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Office of the Press Secretary

For Immediate Release December 9, 1993
                            PRESS BRIEFING
                     DIRECTOR OF OMB LEON PANETTA
                          The Briefing Room

3:12 P.M. EST

MS. MYERS: We'll begin with a briefing by Secretary Bentsen and Director Panetta on the Lewin report and health care financing. And then in the unlikely event there are additional questions, I will come back and answer them.

Q Is this all on tape or --

MS. MYERS: Yes, Secretary Bentsen and Director Panetta will be on tape, on the record, and then for my briefing it will be the same standard five minutes and then on the record.

Q paper --

MS. MYERS: No, there's no paper. So without further ado, Secretary Bentsen.

SECRETARY BENTSEN: Good afternoon. We've only had a short time to study this Lewin report, but I must say it is most encouraging. There were a lot of people that said we couldn't have one of these, that we couldn't have universal coverage. But the Lewin report says we can. It says that we meet the overall objectives of the administration's plan. And not only that, that we do it without a broad-based tax and then in turn we make a contribution to the deficit.

I think it's encouraging -- you know, projections on a new program like of this with this scale, it's a challenge. We have plenty of experience in government making estimates of program --. But with this one we're looking at years into the future. So we had a number of agencies in the government work on it -- HCFA, Treasury, we had our estimators, we had our actuaries -- to try to be sure that we were right in this regard. And I think that they were very cautious in doing that. Our economists and our estimators at the Treasury Department looked at this one with a magnifying glass. We've had actuaries and estimators from the five largest accounting firms checking on the methodology -- to be right -- be sure we were right in that regard.

And the conclusions overall buttress each other, reaffirming my confidence in the estimating job that we've job. We're finding we agree on a number of points about the financing of health care reform. We agree that our plan is paid for. And we agree that there will be a deficit reduction. -- we don't come up with the same deficit number, but it's a major contribution on each on them insofar as cutting that deficit.

And I better point out that the estimates in this study of the subsidies that are required under the plan of the government spending, are less than we in the administration had reached, which I think shows how cautious and conservative we were in coming up with those numbers.

Americans deserve a comprehensive health care reform that covers everyone. And they expect the truth about what it will cost. And, once again, those estimates are buttressed by the Lewin Report.

DIRECTOR PANETTA: From the beginning of process of developing comprehensive health care plan, it's been our intent to produce a plan that was fully paid for and that had the most accurate estimates of costs available so that the American people could be confident that they could get universal coverage, and that they would get a plan that is fully paid for.

That has not been an easy process. As I indicated before, we began this year developing models that did not exist before in terms of determining a lot of the estimates with regards to cost. We believe we have the most accurate estimates, and we think that the Lewin Report in effect confirms that. We now have, I think, as a result of the Lewin Report -- and the people that are associated with that review and that analysis -- the same judgment that this plan is financially sound. As the Secretary has pointed out, I think, if there's anything that the American people were asking themselves when the President kept saying, "We can have comprehensive coverage of health care. We can have cost controls. We can reduce the deficit, and it doesn't demand a broad-based tax," we now have confirmation that, in effect, this can be accomplished. And I just would read for you a quote from the Lewin Report: This report shows, and I quote, "shows that the plan's financing structure works, it meets the President's requirement of providing universal coverage, and it does so without relying on an increase in broad-based income taxes."

Now, if I can, I would like to kind of point to where the areas of difference are, and generally how they arrive at their conclusions. This is about a 200-page report with about 80 pages of indexes, and we are still in the process of reviewing it. But to the best of our ability, these appear to be the principal differences with regards to the chart on my left that basically establishes what's in the President's plan in terms of cost, and the revenues that we will raise in order to cover those costs, and obviously the deficit reduction that would then result.

If I can draw your attention to the right side of the chart. On that chart there is a difference here with regards to the proposed premium -- they believe that the premium will be about 12 percent higher -- I think they say 17 -- but we estimate that using the right mathematics here it would be about a 12 percent increase in the premium. If you combine the $117 billion and the $44 billion, which is what we project on the premium cost plus the cushion, that number would be $161 billion. The number that the Lewin report came out with is $153 billion, so that even with the increase that they project in the premium -- we don't agree with that -- that it would involve that higher premium; we nevertheless are below the caps that we established with regards to the premium side.

On the Medicare drug benefit, we estimate the cost of that at about $66 billion. They estimate the cost at less -- $59 billion, which shows again that we tried to accept the most conservative judgments of the costs in these areas.

