?

[David Hoffman explained that his architecture firm was started in 1967, 
and many of his employees have gotten older and are now needing more 
medical attention. His insurance premiums have increased by 35 percent 
because several of his employees have needed

[[Page 710]]

surgery, and he has been forced to find a new insurance company three 
different times. He stated that the cost of the premiums are split 
between the firm and the employees; however, the firm still spends 12 
percent of its payroll on health insurance premiums.]

    The President. Total, 12 percent total?

[Mr. Hoffman stated that the total amount his firm pays for insurance 
premiums is 12 percent of the payroll.]

    The President. Let me try to make an observation here about these 
two cases. Under the plan that we propose, no one could pay more than 
7.9 percent of payroll in--no employer--for the health insurance 
premiums. So in the case of the architectural firm, in David's firm, 
they would actually pay less, considerably less, than they're paying 
now. Why would they be able to pay less? Well, because they would be, 
again, in a big pool where they'd have more bargaining power, and it 
would be more economical to insure them.
    Now, in the case of the florist shop, they would obviously pay more 
since they're paying--they can't get insurance now. But because it's a 
smaller business, they would be eligible for a bigger discount, and for 
somewhere in the range of, let's say, 6 percent of payroll, they'd be 
able to get a comprehensive benefit package, and no one would get cut 
off.
    Again, it all goes back to the economics of scale. Now, the problem 
is that some people will say--and we'll explore this because we're going 
to come to some harder cases as we go around the table--some people will 
say, ``Well, that's fine, Mr. President, but I can't afford 4 percent of 
payroll. My payroll is 50 percent of my costs of doing business, so 4 
percent of payroll adds 2 percent to the cost of doing business, and I 
can't add 2 percent of the cost of doing business.'' Some people say 
that.
    Now, what we have to do is to--we need to kind of work through that. 
And that's one reason I've asked Erskine Bowles to be head of the Small 
Business Administration, because he spent 20 years starting small 
businesses instead of in politics or doing something else, to try to 
work through these things.
    There's no question that the ability to bear this cost is greater if 
all your competitors have to do it as well. And that's one point that 
David Hoffman made, I thought, very eloquently. I was in a--we have 
someone here who's in the food service business--I know I was in a 
restaurant in Columbus, Ohio, with a woman who had 20 employees full-
time and 20 part-time and had had cancer. And she insured the full-time 
employees; she didn't insure the part-time employees, and she paid high 
rates because she had cancer 5 years ago. And she said, ``I'm in the 
worst of all worlds; I insure my full-time employees because I feel that 
I should; but my competitors don't, so they have an advantage over me. 
And I feel guilty that I don't help my part-time employees.'' And she 
paid very high rates because one person--happened to be the owner 
there--paid for her previous illness.
    So again, this whole thing will only work if everyone contributes. 
But as a result of contributing, you get to be in big buying pools, so 
at least your rates are manageable. In your case, I just don't think 
anybody should be paying 12.5 percent of payroll for a reasonable health 
insurance policy. We know that the economics of the competition--we've 
had it analyzed by too many people--will permit us to have a ceiling of 
about 7.9 percent of payroll. And you might actually qualify for a 
modest, but not a great, discount there because your employees make a 
good living.
    I'd like to go on now to Sheryl Wohlford, who is from Wichita, and 
have her talk a little bit about her situation because it's slightly 
different. And it will get more complicated as we go around the table to 
show some of the problems we've got with this.
    Sheryl.

[Sheryl Wohlford explained that she provides insurance for the majority 
of her employees. Given the fact that premiums have continued to rise, 
she expressed her concern that they will become even higher under the 
President's health care plan.]

