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                  Office of the Press Secretary
                         (Topeka, Kansas)
For Immediate Release                          April 7, 1994     
                     REMARKS BY THE PRESIDENT
                    IN HEALTH CARE DISCUSSION 
                    WITH SMALL BUSINESS OWNERS
               Topeka Foundry and Ironworks Company
                          Topeka, Kansas   

2:03 P.M. CDT

THE PRESIDENT: First, thank you, Congressman Slattery, for hosting this. 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 businesspeople 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 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 has -- as is my understanding -- 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 simply or easy. If this were simply 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 go 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 happen: 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 two and three 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 that my program rests on five principles: guaranteed 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 feefor -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 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 modifications, 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 increase 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.

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.

Q My staff varies a little bit seasonally, but generally I have about 10 part- and full-time employees. It can increase to 15 to 20 at busy holiday times, but generally we keep about 10 people on staff.

I need to sort of preface what I'm going to say by saying that I have always had excellent health care coverage. I've always had great insurance. I've always had fine access to doctors and fine access to hospitals. But I have seen through my employees' eyes that that's certainly not the case for everyone.

I hired a woman to work for me about seven or eight years ago who, when I hired her, I didn't realize that she had a dependency problem. She had worked for me about six months or so, and we had a great group plan for all of our employees. I co-paid. We had full coverage, Blue Cross-Blue Shield, for our whole staff.

Her problem got worse and more severe. She was getting unproductive, and I finally threatened her that if she didn't change her behavior that I was going to have to let her go. At that point she chose to be hospitalized. I didn't know that she was going to be hospitalized until the morning that she was. She was in our regional medical center here for about a month, and I will say without reservation that they did a wonderful job with her. She became a fabulously productive employee; she has been dry since then. I mean, I haven't seen her for a while now, but she became a very productive employee and very good.

Well, shortly after that, the next time that we had to renew our insurance policies, our rates for our whole group tripled. I mean, they were beyond the reach of any of my employees who had a co-pay basis. So our group just disbanded. It was -- I said, well, if you all can find coverage anywhere, I'll help you pay for it if it's at a reasonable rate. And so, basically, most of them could not afford it. Most of them could not afford it, and so they just dropped health care.

She was also diabetic and continued to work for me, and would have insulin reactions and was a very physically sick individual who needed a lot of attention medically. She was one of the people that lived with emergency room health care at that point because she did not have any insurance.

Someone came along later and offered her a job and said, I will give you health insurance if you'll come to work for me. And so I started calling around, looking to price-shop health insurance, and was told that nobody could write her an insurance policy for any price, that they just weren't interested, that she was a bad risk, that there was no way that anybody was going to insure her for any price. And I said, I don't know where you're going to go to work and find health insurance, but I wish you luck. I wish I could buy it for you. I have offered to buy it at any price and it is not available at any price.

So she quit and went to work for another florist business here in town. A couple of months after that, I had a friend who was an insurance agent calling me and wanted to give us price quotes on group health insurance. And I was thrilled, thinking that we could come up with a better price and I could get insurance coverage now without her being part of the group, that we would be able to buy health insurance again at a more reasonable price. So he came in and did an audit of our employees and whatever insurance men need to do to write a group policy.

About three days later he came back and said, well, I'm sorry, I can't write you a policy. And I said, what do you mean? And he said, well, I can't write you a policy at all. At that point I think it probably would have dropped if he had not been a friend, and I asked him -- I said, do you think our business has been red-lined? And he said, yes, it has. And for people who don't know what that means, I think I should explain a little bit that it means that our business has a lot of creative people in it and tends to have a lot of AIDS cases. And so the insurance companies have just written us completely out of -- and I'm not saying all insurance companies; I don't know how many insurance companies do that, but I know that with this particular company, that we weren't even a candidate for insurance.

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 businesspeople 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 who got sick. And we all bought insurance against getting sick. The same way you buy insurance -- life insurance, 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 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 Hawkins, if I might, now to make the point -- another way somebody kept insurance and had to pay an enormous premium for it, or at least did until recently. Could you tell us, David, about your experience?

Q Thank you, Mr. President. Our company has been around since about 1967 and we currently have 33 employees. Over the years our staff had gone through a maturation process, and with age comes certain problems. We have had in the last approximately a decade four bypass surgeries that had to be performed on people that are employees. There was a correlation between when we saw insurance premiums increase with those events. In some cases, we were faced with 20-30 percent increases.

