Press Briefing by Council of Economic Advisors (Text Only)

Press Briefing by Council of Economic Advisors
Medical College of Wisconsin
Milwaukee, Wisconsin

MR. SCOTT McCLELLAN: All right, is everybody ready? We'll start the -- again, this is an off-camera, on-the-record briefing, and I don't have anything to say at the beginning, other than just to introduce my older, smaller brother, Mark. (Laughter.) And with that, he'll go over the health care initiatives the President just outlined.

DR. McCLELLAN: Thanks, my larger brother. I don't have much in the way of remarks to open this with. I just want to highlight that the President laid out a clear agenda for action on health care this year that includes over $300 billion in new proposals in his budget to implement the key ideas that he talked about in the speech. This is an important time for action in health care, the President believes. Health care costs are up. Uninsurance rates are threatening to go up, and it's time for Congress to act on proposals ranging from improving insurance, through health credits and improved health accounts for all Americans, to improving Medicare, making much broader choices available.

And the President also spent a good deal of time talking about the need to improve the environment for medical practice, so that we have a health care system that helps and encourages doctors to provide high-quality care, and he laid out a number of proposals to do that.

So I'm happy to answer any questions about the speech or about the health care proposals.

DR. McCLELLAN: The President, in his budget this year, includes over $300 billion in health care initiatives. This includes well over $100 billion in initiatives to improve access to affordable health care coverage. That includes an improved version of a health credit for people who don't have insurance through their work, and it also includes a proposal that passed the House of Representatives and has bipartisan support in the Senate to provide direct assistance to workers who have lost their jobs with their health care costs. Those are all new proposals.

DR. McCLELLAN: Right. And they make up the President's package on initiatives to address the critical problem of uninsurance today, with uninsurance -- with concerns about uninsurance rising and health care costs up.

So there is a major proposal on health accounts -- that is, to improve and expand what have been known as medical savings accounts, to tax-favored health accounts that could be available to all Americans to help them with their high, out-of-pocket costs. As you all know, there have been recent trends towards health insurance plans requiring more payments out of pocket by patients, especially if they want to choose their own doctor and avoid the red tape of managed care.

The President has also proposed health credits which would enable people without health insurance coverage to buy it. He had a health credit in his budget last year. This is an improved version of that. For example, it's worth up to $3,000 per family. And it has a specific implementation mechanism so that it can be available to people when they're actually paying their premium. They don't have to wait until the end of the year, it does not matter how much taxes they owe, they get the money up front, goes directly to their insurance company. So it gives people, as he said in the speech, help when they need it with buying their health insurance.

And, in addition, the health -- this is also part of health credits -- but the President has supported legislation that has passed the House of Representatives, was crafted by a bipartisan group of centrist senators as part of the economic stimulus package to provide direct health care assistance to workers who have lost their jobs. In particular, they would get 60 percent of their health care costs covered for continuing their health insurance. That's a new proposal, as well.

The President also laid out an agenda for moving forwards quickly on the patients' bill of rights. That's something that he's been working on for a long time, but we continue to work closely with members of both parties in Congress to help get a bill to the President's desk that he can sign. He made clear that he wants Congress to take action to protect patients from genetic discrimination, and he also laid out a strong agenda for research this year.

He had, in the campaign, been committed to doubling the NIH budget. His 2003 budget does that. It also includes additional funding for bioterrorism research as part of a real and new effort and urgent effort to strengthen our public health infrastructure to protect against attacks.

Q Mark, on MSAs, haven't they been shown in the experimental programs around the country, that they only help the young and healthy?

DR. McCLELLAN: There have been some studies that suggest that they might be attractive only to healthy people. But those are mainly done of the MSA plans that are in the law today. And the President pointed out, I think, a number of reasons why those versions of MSAs don't work. They have very high deductibles, over $3,000 for a family policy, which is far more than most families feel comfortable with. They are limited to employers that have fewer than 50 employees, and they are capped at the number that can be made available.

All of that provides a real disincentive for health plans to develop ways to make the health accounts work. What we've seen in recent years, and especially in the past year, is an increase in the amount that people have to pay out of pocket for their health care, especially if they don't want an HMO plan that restricts the doctors they can see and the kinds of treatments that they can receive.

If they want more control over the doctors they see, if they want to avoid red tape, they often have to pay more out of pocket for it, in a point of service plan or a PPO plan or something like that. Those plans require substantial out of pocket payments and, right now, families get very little or no assistance with those costs.

Many families are starting to choose those kinds of plans, but they don't qualify for the kind of health account that the President has favored. What the President wants to do is to make health care that people control as attractive as health care that the managed care plans control. And right now, tax subsidies are only available through health plans, through premium payments, the amount that you pay for your premium out of your employment-provided health insurance is subsidized as a worker benefit.

