For Immediate Release
Office of the Press Secretary
June 27, 2007

Press Briefing on Health Care by Senior Administration Officials
Room 160
Dwight D. Eisenhower Executive Office Building

Press Briefings

      President Bush Discusses Health Care
      In Focus: Health Care

PARTICIPANTS:
Secretary of Health and Human Services Mike Leavitt
Director of National Economic Council Al Hubbard

2:53 P.M. EDT

MR. FRATTO: Good afternoon, everyone. This is an opportunity we wanted to make sure we had for you following the meeting and remarks that the President had this afternoon on health care. A number of you we talked to after the State of the Union address on the President's proposals on health care, and as we move into discussions and debate on Capitol Hill on S-CHIP and health care broadly, we wanted to make sure that we had an opportunity to talk about where the President is and remind you of the policy goals that we're trying to achieve and some policies that we're trying to keep from occurring also.

So we're very happy to have Al Hubbard, Director of National Economic Council here at the White House, and Secretary Leavitt from HHS. I'm going to ask each of them to just make a few comments and maybe even talk a little bit about the meeting today that the President had, and then open it up to questions.

SECRETARY LEAVITT: Thank you. In referring to the meeting, let me just say that it was a very thoughtful conversation between a group of people who have spent a lot of time over the course of many years examining this. And the discussion boiled down, as almost any conversation like this does, to the fact that there is a widely held aspiration that every American have access to an affordable basic insurance policy.

But there are two competing philosophies about how that should be accomplished. One is a Washington-run, government-owned plan, where government makes the choices, where government sets the prices, where government then taxes the people to pay the bill. The other is a state-organized private market where consumers choose, where the insurance plans compete, and where innovation then drives the quality up and the cost down.

S-CHIP and the reauthorization debate is a center court match between the philosophies of government-run health care and organized private health care markets. There are obviously things on which we agree, and then there are things on which there is disagreement. I'd like to at least frame those for you.

What do we agree on? Well, we agree that S-CHIP, the program for low-income children, should be reauthorized. There is no disagreement on that point. However, there is disagreement on whether S-CHIP should be used as the vehicle to shift millions of people who have good incomes and private insurance to a publicly assisted government insurance. The proposals that are being made now would increase those who are eligible from 200 percent of the federal poverty level to nearly twice that, which would mean that families making over $81,000 a year would have children eligible for public assistance. It would mean that 71 percent of all children in this country would be eligible for a program that was designed for low-income children.

There is agreement that over the next five years S-CHIP reauthorization will require more money than it did in the last five years. There is disagreement on the point that it should be $50 billion more. There's agreement that it's not just children that need health insurance -- it's every American that needs insurance and that we ought to be focusing on not just the problem of children, but every American, and that, again, government -- there's disagreement on the fact that government shouldn't be the vehicle.

Now, let me just say that in the context of our conversation today we talked about those two competing philosophies. There are those who clearly advocate that Medicare should cover everyone, or the federal government. And then there are those who believe that government's role is to organize an efficient and a fair market. And there are really three steps to making every American -- or to providing every American with access.

The first is to recognize that if you're in hardship in this country -- if you're poor, or if you're elderly, or disabled -- Medicare, Medicaid and S-CHIP are there and need to be there as sustainable programs. Second is that everyone who isn't in hardship deserves to live in a state where there is an organized market providing them with access to an affordable basic insurance policy.

The third step is that we need to end the discrimination between those who are able to buy insurance in the private market through an employer -- I should say -- let me restate that -- we need to end the discrimination between those who are not able to purchase insurance through their employer and those who have to buy it on their own. The President, earlier, had made a proposal involving a standard deduction. And we had a very robust conversation about that today, and the President and many of those who were there talked about alternatives that were being suggested to solving the problem. Sic* One is an earned income credit. The President was very interested in that; it was part of our discussion. And I'll ask Al to discuss the conversation related to the credit.

MR. HUBBARD: Thanks, Mike. As you know, the President, last January in the State of the Union, talking about the importance of addressing health care, proposed the standard health care deduction of $7,500 for individual, single-purchase health care, and $15,000 for family-purchased health care, and making that available to everyone in America, no matter whether you get your insurance through your employer or whether you buy it on your own.

