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Office of the Press Secretary

For Immediate Release October 12, 1995
                         REMARKS BY THE PRESIDENT
                         IN RURAL CONFERENCE CALL

The Roosevelt Room

11:45 A.M. EDT

THE PRESIDENT: First of all, let me thank you very much for participating in this conference call to discuss the importance of continuing to invest in health care in rural America.

As you all know, we are involved here in a serious attempt to balance the budget. I want to balance the budget. I have offered the Congress a proposal to do it. I think it will help to lift the burden of debt off our children, it will help to strengthen our economy if we do it in a way that is consistent with our values and our interest.

And one of the most important values we have is the obligation we have to strengthen our families and preserve the health care of our children and our parents. And the balanced budget I presented to the Congress does call for slowing the rate of growth in the Medicare and Medicaid programs, and it does secure the Medicare Trust Fund. But it strengthens rather than guts our Medicare program and it recognizes that Medicaid is the principal source of funding not only for health care for poor children, but for a lot of our seniors and for an enormous number of our hospitals in rural areas and in urban areas.

And I believe that the Medicare-Medicaid budget that the Republicans in Congress are pushing violates both our basic values and our interest, and it is not necessary -- not necessary -- to balance the budget.

The level of Medicare cuts are more than twice what I've proposed. The level of Medicaid cuts are three times what I proposed. And I believe it will force American families to choose between educating their children and making sure their families have the health care that the need.

And as all of you know -- and I want to hear from you in a moment -- these cuts will be especially devastating to rural communities and to rural families because Medicare and Medicaid are the backbone of the health care system in so many rural areas. Hospitals in rural areas already are struggling to make ends meet and are closing at far more rapid rates than hospitals in urban areas, and tend to -- depend a lot more on Medicare and Medicaid than urban hospitals do.

Therefore, if this budget passes that the Congress has proposed, it can mean, I think, devastating consequences for rural health care. And, of course, we want to hear what it will mean for your local hospitals, and if more of them close they won't be there for families in emergencies or for families with a child that needs to be immunized, or for people who need longer-term care.

And let me say, having been a governor for 12 years in a rural state and having presided over a lot of hospital closings in the 1980s, and having spent hours and hours and hours inside rural hospitals in all different kinds of communities, I think I have a good feel for this. But I wanted to hear from you because I want America to know what the real consequences are.

This budget debate should not be a matter of abstract ideologies. We know we have to slow the rate of medical inflation. We know we have to deal with entitlements. We know we have to balance the budget. But we have to do it in a way that is prudent, humane and decent and that is consistent with our values. So that's my objective, that's what I'm fighting for, and I need your help.

Now, before I close, I'd like to say one more word about the Republican Medicare plan because it affects hospitals directly. Two days ago we saw further evidence that the Congress is prepared to walk away from the impact of this plan on people. In the dark of night, the Republican leadership cut a deal with the AMA that, once again, put their interests ahead of the interests of the patients.

It may help the Republicans to pass their plan, but the rest of America needs to know who's going to pay for the payoff to the AMA to get them to support it. Older Americans who rely on Medicare are going to pay for it. Rural hospitals are going to pay for it. They took $3 billion more in cuts and they shifted them to patients, which means they shifted them also to rural hospitals. They give less protection for laboratory results and doctor's offices, and, worst of all, it's another hidden tax on elderly people who rely on Medicare.

Under their plan, seniors can be forced into managed care networks which then can impose new fees on top of new premium increases. Under the Medicare program we have today, as all of you know, doctors can charge the Medicare-approved fee and no more. The new Republican plan would give doctors the power to charge any amount of additional out-of-pocket costs they want to older Americans every time they go to the doctor, whether or not they can afford the plan. And if you look at that and you add to that the fact that they cut out the Medicaid payments to low-income elderly people to help them pay their co-pays under the Medicare program, one group has estimated that as many as a million seniors may actually drop out of the Medicare system. And, of course, that's going to make it even more difficult for rural hospitals.

So I'm very disappointed that the AMA supported this plan. It may look better to doctors in the short run, but it's going to be a lot tougher on our patients and a lot tougher on the hospitals in which they practice, especially the rural hospitals. They will be dealing with this.

And I'd like to ask Secretary Shalala to say a few words, and talk about this from her perspective. And then I'd just like to hear from all of you and we'll have a little conversation about it.