It drove us to the point where, over the last decade, we've had to shop for insurance three times, and each time switch to a new carrier, new structure, and try something different to keep those premiums in some sort of control.

We currently share premiums between our employees and the firm. It's an 80-20 split, which I think is fairly common. However, to put this in perspective, we still pay 12 percent of our payroll in health insurance premiums.

THE PRESIDENT: The total -- what was the total?

Q A 12-percent total. So 80-20 breaks that down. Our business is -- we're a little bit unique. We're in a Catch- 22 situation. Approximately 74 percent of all architects are self-employed. And of that group, about two-thirds of the architects provide health care. However, what we find is that while we provide health insurance for our employees, there are firms who do not. And we have found on more than one occasion that the difference in the fees that we may quote to a client has put us sufficiently out of the running -- we're talking less than one percent difference now -- that where if we had not had the health insurance premiums to pay we probably would have gotten those jobs. It's gotten that tight; it's that competitive.

We've had some other problems that you alluded to earlier similar to that. Our business runs in cycles. Obviously we're just coming out of a fairly deep depression. Our firm size was basically cut in half, and now we're coming back. But we're finding that people are being held hostage in their jobs -- that they want to move on to another job, the type of problem they may have within their firm and the coverage that they currently have if they move, they're not going to be able to get. So they're almost being forced to stay in the present job that they have. It removes the flexibility.

The worst-case scenario is when we finally have to lay people off. In our case, the people who are finally let go, even with an 80-20 split, that sounds good, but when they are let off, they see a 500 percent increase in their premiums if they decide to stay with the same program that we offer them in our firm. If it's a 50-50 percent split, and they decide to stay with the same program, they end up with a 200 percent pop. And when you're unemployed, the last thing you need is to see that kind of an increase. Your income is just not there.

So the option is, you basically drop your health care. In our profession that is what we see primarily among the young practitioners, where if that's their option, they just basically go bare.

Finally, there's this issue of fairness. We know that the premiums that we pay, a percentage of them go to those who choose to not be covered at all. I've already pointed out it's a competitive disadvantage to us in that regard. But overall -- I talked to our carrier before we came here -- and their estimate is about 10 to 15 percent of what we pay ends up covering those who will not be covered. And that is just plain unfair. We need to broaden that base and have everyone pay a portion.

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, six 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 -- and 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 four percent of payroll. My payroll is 50 percent of my costs of doing business, so four percent of payroll adds two percent to the cost of doing business and I can't add two percent of the cost of doing business -- some people have said 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 Hawkins 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 parttime 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 five 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 that 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 we'll get more complicated as we go around the table to show some of the problems we've got with this. Sheryl.

Q Thank you, Mr. President. We currently employee 25, we cover 19. All of our employees are fortunate enough to have some type of coverage, whether it's through our plan or through a spouse. We have not had any catastrophic losses, so we're in a situation where the concerns that we face every year are the rising cost, and we do have to go out and shop the market and look for the best coverage for the dollar.

Some of my concerns with the reform -- I mean, obviously, we're in a little bit better situation knowing that that could change -- but is the employer mandate and that responsibility. For us, that would increase our costs. And so that's a concern. You know, that can take money out of your operating expenses that will allow you to do R&D, which we do a lot of. That could possibly not allow you to increase your business as you would like. So the costs are always a concern.

And another concern that I have is with the plan, hopefully, costs would go down. I mean, that is the whole intent of that. What happens if that 7.9 percent cap is exceeded? And would we be forced to entertain a mandate higher than that? So I really look at it from a cost standpoint totally, though, in favor of citizens having access to coverage, and employers offering that coverage. I think that's -- you know, we believe in doing that, and have been fortunate enough to do that. So, those are really my concerns.


REPRESENTATIVE SLATTERY: I'm just curious, Sheryl, could you tell us how much you project that the costs for your company would go up in the event that the mandate was imposed?

Q 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?

Q No, I have not done that.

REPRESENTATIVE SLATTERY: Okay. I was just curious how that was going to affect you individually.

Q 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.