    The President. Yes, Jim.
    Representative Jim Slattery. I'm just curious, Sheryl, could you 
tell us how much you project that the costs for your company

[[Page 711]]

would go up in the event that the mandate was imposed?
    Ms. Wohlford. We currently pay 5.5 percent of payroll, so it would 
be up to the 7.9 percent.
    Representative Slattery. Have you had the opportunity to visit with 
your insurance agent to determine if, in fact, the benefit package that 
the President's plan envisions was enacted, what that would do to your 
costs? I mean, do you think it would bump it then from the, what did you 
say, 5.5 percent to the 7.9 percent?
    Ms. Wohlford. No. I have not done that.
    Representative Slattery. Okay. I was just curious how that was going 
to affect you individually.
    Ms. Wohlford. Well, based on--and I was doing that based on in the 
discussions with the people this week, prior to this. I was informed 
that it would raise our costs a little bit.

[At this point, Small Business Administrator Erskine Bowles stated that 
under the President's plan small businesses like Ms. Wohlford's will get 
better coverage at better rates.]

    The President. Sheryl asked two questions. I think we ought to try 
to deal with them as forthrightly as possible. The first question is, 
okay, if I have to go from 5.5 to 7.9 percent, how do I know it's going 
to stay at 7.9 percent? I mean, that may be the most important question 
of all. And the answer to that question is--I mean, I can only tell you 
where I'm coming from on this--is that we looked at what the average 
employer contribution was for a good health care plan that included 
primary and preventive benefits--because one of the ways you get health 
care costs down is to emphasize primary and preventive benefits; nearly 
any physician will tell you that--and it was about 8 percent. So we 
decided to go with 7.9 percent. And from my point of view, if we can't 
manage at that, we'll have to find some other way of dealing with it, 
not raising the payroll cost. I just don't think we can. The whole idea 
is to try to get health care costs as close to the rate of inflation 
plus population growth as possible.
    The second issue is what about people who--if you go back to 
Sheryl's situation, she went from 5.5 percent, let's say, to 7.9 percent 
of payroll. You should know that we provide discounts for small 
businesses if they have fewer than 70 to 75 employees, and if the 
average annual wage is $24,000 a year or less. Is that right, Erskine?
    So if you go over either one of those, then the discount system goes 
away. But the main reason for the difference--and I haven't looked at 
the health care package--is that she's on a 50-50 cost share. And the 
reason we went to an 80-20 is that that was the average cost share of 
employers and employees in the private sector insured now. But I'll bet 
you that the package will be better, too, as a result of that, because 
again of the bulk buying plan. So even she would benefit from that.
    But we've got to be up front about this. Not everybody pays less. 
Some people pay more, and that's part of the assessment you have to 
calculate. But I do think you can rely on the 7.9 percent. I do not 
believe the Congress would enact a program and I do not believe that I 
would support it unless we could do that.
    And let me also say, we had lots and lots of insurance actuaries and 
others look at this for a year and constantly labor over the costs. So 
we would not knowingly do anything that would run the cost up. And I 
will say that, as Erskine was reminding me earlier, our ability to 
predict these costs now is far better than it used to be. We've been 
pretty good about predicting what's going to happen to our medical costs 
for the last few years. And I think that ability is pretty well intact.
    Let's go on now to James Heiman, who's in, again, in a different 
situation. And I'd like for him to talk about his businesses and what he 
does about it and how he thinks he'd be affected by this.

[James Heiman stated that he employs approximately 61 people in his 
agricultural related companies and provides health insurance for all his 
employees. However, due to a heart attack he suffered and the decline in 
health of another employee, the cost of his premiums increased by 2 to 3 
percent. He has since found a more affordable policy but

[[Page 712]]

is still concerned about the rising cost of health insurance under the 
President's plan.]