You should know that leading up to that, as we went through the policy process -- which takes, literally, months -- leading up to the State of the Union, and with multiple meetings with the President talking about health care, he considered both the tax credit, refundable tax credit, as well as the standard deduction, and saw a lot of positives in both. And to be perfectly frank, it was a very close call which way he went, but eventually -- and saw benefits to both, saw that both were major steps forward in dealing with the systemic problems with health care, but ultimately decided the standard deduction was what he would propose to the American people and to Congress.

Congress, as they have considered this, had -- I think you will find, we have certainly found that a number of them are very interested in a tax credit. And in the meeting today with these six experts, some of them supported the standard deduction and some of them supported the tax credit, the refundable tax credits, and there are good arguments for both. And the President made it clear in his presentation today that although he supports the standard deduction, he is open to the refundable tax credit, and what's most important is that we deal with the fundamental problem -- the systemic problem facing health care in America and create a system that makes health care, as Mike said, accessible and affordable to every single American.

And we think either approach -- and to be perfectly frank, in our meeting -- and I've heard proposals on Capitol Hill that actually combine the standard deduction with a tax credit -- but any of those three approaches is a major step forward in addressing the major problems facing the private insurance market. And when you combine that with giving governors and legislatures more flexibility in the way they use federal dollars, encouraging the states to address the challenges of the chronically ill so they have affordable and accessible health insurance, as well as addressing the problems of those who are extremely poor, so health care -- private health insurance is affordable to them, the President believes that, again, with either approach we can end up with a system, organized basically at the state level, that would make it possible for every single American to have affordable and accessible health care.

Q Is the President hoping that by expressing openness toward a tax credit that he can bring more Democrats along? And, also, can you just talk a little bit about why did he come down on the side of the deduction in the first place and why is he more open to the tax credit now?

MR. HUBBARD: As I said, it was a close call. The signal he wanted to send is he wants to encourage the debate and encourage Congress -- and, obviously, nothing gets passed in Congress if it's not bipartisan -- but encourage both sides of the aisle to very seriously look at -- both sides of the aisle to be committed to fixing the problems of health care, and doing it through private insurance and the private sector, preserving the freedom of choice and the important doctor-patient relationship that exists in the private sector.

And what he's saying is, either way works; it's a major step forward, but what's important is that we address it and we address it now, and we fix it for the American people.

SECRETARY LEAVITT: Can I add something to this? In the State of the Union the President basically said two things. The first was, we've got to solve this tax discrimination problem. And the second was, I'm assigning the Secretary of Health and Human Services to go out and talk to all of the governors. Well, I've talked to every governor; I've been in every -- virtually every state, talked to state legislatures. There is a torrent of activity happening right now in the states. The states have a significant challenge, however -- they cannot deal with this tax discrimination problem on their own. States have to depend on Congress to do that.

Now, when you look at the dilemma between whether you use a credit or a standard deduction to do it, what you find is that the standard deduction has -- influences more of the equity issue, treating everybody with exact equity. The credit tends to be more helpful to those at the lower income. So what you see is the struggle between those two very high priorities.

Now, as Al mentioned, there are people now who are beginning to say, could you blend those two and find a balance? And for that reason, the President is saying, look, I want the problem solved so that this torrent of activity in the states can unfold and allow states to solve the puzzle of how you make certain everyone has access to an affordable, basic policy.

Q How do you go the route of the refundable tax credit and still keep it revenue neutral?

MR. HUBBARD: You make the credit -- basically, you work -- what we presented to the President was what Treasury told us was a revenue neutral number of $4,500 for family coverage and $2,500 for individual coverage. I think others, it's my understanding, have come up with other combinations, but that -- because what you're doing is -- right now, these numbers aren't perfect, but we can get you the close to perfect numbers from OMB. The Treasury gives up about $230 billion a year from the tax inclusion, the fact that those of us who get their insurance through their employer don't pay taxes on -- either payroll taxes or income taxes, and that amounts to about $230 billion.