On long-term care they estimated the cost at $62 billion -- we estimated the cost $62 billion; their estimate is about $65 billion -- but I have to tell you that they were working off a version that we provided earlier that involves a $65 billion number. So, we think we're very close on the cost estimates with regards to long-term care.

The one area that we are not sure of what their estimates are, at least in a preliminary analysis, is on the public health part of this where we have public health and administration costs. We have estimated that at $53 billion; and this is the one are we're not sure how they come to their costs estimates and that's something we've got to continue to review.

On the revenue side, the Medicare savings are exactly alike. We have said $124 billion on Medicare savings; their judgment is that we're right on the button with regards to our Medicare savings of $124 billion. On Medicaid savings, we projected $65 billion; their estimate is $67 billion. So, they assume that we will achieve some additional savings, not much, but in these numbers, but nevertheless, they show that we will get about $2 billion more in savings from Medicaid.

On the tobacco tax, our estimate on the tobacco tax is $65 billion; theirs is $66 billion. So, they're estimating, again, we're all in the right ballpark here -- about $1 billion more on the tobacco tax.

On the corporate assessment which is part of this we really have not been able to determine what they estimate specifically with regards to revenues from the corporate assessment. On the federal savings, this is an area of difference -- we're assuming about $40 billion in savings from various federal programs as a result of implementing this plan; they estimate $27 billion. But I have to tell you that at least our sense of this is that the reason you're having less savings here is because of their higher premium estimate and what that then does with regards to savings, particularly with regards to federal employees.

Lastly, on other revenue effects on the $86 billion that we estimate, we think there are differences here as well; and we are still in the process of trying to analyze specifically what those differences are. But when you add up where they're at in terms of revenues versus the cost, they arrive at a deficit number of $25 billion as compared to our $58 billion. Again, I think the point is this -- that they have essentially confirmed that we are well within the ballpark that we are working with here in terms of the estimates for this plan; and that the plan we have presented is indeed financially sound as we presented it.

What I hope we will do is be able as a result of this -- and I hope there will be continuing analyses that are done of these numbers. We have always said that these are out best estimates, and we hope that there are additional people who will look and analyze the numbers that we presented.

But we hope that in this process that the American people will derive as we have a degree of comfort here that we are in fact working with the right numbers in terms of the estimates and the costs; and that we can shift the debate here in the health care area to what exactly should be in the plan. I've often mentioned in the budget battle the credibility of our numbers was not questioned. It was a question of what should or should not be in the plan -- should there be additional revenue, should there be additional cuts. That's a fair debate. But we were right in terms of the numbers. And that's essentially the kind of debate we'd like to have on the health care plan. And we also hope that other plans will be subject to the same kind of review -- that Lewin will look at the other plans that are on Capitol Hill and make the same kind of analyses that he did with the President's plan.

I think the bottom line is that we derive a great deal of comfort as a result of this first analysis that we're on the right track when it comes to health care reform for this country.

Q How sensitive are these figures to the current interest rate environment -- I mean, you know, if the Fed ends up having to be on a tightening path as the economy picks up steam, how sensitive is this analysis to interest rates staying where they are now?

SECRETARY BENTSEN: First, let me say that I think you're going to see certainly long-term interest rates stay at the same relative level that they are now, because what we are seeing in the way of excess capacity and excess labor gives us some cushion in that regard. So I'm optimistic on it. Insofar as short-term rates, over a period of time, obviously they're going to raise some -- they're going to rise some. But I would not estimate that that would be anything major.

DIRECTOR PANETTA: Let me just -- there really is not that much that's included here that is interest rate-related in the sense of cost estimates with regards to either the drug benefits and others. I mean, obviously there would be some impact, particularly, I think, on the revenue that might flow in depending on obviously incomes and earnings and what have you. But other than that, I think that certainly in this interest rate climate, these numbers are right on track.

Q Can you tell us what the mechanism for the cushion is? How is that to be appropriated by Congress? And second, can you tell us how many businesses with how many employees do you expect -- be paying the corporate assessment?

DIRECTOR PANETTA: Do you have the number on the amount of businesses that would be paying the corporate assessment?

MR. THORPE: We don't have it with us. Again, the cushion in the --

DIRECTOR PANETTA: You want to come up here.