    The President. I think there's a lot of well-founded skepticism 
about the ability of the Government to fix anything; I understand that. 
And that's one of the reasons that I did not want us to get into a 
situation like the Canadian health care system, which a lot of people I 
respect favor, which is inexpensive administratively but has huge cost 
problems because it's all Government financed. If you save the private 
insurance system, and you keep the employers and the employees directly 
involved in trying to manage their costs, then our view is that we'll 
have much better luck in trying to control the costs in the future.
    But under your situation, you would plainly pay considerably less 
because you would not only have a maximum of 7.9 percent, but with about 
60 employees--I understand that's about how many you have--you would 
qualify for some kind of discount there, which I think would be 
important.
    And let me explain why the administrative costs would go down. 
Presently, if you have 1,500 separate companies writing thousands of 
different policies and you overlay on that the Government's program of 
Medicare and Medicaid, every doctor's office and hospital in America has 
to hire a huge number of people to figure out what is and isn't covered 
under every policy. Every insurance company in the country has to hire a 
huge number of people to figure out what is and isn't covered. So 
instead of facilitating the payment of health care bills for people who 
have paid their insurance, you literally have an untold number of people 
in the doctor's offices and the hospitals and the insurance company 
figuring out what is and isn't covered. And the burden of that is 
staggering.
    I visited the Children's Hospital in Washington the other day, and 
they estimated that they could have another 100,000 children's visits a 
year if the doctors and the nurses had a single form with a single 
benefit package as opposed to what they've got now. It was a staggering 
encounter. And I would urge any of you--I don't know if there are any 
doctors and nurses in the audience, but I spent a lot of--I've got a 
friend at home, a man in Washington, who grew up with me, who just had 
to hire--there's two doctors in his office, and they have a lot of 
clerical workers. Now they've had to hire a third person--or a fourth 
person--to do nothing but just telephone insurance companies all day 
trying to get payments as they struggle to find out what is and isn't 
covered. And that's why we can simplify this.
    And a lot of people say, well, if you put small businesses in these 
big alliances and buying pools, that's going to be a huge government 
bureaucracy. Let me just give you one concrete example, because in order 
to give you good rates, you have to be in a big buying pool; that's what 
we talked about for the florist shop or the architects or anybody else. 
The State of California just set up a small business buying pool, put 
40,000 businesses and their employees in it. They hired only 13 people 
to operate it, and the insurance premiums for the people in the pool all 
went down this year instead of up. And Florida is starting it and having 
the same experience.
    So the question on these alliances is, how do you have enough 
cooperative buying power, just like the old-fashioned farmers co-ops 
which you have in Kansas and Arkansas, to give the small business people 
the same sort of break that those of us in government and big businesses 
have.
    Dan, were you going to say something? You look like you were about 
to.
    Representative Dan Glickman. Sheryl, do you cover 100 percent of the 
self and family, or just the self coverage?
    Ms. Wohlford. We pay 50 percent of either. If it's a family plan, we 
pay 50 percent. If it's a single plan, we pay 50 percent.
    Representative Glickman. One of the things that struck me is that a 
lot of people--small businesses--will pay the self, but not the family. 
And so they may be paying $150, $180 a month per employee for self but 
not the $450 for the family. And they worry, under this plan, whether 
they would in fact be paying more. But the numbers that I've seen under 
your plan indicate that 80 percent payment rate under the premium rate 
of a 7.9 percent in a majority of cases would result in lower premium 
rates, even combining self and family. Is that correct?

[[Page 713]]

    The President. That's correct because--for a couple of reasons. One 
is--and I don't think it applies, though. We've got to be careful; I 
don't want to overclaim. I don't think it applies to Sheryl. If you've 
incorporated, it wouldn't apply.
    But, for example, we've got a lot of small business--and we're going 
to Regina in a minute; I think she'd be covered like this--we have a lot 
of small businesses where the small business, let's say, has four or 
five employees, and there's a family policy for the owner of the small 
business. And then they may or may not cover the individuals who work 
for them. The family policy alone is often so expensive and if it's 
under a self-employed provision, only 25 percent of it is deductible 
under the income tax code, that when you look at the 100 percent 
deductibility we would provide, plus the ability to buy more insurance 
at a lower cost, there are an awful lot of small businesses in this 
country who could insure their families and their employees and their 
families for less money than they're paying just for their family policy 
today. And a lot of farmers--there are a huge number of farmers that are 
in that situation just because their family policies are so high and 
because they don't have any access to these buying pools.

[Administrator Bowles explained that grouping small businesses into 
large buying pools will lower the cost of health care for small 
businesses and will help them to become stronger. He also stated that 
simplifying the insurance system and reducing the amount of insurance 
forms will make the system more cost effective and will enable them to 
provide health insurance to those who do not have any.]