But if you pay out-of-pocket costs for health care, that's not subsidized through the tax system. And the President wants to correct that inequity to give patients more control over their health care and easier ability to pay for the out-of-pocket costs that they often have to face in the plans that give them the options of getting the kinds of care they want.

DR. McCLELLAN: Fewer restrictions, lower deductibles, preventive care -- he didn't mention this in the speech. But in his budget, he proposes that preventive care should be covered in these health account plans. That makes it much more attractive to families, to people with ongoing chronic illnesses. So there are a lot of features that are different than MSAs in law today that would make it more attractive to people right now who are having to pay a lot of money out of pocket for health care that they want.

Q Can you explain how the health premium credits will work? The President mentioned that the people who don't use all of their money or don't need this money could get it back somehow. How would that work?

DR. McCLELLAN: This is the health -- the health savings account proposal, or the improved MSA proposal. And what happens is, you sign up for an insurance plan that requires you to pay a significant amount of money out of pocket, for example in a deductible, if you want to see a doctor who's not in a network of care or something like that. And in order -- when you sign up for that plan, you would also set up a health account, and you can make tax-free contributions to that account that you would have otherwise had to spend on a health insurance premium for a much more comprehensive insurance plan. Because you're paying for a plan that has a significant deductible that requires you to make significant out-of-pocket payments, the premium is going to be lower. So you can put that money into the health account instead. If you need to use health care, then it comes out of your health account.

Right now, if you need to use health care and your plan doesn't cover it, you've got to pay it out of your pocket, after you've paid taxes on it, which makes it even more expensive. This way, you don't have to pay the taxes on the plan if you use care. And also if you don't use care in a year, you can keep the money in the health account. You can build up a balance in your health account to protect -- to provide even more protection in the event of a serious illness.

Q What's the difference between that and a flexible savings account? And how would they work together --

DR. McCLELLAN: A flexible spending account -- that's a good question. A flexible spending account is a benefit that is available to many employees, not just people in small firms and not just with all these restrictions like MSAs have today, that they can use for out-of-pocket health care costs.

The problem with a flexible spending account is that it has a use-it-or-lose-it requirement, so if you put money into it and don't spend it at the end of the year, it's gone; it's not yours. So that's why a lot of people who have flexible spending account through their employers only use them for eyeglasses or medications that they know they're going to need to take, and that's why there's a run on eyeglasses at the end of the year in many of these employer plans.

What the President has proposed to do is let you roll over some of that money, even to keep it in a flexible spending account for next year, to protect you against expenses that you might have down the road; or to use in your 401(k) plan as a retirement benefit. Again, to provide better protection for you down the road for health care and other costs that you might have in your retirement years.

DR. McCLELLAN: The flexible spending account proposal is limited to a $500 roll-over. The health account proposal would not have a limit on it.

Q How are you defining low- and middle-income American families for the health credits?

DR. McCLELLAN: The health credit phase-out for individuals who use them, beginning at an income level of $15,000, and they fully phase-out at $30,000. For families, the health credits, which can be up to $3,000, begin phasing-out at an income level of $25,000 and they fully phase-out at $60,000.

So even if you're a family of four making over $40,000, you're going to get significant help through this proposal, over $1,000 a year in assistance. And, again, this is direct assistance that you get when you're paying your health insurance premiums. It doesn't depend on the taxes you owe, you don't have to wait until the end of the year to use it. It makes health insurance cheaper when you're choosing your health insurance plan and when you're paying your premiums.

Q Mark, the Families U.S.A. Group, they cite an example of the President's plan, saying that right now a 25 year old woman pays an average of $4,700 for health insurance, a standard health plan. They say that's above the $1,000 tax credit being offered. Is that a --

DR. McCLELLAN: I don't think the Families U.S.A. numbers are representative of the policies that are available to most people in the health insurance market. We've seen a number of studies done and we're going to have more data this week showing that the vast majority of people would get help towards most of the cost, much or most of the cost of their health insurance plans with this credit.

I think $4,700 for a 25 year old woman is just plain wrong. That might be the cost of a comprehensive first-dollar insurance plan, but as you know, if you talk to people today, that's not a kind of coverage that many people can afford or even want. You know, they might want more control over their health care by being willing to spend some out of pocket when they get sick.

So for a good PPO plan with $1,000 deductible, or a good HMO network plan, the costs are far lower than $4,700. We've seen numbers -- I think you can go to websites, like ehealthinsurance.com, and get quotes quickly that are much lower than that. So I don't think that's a representative price. I think the bottom line for showing how much of a difference this proposal makes is that the technical analysis of it suggests that 6 million people who otherwise would have gone without coverage for some or all of the year, would get coverage under this proposal. That's 6 million new people with health insurance as a result of this proposal. So that's clearly -- clearly means that we're providing significant help that makes the difference between getting health insurance and not.