ADMINISTRATOR BOWLES: Mr. President, it's interesting when you look at a case like Sheryl's -- and there are -- I believe that the vast majority of small businesses today that currently offer insurance will find out under your plan that they'll get better coverage at lower rates. Some, however, will pay more, and she's a good example of that.

I do think you do have to look at the whole picture, though, and see what kind of effect that has. Her costs are going to go from -- what did you say, from 5.5 to 7.9 percent of payroll? And payroll is just x percent of your total costs. So she's going to have to distribute somewhere on a revenue base between, let's say, almost one or two percent of revenues. It's what you -- you've kind of got to make up. Some of that's going to passed along to the customers. Some candidly will be passed along to your employees. And perhaps some will be left over to be consumed in the margin.

But one of the things we have to remember is that all small businesses will be on the same level playing field with all other businesses. That's one thing that we have to remember. We also have to remember that probably one of the biggest areas of increases that all of us are experiencing in the small business sector are these rapidly growing increases in the cost of our worker's compensation insurance. And that's something that we really do address, because this program does combine with worker's comp to bring down the cost of worker's comp.

I know in North Carolina worker's comp was the only item on my income statement that rose at a more rapid rate than health care; and it rose at one and a half times the cost. Automobile insurance is also combined, so it'll bring down the cost of automobile insurance. I think it's also worth thinking about just from an overall viewpoint.

There is one state in the union that's had a mandate, and that's Hawaii. And I've tried to look at what kind of effect it had on the small businesses in Hawaii. And I can tell you that even though the cost of living in Hawaii is one of the highest cost of living of any state in the union, their actual medical costs are lower -- about a quarter lower -- than the average of all the states in the country. And they have a mandate. And business formation has continued to expand. And they set up a rainy day fund out in Hawaii to protect that small business if it just couldn't afford health care coverage. And since 1974, it's only been used five times.

So, again, the effect on small businesses, as it turned out, in a state that has mandatory coverage, to be really relatively very small.

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 or 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 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.

Q Thank you, Mr. President. We presently employ about 61 or 62 people in related businesses, different businesses. My main business is grain and cattle and land, which is a very small profit item. And when I get to looking at health care, it's one of our big costs in doing business. I think our health care is maybe a little bit lower than some of these -- maybe like 11 percent. However, a few years ago I had a serious heart attack, and one of my colleagues had a heart problem, and our health care went up two or three percent overnight. And we have now since -- I've had this five years ago -- has now gone done because we shopped our insurance, and we were now able after five years to go from -- my premiums went from $10,000 now back down to $5,000.

We pay 100 percent of our health care costs for people. And it is a good plan because it's a $500 deductible and it has all the things that you can do with health care. We have a couple of small banks, however, we did change here a year or two ago because, as you know, the banking business has been in tough straits. And we went to a cafeteria plan there. And we compensated the people to pay most of their health care. So in a roundabout way, we're paying it anyway. But I don't have any problem with the government coming in and being this thing if we can hold the administrative costs down to these kind of levels, it's certainly going to help me.

THE PRESIDENT: I think there's a lot of wellfounded 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 1500 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 oldfashioned 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 GLICKMAN: Sheryl, do you cover 100 percent of the self and family, or just the self coverage?

Q 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?

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're 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, it's 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: -- the buying pools. These buying pools are not some kind of theory. Where they -- as the President mentioned California, there's a group in Cleveland called the Council of Smaller Enterprises that's been in existence for 18 years. It's had some really strong leadership. They're insuring about 12,000 small businesses now, about 80,000 workers and about 180,000 lives. And the small businesses that they're insuring are really small businesses. They're what we normally think of as the working uninsured, with 10 or fewer employees. And they offer 12 different types of plans. So there's lots of choice.

But the good news is that they are paying about 35 percent less than everybody else in Cleveland pays today for health care. And since 1985 their rate of increase in the cost of health care is one-third of everybody else in Cleveland. And the reason is they have some market muscle. They have the same kind of market muscle that big business has today. That's why we pay 35 percent more. That's why are costs grow at 20 to 50 percent a year, because we don't have any market muscle.

And what these buying groups do is they shift the power of the marketplace. They really do change the supply and demand equation from favoring the provider of health care to favoring us, the consumer and the small business owner.