    The President. You don't feel strongly about that, do you? 
[Laughter] That was great. Thank you.
    I'd like to now ask Regina Jaramillo to talk a little bit about a 
situation in her restaurant. And let me preface this by saying that one 
of the toughest issues that we face here is the restaurant business, 
because you have a lot of part-time employees; you have a lot of young, 
single employees who don't feel like they need health insurance and 
probably think they're going to live forever; you have a lot of 
businesses operating on relatively narrow profit margins. And it is an 
enormous part of our economy now; over 40 percent of the American food 
dollar is spent eating out. So this is a very big deal and probably in 
some ways the biggest sector of our economy with large numbers of 
workers without insurance. You also have lot of part-time employees and 
a lot of turnover. So I'd like to hear her talk a bit about that.

[Regina Jaramillo explained that she and her husband gave up their old 
jobs and their health insurance to run their small family restaurant. 
Although they have bought an insurance plan for their own family, they 
would like to provide health insurance for the 12 people they employ in 
their restaurant. However, she found that insuring all her employees 
would cost her more than 10 percent of her payroll, a price too high for 
her to afford. She expressed hope that the President's plan will help 
her to insure her employees at a lower cost.]

    The President. Let me ask you something. What percentage of your 
total cost of doing business do you estimate is in labor costs, what you 
pay your employees?
    Ms. Jaramillo. My payroll? My payroll was at approximately--excuse 
me, I did write this down--$886,000 a year that I pay in payroll.
    The President. But of your total costs of operations, what would you 
say that is? Is that about half your total cost of operations, and the 
rest is food and utilities and the operations----
    Ms. Jaramillo. Oh, I'd say it's at least a third.
    The President. About a third. So I just want to try to lay this out, 
because actually you are in--because your restaurant is small, we 
estimate that you would qualify for the maximum discount, and you could 
actually insure your employees for about what you're paying now for your 
family under our program, because you'd go to a big buying pool and 
because you'd be eligible for a discount because you're a very small 
business. But it's not fair to say that all food service workers would 
be like you because--there are a lot of restaurants that have 100 
employees or 150 employees, so they don't qualify for dis- 

[[Page 714]]

counts. They would have to pay the 7.9 percent.
    So in your case, if our plan were to pass, we think that there would 
be no increase for you or just absolutely minimum, because you would 
qualify for the small business discount to a maximum degree. But let's 
say you had a restaurant of 100 employees or 200 employees, some of them 
have 200 employees, with a lot of part-timers. You would only pay for 
the part-timers when they were actually working. You'd have no 
responsibility when they don't work for you. At 7.9 percent--then the 
real cost, additional cost of doing business would be one-third of that 
because the payroll is a third of total cost or something less than 3 
percent.
    And that's what we have to figure out, to what extent could all 
restaurants pass that on if they were all in the same boat, if they were 
all treated the same way? Would we change our habits, our eating habits, 
if our food prices went up that much? Would more of us eat at home? I 
mean, these are the kinds of questions that it's hard to answer. But my 
instinct is that if all the competitors in this business were treated 
the same way, that most of us have ingrained habits of eating out 
because we have more and more families where both the man and the woman 
are working and working longer hours, and I think it's doubtful that 
habits would change within that range, where the maximum increase--if 
100 percent of it were passed on to the customers, which it might not 
be--was still less than 3 percent.
    In Regina's case it wouldn't happen that way, but it would in a case 
of a cafeteria with 150 employees, if our plan passed just as it is, 
with the 80-20 match. But for the smaller businesses, again I would say, 
families still have to pay too much for their health insurance if they 
have to buy them as individual families. So you would get a 100 percent 
deduction instead of a 25 percent deduction for the premium you pay, 
plus a discount. So you'd be able to insure your employees for about 
what you're paying now.
    Let's go on to Alonzo Harrison, who runs a construction company, and 
let him talk about his situation, because this again is a, I think, a 
pretty typical small business situation where he'd get some discount but 
would still have to pay more.

[Alonzo Harrison explained that he cannot afford to provide insurance 
for his employees but tries to help them find insurance companies who 
will cover them at a reasonable cost. He also explained that a recent 
trip to Washington, DC, made him ill.]