SECRETARY SHALALA: Well, just to repeat quickly a couple of points on your rural hospitals, one of our concerns in this administration has been whether you can attract health care people out to rural areas. Your beneficiaries, your patients are quite poor. And the idea of shifting more costs on to them, of not having resources available so that you can help to attract good doctors and nurses and other health care providers by taking so much money out of the system -- that's exactly what the Republicans are going to do.

The President had a number of goals in his own health care plan, and they're the same goals, I think, that every President has said: to make health care affordable. The Republicans are doing just the opposite by making it less affordable by all sorts of sneaky charges. Second, to make people feel secure that their health coverage is going to be there. And if hospitals are closing, if people are being cut off from health care as they will when the governors get less and less money, clearly, the sense of security that people have that their coverage is going to be there won't be there.

And finally, quality. One of the things that we've been trying to do with all of you is get those reimbursement rates up so that urban and rural hospitals -- both of which have special problems -- get enough resources to maintain quality. Affordability, security, quality -- the Republicans are doing just the opposite of what every generation of leaders has tried to do in health care in this country. It's really a national tragedy, Mr. President.

THE PRESIDENT: The only other point I'd like to make, and then I'll call on you, is, when I served as governor of my state, I worked from the late '70s to the early '90s to try to provide all kinds of incentives for doctors to go out and practice in rural areas to try to keep the quality of health care up in rural areas. And a lot of states have done that. And I know a lot of rural hospitals have done things like have really sophisticated interconnections with urban hospitals and with teaching hospitals. And a big portion of these efforts are going to be undermined by this budget.

And again I will say, this should not be a matter of ideology. We should just practically look at the consequences. We do not have to slow this train down so fast we cause the train to run off the tracks. The health care system of America is too important.

But I'd like to hear from you now to talk about what you think you will be personally experiencing. Let's start with Don Sipes, who's the CEO of St. Luke's Northland Hospital, a hospital with 92 beds and 150 employees in Smithville, Missouri, which is a community of 2,500.

Mr. Sipes.

Q Thank you, Mr. President and Madam Secretary for the opportunity to participate on the call. I believe if these Medicare cuts are approved, rural hospitals and communities they serve stand to endure the greatest losses. There are 132 hospitals in Missouri, 64 of which are in rural areas. It isn't unusual for 60 to 80 percent of rural Missouri hospital patients to be Medicaid-Medicare recipients.

Right now, 24 Missouri hospitals are operating on reserves or on borrowed funds. Rural hospitals are usually the community's major employer. In Missouri, these hospitals employ 20,000 people and spend over half their budgets on payroll. In Smithville, a town of 2,500, we have 150 employees and an annual payroll of $4 million. When a community's major employer suffers,t he community and all its residents suffer -- young who are working, and the elderly who need care.

With the proposed cuts, rural Missouri hospitals will lose a total of nearly $315 million during the seven-year period. Here in Smithville, we anticipate that St. Luke's Northland would lose more than $17 million. A loss like that would greatly affect any community. Such a loss means no money for new equipment, facility updates, no new services, or for, as you pointed out, attracting doctors and nurses.

In my previous capacity as CEO of a small rural hospital in northern Missouri, I was forced to reduce the work force by 15 percent, and cut back on services for which payment wasn't available. These actions were tough on our staff, our community, and on our economic development.

Similarly, here in Smithville, projected losses of $3 million forced Northland Hospital to consolidate services to remain financially viable. After a tough year, we feel we're now positioned for the future at current reimbursement rates. Proposed reductions, however, the largest in history, create devastating new pressures on us, not just on us, but all rural hospitals.

THE PRESIDENT: I'd like to just emphasize two things here that kind of came out of your remarks. Number one, the 1980s were tough on rural hospitals. Rural hospitals -- about 17 percent of our rural hospitals closed in the decade of the '80s, and only about two percent of our non-rural hospitals did. And we knew that some of that consolidation had to occur. But the important thing for the people of the United States to understand is that rural hospitals have undergone significant changes in management and the way they allocate their resources, and they have achieved enormous efficiencies, and their ability to do more is constrained by the remarkable progress that was made in the '80s, and the enormous changes that were made.

The second point I'd like to make is that no one has an answer to what happens to these folks if you close. I mean, who's going to be -- how are these people going to be taken care of?

What is the percentage of your Medicare -- what percentage of your revenue comes from Medicare and Medicaid?