If you take that $230 billion and you start charging people -- so you would start paying taxes on that benefit you're getting from your employer, but then in place of it -- so you would pay taxes, but then you would get the tax credit. And that $230 billion divided equally among everyone purchasing insurance, it spreads out equally at $4,500 and $2,250. Again, that's the Treasury's numbers. By the way, when joint tax does it, they always come out with different numbers. But those are ballpark numbers of what is a revenue neutral number.

SECRETARY LEAVITT: Can I take another -- oh, go ahead, you wanted to follow up on that. I was just going to say that what the credit constitutes is a trade for those who have employee -- those who have employer-sponsored insurance now, they currently get a very prominent tax break, and they're simply trading it for a tax break of a different kind that is extended to more people. And because there is that trading, it makes it more fair and, frankly, it benefits about 80 percent of those who currently have insurance.

We want to emphasize that under either of these proposals, employers would be treated precisely as they are now. Employer-based insurance will continue to be, under any of these proposals, a very important, prominent part of the way people buy insurance, and employers would continue to be able to deduct the cost of health insurance that they pay on behalf of their employees.

Q I am sure that what you say is true, that there are certain people in Congress who would much prefer a tax credit to the deduction. However it seems since this proposal was made that there's really been very little activity in Congress on any of the above. There haven't, as I know, been any hearings; there hasn't really been any talk from anybody in any position to do anything about this. So while I'm sure that that's true, that they're more open to that, is there really any reason to believe that this is going anywhere, at least this year?

SECRETARY LEAVITT: We contemplate that health care as a subject will be raised in the context of the reauthorization of the Children's Health Insurance Program. It's clear to us that the conversation needs to be not just about how we assure children in low incomes have insurance, but how we assure that every American has access to an affordable basic plan. And we believe that this conversation will mature now, as we move toward reauthorization.

Q Essentially are you saying that you don't want to reauthorize S-CHIP unless you're able to include this element?

SECRETARY LEAVITT: I've made very clear, I think, in unambiguous terms, that we support the reauthorization of S-CHIP, and will continue to work actively for its reauthorization. It's a very important part of how we assure that low-income children have care. But we believe that the debate should include not just children, but all Americans. The President made clear today that every American needs access to an affordable plan.

Now, when you start looking at either the deduction or the credit, that clearly not only helps those who have no insurance, but it helps those who have insurance being purchased through an employer to have them -- to get it less expensively.

Q You say you're trying to use this new willingness to a tax credit to sort of jumpstart this debate, to maybe use --

SECRETARY LEAVITT: We expect that the S-CHIP debate will enliven the entire discussion over health care. And we desire this discussion not to be just about children, it needs to be about all Americans having access to an affordable basic plan.

Q Secretary, if what you all support in the S-CHIP reauthorization is to continue it for kids, therefore, some of the people who -- some of the states that have included adults would no longer be including adults, is this a way to pacify, perhaps, some critics that might result from that position?

SECRETARY LEAVITT: Let me be clear that our position on S-CHIP is that any person, whether they are adult or a child, who is currently eligible for S-CHIP would continue to be eligible. We do not believe that new populations of adults or children should be eligible. Those adults that have been put on S-CHIP by states, frankly, for the most part were put there because they got a better reimbursement. If you take a look at the populations, they would almost all be eligible for Medicaid.

So why did they put them on S-CHIP? They put them on S-CHIP because they got a 70-percent match, as opposed to a 50-percent match. This isn't a question of whether those adults should be eligible, it's a question -- it's a dispute between partners as to who ought to pay the most. And if you're a state, then you're interested in having them pay the highest amount. And what we're saying is, this is a program for low-income children, and that we should be focused on the bigger picture, which is all Americans, and we want the S-CHIP conversation to be done in the context of all Americans, not just focused on children.

Q You're having a hard time, though, getting financing to pay for the S-CHIP expansion in and of itself. And I know there's a debate over about whether it's $50 billion, or how far you go, but wouldn't this complicate that, getting that passed on the Hill, S-CHIP, if you're trying to add a tax deduction or a tax credit to help all other Americans?