    The President. You ought to try living there. [Laughter] Actually, 
it's not bad.

[Mr. Harrison then said that he would like to provide health insurance 
for his workers but is concerned about the cost. He also stated that 
many of his employees are seasonal, and he is concerned that health 
insurance be made portable under the President's plan to cover seasonal 
employees during the months that they do not work for him.]

    The President. Our program, as proposed, would make health care 
entirely portable, including for part-time employees. And essentially 
what would happen is the employers and the employees would have the 
responsibility for paying while the employee was working for the 
employer. And then--or seasonal workers, when you weren't working, then 
the Government would help to make sure that the plan is portable and 
people kept it year-round. It would be the same plan.
    For part-time employees, as opposed to seasonal workers, the same 
thing would be true. It depends on how you define part-time, but if the 
worker worked more than 10 but less than 30 hours a week, the employer 
would have a responsibility to pay for some of the premium but not the 
full premium. You have to go over 30 hours a week before he'd have to 
pay for the full premium. And again, if there were differences, then the 
Government would help make up the difference there. So the 
responsibility would be there, but it would be based on how much time 
the employee is actually working for the employer.
    In your case, because you have a smaller business--except when 
you're hiring your seasonal employees full-time--you would qualify for a 
small business discount. Could you afford this if it was between 4 and 5 
percent of payroll?

[[Page 715]]

    Mr. Harrison. We think so. But again, since we're not paying it now, 
it would be an extra cost. And since our profit margin still isn't where 
we'd like for it to be, that means we're going to have to do something 
as it relates to raising our prices; meaning then that, yeah, we could 
put that into part of our budget, but then the cost is going to be in 
our bid.
    The President. Would it help knowing that everybody that competed 
with you had to do the same thing?
    Mr. Harrison. Absolutely.
    The President. I mean, since at least in the contracting work that 
you do, presumably the work has to be done. Somebody's got to have it 
done by someone.

[Mr. Harrison explained that the high cost of workman's compensation is 
of great concern to him because his business involves work that can be 
dangerous to his employees.]

    The President. One of the things that we're working on doing--we 
haven't figured out how to solve it entirely yet, but I think would make 
a huge difference to small businesses, especially to people like you 
with big workman's comp bills, but a lot of businesses that aren't 
particularly dangerous have big worker's comp bills--is to try to figure 
out a way to take the health care portion of worker's comp and at least 
have some common administration of it so that you're not, in effect, 
paying twice for it. Because right now, as you know, worker's comp is a 
disability program, it's an unemployment program and it's a health care 
program, all three. But if you have a health care system, we think we 
can figure out how to moderate a lot of the health care portion of 
worker's comp costs, which has accounted for approximately 50 percent of 
the rate increases in State after State in the last few years, in this 
health care thing. And that would also be a big boost to small business, 
because it's all part of the same cost of operations.
    Jim? Anybody else have anything they want to say?

[Representative Slattery stated that Congress will address the issues 
that the participants discussed and will try to pass a plan that 
requires everyone to contribute to the health care system so some 
businesses will not be paying more than others.]

    The President. I'd like to emphasize that for most of the last 20 
years, big businesses have paid way more than their fair share of the 
health care, and the rest of us have sort of ridden along with them. I 
mean, you've got some companies paying 15, 16 percent of payroll for 
health care. In other words, they've paid more than the percentage of 
our total wealth we spend on health care. And the rest of us have 
benefited from that.
    Now, big businesses and governments are finding that they can get 
competitive arrangements and buy health care for less money or at least 
they don't have to go up as much as inflation anymore, which is going to 
put more and more pressure on small business, which is why we've got to 
find a way, unless we want more and more people to be without insurance 
altogether, while we've got to find a way to get everybody insured and 
then get them in these larger pools.
    Let me just make one remark that I meant to say to our friend with 
the construction company. He said some of his best workers were over 60, 
including his father. Let me tell you, the fastest growing group of 
Americans are people over 65. More and more Americans are going to work 
well into their seventies. The average 18-year-old is going to change 
jobs eight times in a lifetime now. You have people in their late 
fifties and sixties losing their jobs because the defense business is 
cutting back. And there they are, 59 years old, some of them still with 
kids at home not even out of high school, having to find new jobs.
    This health care issue is a big issue. And one of the things that I 
think is very important about community rating is that we not 
discriminate against people in their sixties who are otherwise healthy 
and able to be good workers. Because if you do that, you're going to 
make it harder for people to change jobs.
    And one of the reasons that America--believe it or not, with all of 
our economic problems, we have a lower unemployment rate than all of our 
major competitors except Japan. We're now creating more jobs than all of 
them. And one of the reasons is that people can move freely in and out 
of the job