Q At the Smithville campus, 71 percent.

SECRETARY SHALALA: And you're going to lose at least $1 million under the Senate plan, I think. I think that's our calculation.


SECRETARY SHALALA: Yes. I thought you also made another point, and that is that the difficulty that rural areas have in maintaining grocery stores and other kinds of businesses if a major industry like health care closes, that often we focus so much on health care that we forget that health care workers who get paid spend money in grocery stores, in other businesses in rural communities. And it's been an important economic development investment for the United States at the same time, Mr. President.

THE PRESIDENT: That's right. The other point I want to make is that in this debate you will frequently hear the congressional leaders say, look, we're not giving anybody less money, we're giving everybody more money. And that is true. But the real issue is, is the more money sufficient to deal with more patients and the cost of inflation.

The real answer here is to bring medical costs per patient, per treatment closer to the general rate of inflation. And we're working on that. This year, premium costs for insurance were at or below the rate of inflation for the first time in a decade. But these numbers, the budget numbers will not permit many of our health care providers to deal with increased case loads plus inflation.

So even though it may look like more money, seven years from now, than we're spending today, the real question is, in real dollar terms will it be more? And the answer is, for many, many of you, no. And I think that's really important because just to say we're giving more money obscures the question of whether you'll be able to deal with your patient loads, with the cost of health care, and with inflation.

I'd like to call on Mr. Cannington now. H.D. Cannington is the administrator of the Jay Hospital, which has 55 beds and 110 employees in Jay, Florida.

Mr. Cannington.

Q Yes, sir. I'd like to thank you for the opportunity to talk about Jay Hospital and our community. And I'd also like to personally thank you from myself and for rural hospitals for looking after us.

When asked the question of what would these tremendous cuts do to Jay Hospital and to the community of Jay, I would say that if they're allowed to go through it would probably force Jay Hospital to close. I think it would also disrupt the health care system in this rural area that has been developed by Baptist Health Care Affiliates in Pensacola over the past few years to try to provide access to these people and try to provide some kind of continuum of care for people here. And I also think it would be devastating to the community of Jay through the fact of the economic impact that would be felt through the loss of jobs totaling in our area about $3.4 million. And that's just in salary and benefits to our 110 employees.

The reason I say this is that, first of all, this year we have had to budget expenses 2 percent less than what they were last year. At the same time we are expecting volume of services to increase by six percent. This was done in order for us to try to remain in the black this year. If we are not able to hold the line on these expenses, and we have talked about cutting services. The problem is I don't know what services we need to cut. We think they are all necessary. We are providing not only hospital in-patient care, skilled nursing, emergency care, we also have rural health clinics. We have home health care in rural areas. We provide diagnostics. And if the hospital closes, these other components of the health care system in this area will also go under. I think following right on the tail of that is going to be physicians leaving because most physicians do not want to practice in an area where there's not a hospital located.

THE PRESIDENT: That's another thing I'd like to emphasize that's special about rural America. You just described the kind of services you provide. A lot of people say, well, if we cut the budget this much and these hospitals close, it's not big deal; we'll just convert them into clinics, to primary care clinics. Then if they need a serious hospital they can go to the nearest city somewhere. The problem is that a lot of these rural hospitals, most of the ones that I know in my state do just exactly what you said. They're running -- they are the public health outreach. They are the home health outreach. They are doing these things that those who say if we close the hospitals, they'd be replaced by other people. There's just no reason to believe that.

And we all know, anybody that's ever worked or lived in a rural area knows that one of the biggest problems in getting doctors to go to rural areas and stay there is having access to a decent hospital. And they just won't stay if all they have is their own clinics. We just see it over and over and over again in America.

So I really appreciate your saying that very important point.

Q Yes. And the thing is, I think access to care is important, but I also think it's important to have a hospital located in a rural area from the standpoint, if I have a child or a parent or something that has to be hospitalized, I don't want them to be 30 or 45 miles away. You know, I think that that's the time that they need me and my wife there and other family members, and I think it's important to have this available in a local area.

THE PRESIDENT: What percentage of your revenues come from Medicare and Medicaid?

Q About 69 percent of our revenue and about 71 percent of our patients are Medicare and Medicaid.


Mr. Kelly, John Kelly is the administrator of the Soldier and Sailors Memorial Hospital, which has 217 beds and 500 people on the staff in Penn Yan, New York, which has a population of 5,500.