And the President talked about simplification. We can darn well simplify the system. We can go to things like uniform billing, electronic claims processing, standardized forms. We can take cost out of the system.

Today -- we were visiting a hospital just last week -- in the average doctor's office, a nurse spends 50 percent of his or her time filling out forms. The average nurse today fills out 19 forms per patient per day. It's crazy. Twenty-five cents of every dollar you spend a day in a hospital goes for administrative cost. It doesn't buy you a nickel's worth of health care. Ten cents of every dollar we spend a day in the health care system alone goes for fraud and abuse. That's $80 billion a year.

I was listening to former Surgeon General C. Everett Koop the other day -- he said 25 to 30 percent of the diagnostic procedures performed in this country today are not needed. If we got rid of that waste, that would take over $200 billion out of the system. That's enough to cover the unemployed. We can simplify this system. We can make it more cost effective. And with the buying groups, we can have some market muscle.

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 a lot of part-time employees and a lot of turnover. So I'd like to hear her talk a bit about that.

Q Thank you, Mr. President. Our restaurant is a three-family -- a three-year generation restaurant. It started with my grandmother, passed down to my mother, who is now passing it on to me. My mother, who is 63 years old, is willing to hand me this restaurant. And I as a young person, I feel just getting into this business and realizing that I needed to, in order to have good employees, especially in the restaurant business -- which is, like you say, hard to keep people to work for us due to the turnover -- I have a lot of young people working for me. I feel that it is -- in the past, that I have looked into this just in the last couple of years, looking into health care insurance, because both my husband and I have given up our past jobs to come to take over this restaurant for my family. We gave up good jobs. We gave up good health insurance. We were just starting out, getting married, and we thought we're ready to take this task on -- our family business.

Well, in losing our jobs, or giving them up, we lost our health insurance. It was just carried on for a few months afterwards. We decided we wanted to start a family, and we realized we had no health insurance. Who was going to pay for our doctor bills? Who's going to pay for my children? Who knows -- I have no family history of serious illnesses, but yet we were concerned about it. So we went out and decided we needed to get health care on our own since the restaurant did not cover health insurance for our employees.

We went out and we shopped and shopped and shopped, and we realized it is high if you're not in a group, in a large company that carries health insurance, if you go out on an individual basis to buy health insurance, you're going to pay for it. And you're going to pay high for it.

Well, we decided we wanted our family, so we were willing to take that risk and pay it. We pay close to $300 a month for health insurance. Since then I've had two children. We have shopped again, and we have gotten our premiums down. We're paying a little over $200 now.

But, still, if I were to go and try to provide health insurance for all my employees, I've realized just in calculating during this past week of talking to people from the White House in regards to this situation, that I would be having to take at least 10 percent of my revenue to provide health care insurance, which i don't feel I can do that. Those of you that are here from Topeka and have known our restaurant, we are a small family restaurant, and we want to keep it that way.

We are a very close-knit family -- there's mostly family that works for us, though we do employ outside relatively, or outside people that are nonrelatives. But we just feel that if we were to go out and have to pay for the insurance, we would have to either raise our prices, which we are, I think, very reasonable priced restaurant. And we serve no alcohol. I know everybody feels that they would love to have a beer or Margarita with Mexican food, but just my mother and myself have just felt we don't want that. We don't want to deal with that. We don't want to deal with the liquor license and so forth. So we have chosen not to do that.

But I just feel with the cost of health care insurance, the way it is, and if we -- I am all for health care insurance. I feel that everybody should get it and deserves to have it. I do feel that way. It's just that I feel that's it's just too high for me to take that on right now. I don't know, I'm just real -- maybe just being new in this business and coming into this, it kind of scares me, thinking why did we give up our jobs. Robert and I talk about this -- why did we give up that health care insurance to take this task on.

We had a good thing going for us and now here we are having to take this responsibility on of these 12 employees that are working for us, and who -- they have families, some of them do that are employed by us, and want health care insurance and want it for their families, not just themselves.

I just feel that it's going to be hard for us right now. I think it's something we will have to seriously consider, and we will continue to shop for it to see what we can come up with.

But like I said, I am for this, President Clinton. I am for the people, that they do need health care insurance. And I hope that this package that you and your committee have come up with, that it will help us do that.

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?