[[Page 716]]

market. But it's going to be harder and harder and harder for older 
people unless we remove this discrimination against age.
    So your company would be especially helped by that. In other words, 
you'd be able to buy insurance on much fairer rates if we said that 
vigorous working people in their sixties shouldn't be charged more than 
vigorous working people in their thirties. It would make a big 
difference. But again, I will say since the odds are still greater that 
a 60-year-old will get sick than a 30-year-old will get sick, the only 
way the insurance industry can provide this health insurance and not go 
broke is if you have big pools of people where the risk can be broadly 
spread. That's the only fair way to do it.
    Dan, you want to say anything?
    Representative Glickman. Can I just make a couple of comments? One 
is, is that, Erskine, I appreciate your comments about workman's comp. 
The bill actually does not fold the health part of workman's comp into 
it. If it did, I think you'd probably get almost unanimous support in 
this audience, because that is an extraordinary rising cost. And that's 
something we need to work on to include.
    The other thing is that a majority of people do pay health 
insurance. But I wonder, we got this as an 80-20 mix. I wonder if right 
now the majority of people who employ 50 or less, are they paying 80 
percent, or does that include all businesses all the way to the top?
    The President. That includes all businesses all the way to the top. 
I do not know what the average is for people with 50 employees or 60 
employees or less.
    Representative Glickman. If Sheryl pays 50 percent now, one of the 
things that strikes me that maybe we ought to consider is that 80 
percent may be a little rough for smaller businesses. And maybe we need 
to start with--after all it's 50-50 under Social Security now, and I 
don't know if that's the right percentage, but maybe there is a way to 
bring that number down and then over a period of years perhaps slide it 
up or something, because for a lot of the very small businesses, I bet 
you find a lot of them aren't paying 80 percent. I know the big 
companies are paying up to 100 percent as you say. And that's just 
something that we may want to think about.
    The President. You're at 50-50; you're at 80-20. What were you when 
you had insurance?
    Ms. Wohlford. We were 50-50.
    The President. In part of his business you're at 100.
    Representative Glickman.  So, it's just a thought.

[Administrator Bowles stated that small businesses will continue to pay 
high costs for health care until there is health care coverage for all 
Americans and until small businesses are incorporated into large buying 
pools. A participant then asked what could be done to discourage the 
large number of lawsuits against physicians.]

    The President. For doctors worried about being sued? You mean, 
physicians worried about being sued?
    Q. Physicians, hospitals, yes, the whole group.
    The President. We've proposed two things in our bill. First was 
limitation on the percentage of lawyers' fees in the contingency cases. 
The second is something that has actually worked to hold down medical 
costs where it's been tried, and that is to give different kinds of 
doctors the benefit of medical practice guidelines developed by their 
own professional associations nationally, that if the doctor can 
demonstrate that he or she followed these guidelines, that raises a 
presumption that the doctor was not negligent.
    Now, this is a big deal in rural areas. This could be a big deal in 
rural Kansas, For example, where you've got a lot of general 
practitioners who are out in the country and somebody shows up with a 
broken arm or someone needs a baby delivered and a lot of doctors just 
won't do it anymore. They just won't do it. They won't even set simple 
fractures in some of the country places in my State. They'll send them 
to the biggest medical center where there's a specialist, where the cost 
is 5 times as great. And so what we've tried to do--the State of Maine 
had an experience with this, basically developing simple practice 
guidelines. It's funny. We do it with pilots all the time. That's why 
every time one of us gets up in an airplane with somebody