Mr. Kelly.

Q Yes, Mr. President. Some of our people up here wanted to wish you a happy anniversary, sir.

THE PRESIDENT: Thank you. I had a wonderful day. It was a great day.

Q One of the things I just wanted to point out to you is that we're up here in Penn Yan and we're nationally recognized as one of the 100 best small towns in America, but we're also in one of the poorest counties in New York state in what CBS News once described as a remote corner of rural, upstate New York. But we are the largest employer in the county. We're recognized regionally for high-quality and low-cost care. And we have spent the last decade or more doing just as was discussed earlier; that is, integrating services for the community for a variety of reasons.

One of those was to be ready for a system change. So as you reflected on 217 beds, only 53 of those, by the way are medical-surgical. Twelve are psychiatric, and about 152 are long-term care. We also have the county's outpatient mental health services to provide support local emergency medical services coordination.

And the proposals, as we've seen the numbers, are real threats to the physical, the mental and the economic health of this community. You've made a lot of points already in conversation with others about the essential nature of a hospital in providing a practice base for physicians. I can't agree more with that; that's exactly on point. And that the stripping of resources from rural communities and rural health care systems are wrong, they're a major threat.

We have said to people for the last 10 years as we've been reconfiguring, each time we've had to make a change that we're going to have to make a change here, including downsizing medical-surgical services, we've said there's light at the end of the tunnel. And based on the numbers that we see coming from Washington now, the light at the end of the tunnel looks like a train. And so we are terribly concerned about the numbers flowing out of this. We've been in that environment of the '80s and survived it, and that environment was clearly hostile to rural communities and rural health care. And there have been systematic failures to address issues related to rural health care.

I'd like to be an optimist through this and see that somehow through the dialogue that people could take a perspective of community service and look at the true value of rural hospitals, rural health care systems, and rural communities, and address the systematic failures that have brought us to where we are, rather than taking us further down the road of destruction.

THE PRESIDENT: First of all, let me emphasize something you said that Mr. Cannington also said, that typical rural hospitals -- an awful lot of them now are far more than traditional hospitals. They are long-term care centers; they offer psychiatric care; they perform home health functions; they perform public health clinic functions.

When I started working on all these problems over a decade ago, our big struggle was to try to convince hospitals in rural areas in our home state, if they wanted to survive they had to diversify; they had to use their beds in the most efficient way; they had to provide all these services, that rural areas couldn't afford to have separate institutions for all these different things.

That has now been done. We now have in so many rural communities in our country what we call hospitals, but they're basically comprehensive care centers. And they are now in a position to do what needs to be done. What we believe is that we have to lower the rate of medical inflation, and that now you have the infrastructure in the organization to do that. But if you cut too much too fast, we're going to wind up wrecking the system that we built through a lot of painstaking effort and often trial and error throughout the 1980s.

I don't think most Americans -- they wouldn't have any way to know -- but I don't think they understand the dramatic, breathtaking changes that rural hospitals went through in the 1980s, and how many rural hospitals are now the kind of flexible, entrepreneurial, comprehensive health care systems that we all could only imagine just a decade ago. So I really appreciate what you said, because we need to -- the American people need to know that we're not dealing with some big, fat, bloated, outdated bureaucracy that's been living off the fat of the land for the last 20 years. That's not what happened in rural America. But you are going to get a disproportionate hit out of this.

I'd like to talk to Margo Arnold now, or hear from her. She is the CEO of the West Side District Hospital in Taft, California, which has a population of 5,900 and has 84 beds and 160 employees.

Ms. Arnold.

Q Thank you, Mr. President, and thank you for this opportunity to share our concerns with you and with our community. West Side Hospital has 21 acute beds, we have 63 skilled nursing beds. When we look at the cuts and the revenue reductions that are faced by us, we're not only looking at it on one level, but multilevels. And most of the district hospitals, as well as the larger hospitals are facing those same, multilevel cuts, not only through the federal government, but through the state.

We are faced with third-party providers coming into our community and taking our patients to Bakersfield. We actually serve a population of about 23,000 in Western County. About two years ago, we put together a comprehensive team. Our board, our employees, our local physicians, our auxiliary are all working to keep this hospital open. We did a substantial turnaround a couple years ago. At that time, we made a commitment we never wanted to have to go through employee layoffs, reductions of services, et cetera.