MR. THORPE: The cushion as we've shown it up here, as you'll know, in the capped entitlements that we have in the legislation that what we have under the premium discounts and the cushion is indistinguishable. So built into the capped entitlements are the $161 billion in discounts. So they're really indistinguishable in terms of the legislation.

Q So would Congress appropriate $44 billion or not?

MR. THORPE: No -- yes, it is included -- absolutely -- is included within the yearly capped entitlements.

DIRECTOR PANETTA: You need to have the cushion appropriated so that we're protected with regard to the cap that's established in this program.

Q Lewin's numbers and yours assume you're going to bring health costs under control in par with your premium caps, Lewin predicts you'll get $57 billion in reduced health spending by virtue of those caps in '98 alone. But there's a lot of doubt about whether you'll get those caps through Congress. How much confidence can people have that your numbers actually will hold up to the political realities facing you?

DIRECTOR PANETTA: Well, you know, as always, we present this plan as a comprehensive plan. And the cap is a part of that plan. And so we intend to go to the Congress and fight for that provision because we think it's very important to our ability to say to the American people that we're going to control costs. Now, obviously the debate in the Congress is going to take place and we're going to fight our way through the committees and on the floor. But the position of the administration is to fight to protect that because we think it's an important discipline when it comes to holding down costs.

Let me tell you something from just the budget perspective. And I'm right in the middle of working on the budgets right now. We are very much on track with regards to where the deficit is headed. We are now in a situation, having passed the budget plan, that we expect that we are going to not only meet but perhaps even exceed the deficit targets we're looking at. But it is absolutely essential if we're going to stay on track to pass health care reform. The only way you can keep us on track on the deficit so that we can bring that deficit hopefully below $100 billion and eventually to balance is to pass cost controls on health care. And frankly the cap is a part of that process.

Q Director Panetta, on the deficit issue, the mayors were here this morning, they told us that the President told them that crime is now the number one domestic agenda issue. They have asked for huge increases in crime spending. Are you going to be able to do that and still meet your deficit targets?

DIRECTOR PANETTA: We are operating under a hard freeze cap. That basically means that what we spent in '93 is what we're going to spend for the next five years in the federal government. That means that if there are areas in which we are going to increase spending, we're going to have to find savings elsewhere. And that's the process we're going through. On crime, essentially what the Congress is doing and I think what the President envisions is that whatever we commit to pay for the war against crime in this country is going to come within the caps established by the Congress. And we will have to find savings elsewhere in order to pay for that priority.

Q said a few minutes ago that you're on track in terms of the deficit and you may even exceed your target. Now, as I remember for '94 your deficit number in your last forecast was like 260, and the '93 figure came in much lower than you had thought. Can you give us -- I realize you can't give us an exact number -- can you give us some idea of what the '94 deficit -- what your general ballpark estimate is now for the '94 deficit?

DIRECTOR PANETTA: Right now, we think we'll be below the mid-session projection on the deficit. I can't tell you how much. We're still getting the projections coming in. But by '98 we think that frankly instead of looking at $180 billion deficit, it'll be more like $150 billion.

Q The President talks a lot about personal responsibility in terms of welfare reform. There's a lot of talk on the Hill about personal responsibilities when it comes to health care reform and placing that requirement or the obligation up to the individual to obtain the health insurance. Would the President accept a plan if it had universal coverage and comprehensive package of benefits if the mandate is up to the individual rather than the employer to obtain other --

SECRETARY BENTSEN: I don't believe under those conditions you'd get universal coverage. So we look at the practicality of the application -- what would be forthcoming. And I think the employer mandate is a prerequisite.

Q So you think the Chafee approach would be unacceptable to you?

SECRETARY BENTSEN: I beg your pardon?

Q Does that mean then the Chafee approach would be unacceptable to you because it leaves it up to the individual --

SECRETARY BENTSEN: Well, I've already told you what I thought the administration's point of view is, and we feel that quite strongly, that we think it has to be an employer mandate to be able to bring about universal coverage. And I think these things that we've seen in the way of estimates are fortifying our position as to be able to accomplish it without any broad-based tax and end up paying for it in full with some leftover to curtail the deficit.

Q Do you think you are losing a lot of ground lately that there's has been sort of a backsliding in support for the plan in terms of the AMA and the public at large?

SECRETARY BENTSEN: I heard that same talk on the budget and on NAFTA. No, I think we're going to put together one where we accomplish it next year, and we'll get a package through that is satisfactory to the administration.

MS. MYERS: Thank you.

END 3:30 P.M. EST