[[Page 717]]

else, we expect the pilot to have the practice guidelines. That's what 
they are. And they are checked.
    And if we could give that to doctors and just not say that there can 
be no negligence but just say that that raises a presumption that the 
doctor did the right thing, we believe that would drive down malpractice 
rates considerably and let doctors free to practice medicine with common 
sense instead of just bending over backwards to order a lot of tests. 
For example, in cases--oftentimes, when they know they shouldn't do it, 
but they're just guarding against a lawsuit.
    Q. I have a question about part-time employees, and it sort of would 
apply to Regina's situation as well. I employ several retired executives 
that deliver flowers for me, and it's a job they love to do. And they 
come with a wonderful work ethic, and you know, I'm glad to have them. 
They also come to me with Cadillac health care packages that they've 
gotten as benefits upon their retirement. What is going to happen to 
those packages that they have in place under your plan? And also, what 
about--I have one employee who works one day a week. Am I responsible 
for his health care?
    The President. If the employee works less than 10 hours a week, the 
answer is no. Isn't that right, Erskine?
    Administrator Bowles. Also, you're not responsible for covering 
anybody who works less than 10 hours a week. You're not responsible for 
covering anyone who is under the age of 18, period. And you're also not 
required to cover anyone who is under the age of 24 who is also a full-
time student.
    The President. And I believe, in addition to that, you've asked me a 
question slightly different from the way it's ever been asked me before. 
But I believe that all retiree health plans are left intact, and that 
therefore, you would not have the responsibility to pay for someone who 
is a retired worker with a retiree health plan from another company. I 
believe that is right.
    If it's wrong, I'll get back to you and tell you. But I'm almost 
sure that's right because one of the things we've tried to do is make 
sure that people like retired State employees and other people who knew 
weren't going to have their benefits that wrote, if they happen to have 
a better plan than our minimum plan. So if they've got the kind of plan 
you say, my belief is that they would not be required to be covered.
    Let me just say one thing in closing in response to what Jim 
Slattery said. The toughest part of this is obviously the mandate which 
is why we tried to work out a discount. The main thing I want you to 
know is I have no interest in the Government running the health care 
system of the country. I am trying to use the power of the Government to 
organize the market so that small business people and self-employed 
people can get access to good benefits and so that these kinds of 
discriminatory practices that insurance companies follow today will not 
have to be followed in order for people to make money in insurance.
    And I believe you have to require everyone to be covered in order to 
stop the boat from leaking because there's always going to be people who 
will be dropping their folks even if others pick them up if we adopt 
these new changes. So it seems to me that that is something we just have 
to work through.
    That is the whole concept that has led some of the small business 
groups to oppose what we're doing. But I think it's also important that 
you understand that I will not sign a bill that does not have discounts 
for very small businesses with low payrolls and low profit margins. I 
won't do that. I want a bill that preserves the private delivery system 
we have and that makes the competition that is working very well now for 
Federal employees and for large businesses available for people in the 
small business sector.
    But I think that none of it will get done unless we can provide the 
security that every American will know there will always be some health 
care coverage there, that will also stop a lot of the unfair cost-
shifting and permit people to compete on a more even basis. So that is 
what we are trying to achieve. I hope that you will be supportive of all 
the Members of your congressional delegation without regard to party in 
trying to work through this with less rhetoric and more reality.
    You know, I've tried to just get around here and listen to people's 
real life stories and try to work through the real life stories

[[Page 718]]

in a way that solves the problem and permits America to take advantage 
of what we have which is the best medical delivery system in the country 
and fix what we have which is the worst financing system in the world. 
We've got the best medical care in the world and the worst financing 
system. We ought to be able to figure out how to do that. I think we 
can. And we have to do it in a way that permits small business to 
flourish because small business is the main generator of new jobs for 
the American economy.
    Thank you very much.

Note: The President spoke at 2:03 p.m. at the Topeka Foundry and 
Ironworks Co. A tape was not available for verification of the content 
of these remarks.