SECRETARY LEAVITT: Our goal is to have every American have access to an affordable basic plan. And S-CHIP is an important part of it. But we can't get to everyone else unless we solve this problem. You've got a literal -- dozens of states -- I mean, you've got dozens of states right now, literally dozens of states, that are working to develop the strategies to cover -- or to provide access to every one of their citizens. They cannot solve that problem without Congress acting. And so we want to give states the tools they need for S-CHIP. But we also need to give them tools for every American.

Q And do you do that through the S-CHIP legislation?

MR. HUBBARD: I think it's an important point, though, when you talk about, doesn't this make it more difficult -- well, from a financing perspective, this is much less difficult. The Democrat proposal, based on what we understand, is $50 billion or $50-plus billion over five years. What we're talking about is revenue neutral when it comes to the tax reforms, revenue neutral when it comes to giving flexibility to governors to use federal dollars. Our S-CHIP proposal costs $4.9 billion over five years above the baseline.

Q I didn't mean to interrupt your question. Is Grassley on board with this, Baucus, Rangel? Have you got any members of Congress on S-CHIP who say, let's bring this into the fold, part of the conversation?

SECRETARY LEAVITT: We believe this debate will mature in the context of the S-CHIP discussion, and that there are groups all through Congress now working on different strategies that, in time, will consolidate into what I think will be a fairly focused proposal.

Q I'm just not clear. I just want to -- are you saying that you're hopeful that the tax discussion will actually become a part of the S-CHIP reauthorization legislation?

SECRETARY LEAVITT: We believe that we should be focused not just on S-CHIP, but we see that as a very important part. We believe that we should be finding ways to extend access to health insurance to all Americans, and that a very important part of that is solving this tax problem.

Q But should it be done at the same time, in one piece of -- as part of the S-CHIP legislation, or are you just saying this should be discussed at the same time, and then we deal with that?

SECRETARY LEAVITT: No, we ought to be taking on the discussion of every American and how we provide access, at the moment when states throughout this country are struggling to find ways to solve this problem. This is the moment that it could be done, and we ought to be looking at not just children, but all Americans. Now, I want to emphasize, we see S-CHIP as a critical part of that.

MR. HUBBARD: Let me amplify one point that Mike just make about the governors and this flurry of activity that's going on. If either the tax credit or the standard deduction were passed, it would enhance their ability to deal with their uninsured dramatically. I mean, you're talking about literally for a -- I was trying to remember -- for a state, we could give you the numbers, but you're talking about for a state the size of Georgia, better than $1 billion a year, if all of their uninsured actually participated in one of these two programs. So in terms of assisting the governors, as Mike said, they really can't deal with their problems until the tax code is fixed. And that's why it's so important that Congress deal with the tax code, and deal with it as soon as possible.

SECRETARY LEAVITT: In order for the states to -- in order for us to have -- in order for every American to live in a place, or in a state where they have access, the states have to solve three problems. The first is, they have to create a pooling mechanism, to assure that the hard-to-insure and chronically ill are part of this. The second is, they have to conclude how to subsidize or assist those who still can't afford insurance after they have the tax help. And third, they have to assure that there is a safety net for those who still don't buy. The problem they can't solve is this tax piece.

Now, the President mentioned in his statement today that early actuarial indication is that were either of them, and particularly the credit, were to be implemented, more than 20 million people would buy insurance. Think about that for a minute. If you assume right now there are 40-plus million who don't have it, of those, 8 million to 10 million are people who are eligible for the current S-CHIP, Medicare or Medicaid program.

Q What was the estimate for the original proposal, the 20 million and the original proposal would have allowed how many more people to become insured?

SECRETARY LEAVITT: There were a number of different estimates, and I think we've got to reconcile that offline, because I'm not able to give you the exact number.

Q Mr. Secretary, one of the options that they're talking about for S-CHIP is a tobacco tax. What's the administration decision on that, increasing the tobacco tax?