Q Can you distinguish, please, between -- of the things that the President talked about today, those things that require congressional approval and those things that the administration is implementing without need for congressional approval?

DR. McCLELLAN: Most of the things that the President talked about today will require action by Congress. All the things with significant dollar numbers attached to them, for example.

The President did spend a good bit of time talking about improving the environment for medical practice, to make it more friendly to the doctor-patient relationship, to make it more conducive to improving the quality of care. And the administration is taking some steps to help doctors and help health care organizations that are trying to work together to improve quality and improve safety.

The administration is also taking steps to make better information available to patients about the quality of care that they receive. We're doing some of this on our own, through the Medicare program; we're doing some of this in collaboration with other private groups. But most of the proposals that he laid out today do require congressional action and we're hoping that Congress can act on them soon. These are important problems.

Q Can I ask just a political question? I mean, Senator Kennedy, as you speak, his staff is sending out e-mail saying, as you can imagine, this is completely inadequate at $190 billion. Actually, even people today, I talked to them afterwards, said that $190 billion over 10 years for Medicaid is --

Q For Medicare, excuse me -- is completely inadequate. I mean, how do you answer that?

DR. McCLELLAN: Well, the President has -- we've done a lot of work internally on the cost requirements of improving the Medicare program. The President believes that $190 billion based on that analysis is a sufficient amount. But, obviously, we're going to work closely with Congress. I think what the President made clear is that he wants to try to take action this year to strengthen the Medicare program for the short and the long term.

In addition to laying out a framework for Medicare reform with $190 billion in budgetary commitment to it, the President also suggested some specific short-term steps that should be part of that legislation. And, obviously, we're going to work closely with Congress on implementing that.

There have been other numbers floating around. You know, the congressional budget resolution last year was $300 billion. If you talk to some of the members of Congress, that's not attached to any particular plan. And I think we'll know more and we'll see more as this legislative process unfolds about exactly what amounts would be involved.

DR. McCLELLAN: What the President is willing to do is to take action to strengthen Medicare. And the focus should be on achieving a plan that meets his principles, and he thinks that that can be done within the $190 billion that he laid out. And, obviously, we're going to work closely with Congress to try to get that done.

Q You said they were close to agreement or nearing agreement in Congress on the --

DR. McCLELLAN: Well, we remain optimistic. We're continuing to have ongoing discussions with members of Congress from both political parties in both Houses about that legislation and the President would very much like to see a patients' bill of rights get to him as soon as possible this year. So we think it can be done this year and we think it can be done soon.

Q Mark, on the improved tax credits, how has that changed from the year before? What's improved in the tax credit package?

DR. McCLELLAN: Improved in terms of the amounts that we're putting into it, up to $3,000 per family. Improved in the last year, I think the maximum was $2,000 per family. Improved in the mechanism for delivering it.

There were some concerns last year that unless people had the money available to them, the credit available to them when they're actually writing their health insurance premium check, that it wouldn't be helpful. They need the money right then to make their health insurance premiums. They can't wait until the end of the year, and we fixed that problem. This is a credit that would be available when people are buying insurance. It's a credit that is worth the same regardless of what, if any, income tax they owe. It's money they can use up front to purchase the health insurance plan that they prefer.

Q Is there some projection of if the President's various principles are adopted, how quickly that number of 40-plus billion of uninsured would --

DR. McCLELLAN: Forty million? We think pretty quickly. The one advantage of this proposal is that, unlike some other proposals for addressing the problem of uninsurance, it doesn't require further legislation and appropriation by states; it just requires the federal money. And we think that can begin to be operational next year and make a significant dent in that number by next year.

The health insurance proposal that the President supported as part of the economic stimulus bill, the assistance for displaced workers, could be implemented within three months of enactment or less, and because it also would provide help at the end of the year for people who have already incurred significant health insurance costs after they lost their job and trying to keep their health insurance plans. They would know that they are getting that money later, and so they would get help as well.

But that proposal, too, is something that, as soon as it's enacted, within three months, would give people direct assistance when they're buying their health insurance. And that's an important feature of all of our credit proposals, is that they provide money right when people are paying for their health insurance premiums, when they need it.

So we think this could make a significant dent this year and next year in the number of uninsured.

Q The 40 million you're referring to, please, just refresh me, was in reference to --

DR. McCLELLAN: That's the rough estimate of the number of people in this country who are uninsured for a significant period of time.

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