Q My payroll? My payroll was at approximately -- excuse me, I did write this down -- $86,000 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 --

Q 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 discounts. 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 three 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 three 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 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.

Q Thank you, Mr. President. We are a secondgeneration firm, and we've been around Topeka since 1959 and we incorporated in 1983. And we've had all of the same kinds of concerns and issues confront our firm as my colleagues here on the panel. And what we have tried to do, because we simply cannot afford the exorbitant cost of providing health care for our employees.

We've got older employees. Our better employees, are a matter of fact, are over 60. And I say that somewhat tongue in cheek because the founder is still with us -- my father. He's 68 years old. And we can't afford to pay for health insurance for him. What do I do? Tell him, Dad, you can't come to work tomorrow? Probably won't want to try and do that.

But we've got our other key people who are, again, over 60. And so what we have been trying to do is help identify opportunities for health care insurance for our employees to provide for themselves. We do that by allocating five or ten percent of a person's time -- well, maybe four or five percent a year just looking at different insurance programs out there, interviewing, bringing these people in and trying to ferret out the good opportunities or good policies that these people -- our employees and our staff -- can afford to acquire.

But as a fine example, I personally didn't have health care insurance. I was visiting Washington, D.C., and some said, that's enough to cause you to get ill, I suppose. But I was in Washington, D.C., and I --

THE PRESIDENT: You ought to try living there. (Laughter.) Actually, it's not bad.

Q I was in the hospital for four days. It cost $6,000. I had an ulcer attack; I was trying to deal with the Department of Commerce and the SBA. (Laughter.) And that's the truth, and Congressman Slattery can bear me out on that. I was in there for four days in intensive care. It cost $6,000, and we didn't have health care. And so I certainly have a vested interest in wanting to have health care for our employees, and certainly for myself, as a father and a family man.

But what happened was the policies -- I hadn't had it for 10 years, and actually I was money ahead. Even though I had that $6,000 fee, I was still money ahead because it would have cost me nearly that much for myself and one child. We have looked at several different possibilities -- several agencies, several companies, several policies. And the thing that we're looking for and haven't been able to find is the good quality and the quantity for the value of our dollar. And what happens is when some of our people do get into these programs, which we help identify for them, we found out in six months or nine months or a year that the premiums go up astronomically. So, again, it's out of control. We are a firm that want to have health care for our employees, but we want one that's responsible. And it's a matter of -- the general theme is cost. It's a cost for us that we're willing to absorb a portion of, but we know we're going to pass that cost on to our clients. And our client is the government, by and large. We build -- we do a lot of heavy highway work, and we're getting into bioremediation and other kinds of things of that nature. And those are costs that are going to be borne by our clients. We're going to have to pass it on; we understand that and we're prepared to do that.

The question presented is, will our clients want to pay? Someone's going to pay. We're going to pay, but we're going to pass it on. And, unfortunately, we have a lot of seasonal work, and so we're concerned about a plan that's portable, that our employees can take with them beyond just those six, seven, eight months that they work for us, during those times that they are drawing unemployment or they're waiting for us to get some additional project, additional work.

So, again, those are the kinds of things that we have faced and addressed. And, again, they're the same, very common to what everyone else has said here -- affordability, the quality, the quantity of service that's provided. And, for us, a portable program that makes good sense.

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 yearround. 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?

Q 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?

Q 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 somewhere.

Q The only thing with our business, since we don't do that much work around our own state, within the state so much, we go around a four-state region. It's still going to be a matter of an additional cost because of the fact that there are other factors involved by the very nature of the kind of industry and the fact of who we are and what we're doing. We talked about workman's compensation earlier. But for us, workman's comp goes up just astronomically depending on the kind of work that we're doing. If we're doing underground storage tank removal, as we are at the Whiteman Missile Base, the costs go up astronomically. The same thing is doing it for building bridges. And it's less so if we're laying carpet. So the cost -- if workman's comp is tied in there and there is some kind of a control mechanism to all of it, that whole package for us is a real challenge for us to address and make sense out of.

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: Mr. President, as I listen to the different panelists visit today and share their concerns, it becomes clear to me that there is a broad, common area of agreement. And I think that in the Congress, certainly in the committee that I serve on, there's a commitment to deal with these issues. First of all, for example, the whole question of portability. I don't think there's any question that there's a broad consensus on both sides of the political aisle to address that issue, and to correct that. I think there's clearly a broad consensus to deal with the question of preexisting conditions that several people talked about, and what that has done to them.