MR. HUBBARD: Well, our position is that S-CHIP shouldn't be expanded the way the Democrats are proposing. S-CHIP should deal with, as Mike has said, as the President has said, deal with its original -- with the originally targeted group of people, which are children from families under 200 percent of poverty. And that would cost $4.9 billion. That's paid for in our budget, and doesn't require any tax increases.

SECRETARY LEAVITT: This is an important point. Can I reconcile this number for you, because I -- you want to follow. At some point -- ask me to reconcile these numbers today.

Q I'll ask you about them.

Q Just to -- there are people that are saying, no, it would cost more than that to reach all the currently eligible children.

SECRETARY LEAVITT: That sounds like the question I was looking for. (Laughter.)

Q So are you saying that -- you're not ruling out a tobacco tax increase right now?

SECRETARY LEAVITT: We don't think we need a tobacco to do it.

Q You say you don't think you need it, you're not saying you don't --

SECRETARY LEAVITT: We don't support it. I'm not the President, I don't speak for the President, but I have not heard him make any reference to this. So you'll have to get that from people --

MR. HUBBARD: A tax increase is not needed if you pursue the policies of the President. Our budget accommodates addressing kids from families under 200 percent of poverty, and there are no tax increases necessary to take care of those folks.

SECRETARY LEAVITT: I'm itching to tell this story about the numbers, so I want to -- this has been bothering me. Look, there are -- what is the universe of eligible S-CHIP children -- that's at the heart of this -- who don't have insurance? We asked, through a contract we have with the Urban Institute, for them to go out and help us determine that. They came back and said this: If your question is, how many children who are under 200 percent of the poverty line who have not had insurance for the last year, the number is 690,000 people -- children. Now, if you ask the question, how many children are eligible for S-CHIP in all of the states who currently do not have S-CHIP, the number is -- and did not have S-CHIP`-- let me restate that, let me make this right. If you ask the question, how many children are there who did not have health insurance for any part of the year, one day or 11 months, the answer is 1.7 million.

Q Of any economic background? In other words, how many children who did not --

SECRETARY LEAVITT: Of those who were eligible for S-CHIP. Now, in some states it may be 235 percent, in some states it may be 200 percent, some states it may be less. If you take all of the states, take their eligibility, ask the question, how many children at some point during the year did not have health insurance, the number is 1.7 million people.

Now, just for a minute with me, let's assume that you could find all 1.7 million of them on the 31st of December of a given year, and you could enroll them all in S-CHIP, and that none of them would leave S-CHIP through that entire year, so you would keep them on S-CHIP the entire year -- I think that's about the most conservative estimate you can -- now, take that 1.7 million and multiply it by the cost of S-CHIP. It's $1,152. You do the math. What you'll find is that it is slightly less than $2 billion a year. Now, we're doing five-year budget estimates here, so just under $2 billion a year times five is just under $10 billion.

Now, where do they come up with $50 billion? The only way that it can be coming up with $50 billion is if you expand the population from 200 percent to 400 percent, or some other number. And so when we say the President's budget accommodates that, the President's budget is $34 billion. There's a $25 billion baseline, and there's a $5 billion piece in the President's budget, and there's $4.9 billion left in unallocated resources. That is just under $10 billion. That's how the President's budget does this. Where does the $50 billion come in? It has to be a dramatic expansion.

There's another point -- while I'm on a roll here -- if you look at the people who are going to be added in a higher income, the higher the income the more likely they are to have existing insurance. At least half of the people who would be added to the rolls of S-CHIP have private insurance right now. By some estimates, it's as high as two-thirds. So if you're going to add 4 million people, and they're higher-income people, the likelihood is 2.5 million of them already have insurance.

So what are we accomplishing here? What we're accomplishing is we're moving people from private insurance who have good incomes to government insurance, and we're moving people toward -- rather than having a system of private insurance, a government insurance. That's why we talked about this collision. When you look at those numbers, you can, in fact, cover people -- children who are eligible for S-CHIP with the President's budget.

Q Do you think that the Bush administration created this problem for itself by approving all the waivers that are currently in existence that are covering all these kids that you think are too -- not poor enough to qualify?

