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Office of the Press Secretary

For Immediate Release October 6, 1993

Economic Effects Of Health Care Reform

Comprehensive health care reform is a necessary element in an overall strategy to increase long-term economic growth, lower interest rates, reduce the deficit, and create jobs. Today, the rising cost of health care is a hidden tax on employers - hurting businesses, depressing wages, limiting job creation and threatening our competitiveness. The bottom line is this: health care reform will lower business costs, raise wages, and increase opportunities for workers.

I. The Health Security Plan Will Lower Costs For Many

Businesses, Freeing Up Money For New Jobs, Higher Wages, And More Investment.

Most businesses provide health care, and the Health Security plan will lower their costs by slowing the rate of growth of health care costs, eliminating "free riders," and lowering the markup for uncompensated care. This will make it easier to hire future workers and to give wage increases to existing workers.

II. Small Businesses Who Now Provide Coverage Will

Particularly Benefit.

Most small businesses provide health care to their workers and have to pay up to 35% more for health care than their big business competitors. The Health Security plan will lower health care costs for these small businesses, giving these firms more money to hire more workers and pay their existing workers higher wages. As the Wall Street Journal said, "for many small businesses, saddled with escalating health care costs, President Clinton's health care package comes as an unexpected windfall."

Accessible, reasonably priced insurance makes it easier for people to form new companies and for small business to attract and keep workers.

III.The Health Security Plan Will Reduce "Job Lock" And

Increase People's Ability To Find Better Jobs.

Up to 30% of people report that they are afraid to leave their current jobs because they could lose their health insurance. The guaranteed security of the Health Security plan means that people will be free to switch jobs or start a small business.

IV. The Health Security Plan Will Reduce "Welfare Lock."

One of the reasons people do not leave welfare is the loss of Medicaid benefits. Studies suggest that as many as one million of the four million welfare recipients would take jobs if they were guaranteed health care.

V. Health Care Reform Will "Level The Playing Field" Among

Small Businesses, And Between Large And Small Businesses.

Small businesses that provide insurance currently pay more for labor than their competitors that do not insure, and pay more for insurance than their large business competitors. They also must bear the cost, in the form of higher premiums, to finance care for the uninsured.

VI. The Health Security Plan will increase health care jobs in

the short run and increase efficiency in the health care sector in the long run.

By 1996, as many as 400,000 jobs will be created in the health care industry. As cost savings begin to accrue, employment growth in the health care sector will slow. Improved efficiency in the health care sector will lower the price of care to families and businesses.

VII. Minimum Wage - Look At Real World Evidence.

Real world evidence from Harvard and Princeton studies of small businesses and restaurants shows that recent minimum wage increases did not hurt job growth, and in fact, can make it easier to hire people. Health care reform is equivalent to a small increase in the minimum wage for those firms that currently do not provide health insurance. The increase in health care costs under the Health Security plan for currently uninsured low- wage workers in small firms is equivalent to only a very modest minimum wage increase of $.15 to $.35 per hour.

VIII. Hawaii - Look At Real World Evidence.

Real world experience from Hawaii, which imposed an employer health insurance mandate in 1974, shows that from the 1970's until now, Hawaii's private non-farm employment increased by 90% (compared to 54% in the U.S.) and retail and wholesale trade employment grew by more than in the U.S.