There's no question, also, that we will move toward a community rated type insurance system in this country with some kind of modifications to deal with; maybe the extremes of age or problems with people's habits, life habits, that they can control -- drug use or something of that nature. But I think there's a clear commitment to move in that direction. So I want the panelists and those in the audience to know that there is growing political consensus in the Congress to respond to these issues.

The other thing I would just point out is clearly that whatever bill passes the Congress, we will address the issue of the self-employed not being able to deduct 100 percent of the cost of their insurance. That will clearly be, I think, enormously beneficial to farmers and smaller self-employed people. So there is a broad consensus about that. And when Erskine was talking about the need for simplification, I think we all say Amen to that and the whole concept of electronic billing and standardization of forms; anything that we can do to streamline the system, we should move in that direction. And with the standardization of a benefit package nationwide, clearly that's going to assist in that.

The real problems that we still have remaining, I think, that we're still struggling with, in all candor, is this question of how in the world we're going to pay for the uninsured care; and the question of what kind of a mandate is imposed on businesses and how that effects those businesses that aren't currently paying anything. And that gets back to the question that David was talking about where he's out there every day competing with people down the street who are electing not to contribute anything, perhaps, to the health care delivery system; and they're your competitor and that puts you at a competitive disadvantage when you're trying to do what society's urging you to do and what the government's urging you to do.

So I think that there's growing consensus even in the Congress that everybody -- as the audience has already unanimously voted on -- should be contributing something. ANd I think we'll have a big debate about exactly what that contribution should be. But I think there's a growing consensus that everybody should contribute something. And I think the public agrees with that, and they embrace that.

And the other thing I think that we have to recognize is that small business is today paying -- as several have already noted, and I think you, Mr. President, noted too -- small business, because of the cost shifting phenomenon, the fact that the Medicare-Medicaid reimbursement rate isn't adequate to cover the cost of care; the fact that we have all the uninsured that are going to the hospitals and accessing the same quality of care as the insured; and then you have the large employers, like the Boeings of Wichita that enter into various preferred arrangements with local providers that contain their costs, and the only place to shift this cost is to the small business entities. And that's the thing that we have to address, and I don't think there's much disagreement about the need to do that.

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 benefitted 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 70s. The average 18 year old is going to change jobs eight times in a lifetime now. You have people in their late 50s and 60s 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 60s 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 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 60s shouldn't be charged more than vigorous working people in their 30s. 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 the 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 business, 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?

Q 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: -- that all small businesses have done everything they can to hold down the cost of health care. We have tried switching programs. We have tried managed care. We have tried self-insurance. We have tried reducing benefits. We've tried passing along a bigger share of the cost to our employees, and today nothing helps. The cost of health care continues to grow, and just grow at 20 to 50 percent annual rate. And unfortunately, the smaller our businesses are the more disproportionate the costs are.

I do believe that if we do the things that the Congressman said, we will make some headway. But for small businesses, unless we have universal coverage, guaranteed private sector health care for all Americans, we will never solve this problem. Because you can bet your life that those 38.5 million people out there who don't have health care insurance get health care; they just get it at the emergency room at four or five times the cost it would be in the doctor's office. And who pays for it? We do, the owners of small businesses. That's why our costs go up 20 to 50 percent a year.

And when we cut the cost of health care in Washington, it just simply gets shifted through the system -- cost-shifted. And it gets shifted to the weakest link in the chain -- us, the owners of small businesses. That's why our costs go up 20 to 50 percent a year. We really need these buying groups. We need that market muscle to hold down the cost of health care if, in fact, we're really going to do something for small businesses.

Q Mr. President, I have a question for you. On this -- being a professional, I'm always looking over my shoulder in terms of professional liability for documenting -- worried about being sued. And I know that we're trying to simplify the forms that are being used in the health care industry, but I have a feeling that if we don't somehow reduce the pressure and the threat of always being sued that we're not going to reduce too much form work. What can we do with this program to --

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's there's a specialist where the cost if five 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 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 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 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 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 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 hbecause small business is the main generator of new jobs for the American economy.

Thank you very much. (Applause.)

END3:21 P.M. CDT