SECRETARY LEAVITT: I was not there when the waivers were issued, but I do know this, that they were on children -- we did not have any authority to disapprove the states' movement up because they had an allocation, they had a block -- they had a grant, rather, an allocation, and they could spend it any way they wanted on children. There were a limited number of places where the Department provided for limited demonstrations on adults. That was before we had Medicaid flexibility. And they were all given -- we had an agreement with them that if they ran out of money, here's how they would do it: They would put those people back on Medicaid. We now have Medicaid flexibility. They can do exactly with Medicaid what they were doing before with S-CHIP. It was a noble effort to learn something, and second of all, to try and help the states with flexibility. Gratefully, the Congress has now granted that into Medicaid, and we won't need to be doing what we did before.

Q Just to follow on Laura's question earlier. The President's proposal for the standard tax deduction kind of went nowhere on Capitol Hill. You've already said that Baucus and Grassley and Rangel -- you kind of shrugged when you were asked if they were on board. So what makes you think that the idea of a tax credit will generate any more enthusiasm among those on Capitol Hill?

SECRETARY LEAVITT: The President asked me to visit with all the governors; I've done that. He also asked Al and I to have a lot of conversations with Republicans and Democrats who are interested in this issue. I can just report to you that there is a robust interest in this in various quarters in Congress. They need to speak for themselves at the time they choose, but the reality is I believe this debate will mature as the health care discussion unfolds.

Q Sir, are you going to consider increased funding for S-CHIP if Congress would go along with the President's tax proposal?

SECRETARY LEAVITT: The President has a budget. He has funded S-CHIP in a way that will reconcile to that budget. He believes that all Americans ought to have access, and he's made a proposal for that. And we're anxious to have both discussions.

MR. FRATTO: We have time for maybe one or two more questions.

Q Did the question of a one-year reauthorization come up in this discussion or any other discussions? Given the political realities and the difficulty of getting the big tax proposal, as well as S-CHIP, and the fact that you have to reauthorize and do a lot of other things this year, how realistic is it that you could get this done? And wouldn't a one-year reauthorization be a way to deal with this?

SECRETARY LEAVITT: I fully anticipate that S-CHIP will be reauthorized; it needs to be reauthorized. We support reauthorization. I don't know anybody in the Congress who doesn't. Therefore, it ought to be achievable. I think that one of the other things we have in common is that we -- there is this widely held aspiration for every American to have access to an affordable insurance policy. To me, the opportunity -- I didn't get a chance to finish what I was talking about. You take 40 million people who don't have insurance, and if you figure 8 million of them are people who have eligibility for S-CHIP or Medicaid or Medicare, but haven't done it yet, that gets you down to 32-plus million. If you look at the balance of it, about 10 million of the people here who are here on an undocumented basis and aren't eligible for those programs, that leaves you in the 22 million to 25 million range. We're within striking distance of having every person have access to an affordable basic insurance policy. And Congress ought to act on that, and they ought to do it in a way that creates equity where equity currently does not exist.

MR. HUBBARD: Just to follow up, and it's really answering you all's questions, with Congress having this opportunity, it will be astounding that they don't move on it. And if they're truly interested in making health care affordable and accessible to all Americans, then there is no reason for them not to address the systemic problems of the tax code, either through a credit, or a deduction, or a combination of the two, and through more flexibility for governors in using federal dollars.

SECRETARY LEAVITT: I might add -- if you look back among many of the proposals that are being put forward by Democrats and have been voted on by Democrats and Republicans, you'll find that the credit is prominent in a lot of those plans. This is a proposal -- fixing the tax problem is a proposal that has been widely supported by members of both parties at different times. This is a place where a lot of people could come together.

MR. FRATTO: Last question.

Q If the Congress were to present the President with a S-CHIP bill along the lines of what we're talking about, a $50 billion bill without any of this other stuff in it, would you recommend a veto?

SECRETARY LEAVITT: The President has made very clear what he supports, and any expression of how he'll respond to specific legislation I won't deal with today; others will. It's very clear to me that he does not support a $50 billion expression -- expansion of government-run health care.

MR. FRATTO: Thank you.

END 3:31 P.M. EDT

Sic* One is a tax credit.