Again, we're trying now to outstride the cuts, and hopefully we'll make it. I can't say today that we're going to close if these cuts come about. If they continue, if the onslaught continues, I can guarantee you that our hospital will not be able to sustain. We have no reserves. We have about a $10-million budget. Our 160 employees, with the benefits, our payroll is about $3 million a year. And that has a substantial impact on our local community.

THE PRESIDENT: What percentage of your revenues come from Medicare and Medicaid?

Q Approximately 69 percent. We believe we want the balanced budget. We're working to try and drive down our own cost of care. We want to be in the market; we want to be a player. But we can't do it with this onslaught of cuts. We need to sit down -- the health care industry needs to sit down with the legislators and create a comprehensive program that's going to carry us over the years so that we will be here. Because if we're not, the cost of care is going to go up.

Rural hospitals save lives on a daily basis. We have excellent people here doing a great job. They're saving lives; they're delivering those babies if they can't make it to Bakersville. If there's an industrial accident out here in the oil fields, we're here to save those people's lives; to stabilize them before they're transported to a larger facility, if it's a life-threatening situation. What's going to happen if we're not here anymore? Where are those people going to go, and what's going to happen to our 63 residents and their families? We're very, very concerned about this, Mr. President.

THE PRESIDENT: Thank you very much.

Peter Hofstetter is the CEO at Northwestern Medical Center, with 70 beds and 400 employees, in St. Alban's, Vermont. Peter, would you like to comment?

Q Sure. Thank you, Mr. President. I, too, would like to thank you for your interest in rural health. It's obviously important to all of us. There's a couple of issues. I first would like to say I agree wholeheartedly with all of my colleagues. Most of the issues they've mentioned are certainly things that we're concerned about here as well. One of the things that I would like to emphasize is sort of the physician's side of it, and a couple of folks touched on it a little beforehand.

We've worked real hard to get a medical staff that is absolutely excellent, and we went from 17 physicians in the mid-'80s to almost 48 physicians now. And one of the things that we're most proud of is, in the last year, we've worked with five of our local communities, or, really outlying communities, to bring physician coverage to those communities, and we're just starting on that. Our goal is to have two or three physicians and like a nurse-practitioner or PA that can service all of those towns.

Some of those towns, the folks would drive at least a 60-mile round trip to get to the hospital. And the hospital is employing the physicians because, frankly, there isn't another financial way that a physician would do that as an independent business. As you can imagine, the payer mix is such that it wouldn't work, plus the population of any one town wouldn't make it happen.

But we've been very instrumental in trying to put that together, and we certainly have a way to go. But I think if you look at activities like that and you look at things like loan repayment for some of these physicians, a lot of these primary care folks are coming out with $70,000 to $100,000 in loans, and we've been trying to help them as well. And I think that with the proposed budget cuts, we certainly worry about, will the hospital have the revenues to be able to help with those and assist with those, and if we don't, who's going to? And then you get into all the issues of the people having to use the ER and the emergency room and those things in an inappropriate manner, or just not taking care until the absolute last minute. So we're really sort of concerned about all those.

One last issue, and you mentioned about partnerships, and I think it's important to note that the hospital is working very closely here locally with our home health and mental health agency and have developed things like a center for wellness where we would market to businesses and stuff wellness types of programs. And the hospital also just recently, last year, completed a -- which I think is a phenomenal effort -- is a $3 million renovation project that was done with all community support, all donations and hospital operations where there was no borrowing for that. And that's, frankly, the kind of community we have. And I would just echo what my colleague said about the potential loss if this hospital wasn't here.

SECRETARY SHALALA: Mr. President, it's clear from listening to our colleagues out there that -- I'm wondering who the Republicans want to cost-shift to. There's no way that they can pass on these cuts to the populations that they're dealing with. They're dealing with older people and with very young people, but not with people that make a lot of money. So under-funding the system threatens their ability to keep these hospitals open because there's no one to cost-shift it to. These are very high percentages of people that are on the public program.

THE PRESIDENT: Yes. I think of all the people we're talking to, Mr. Hofstetter's Medicare-Medicaid reliance is the smallest. And yours is what? What percentage of revenue --

Q 60 percent.

THE PRESIDENT: And that's the smallest of anybody we're talking to -- 60 percent.

It's important to emphasize that rural populations tend to be older and that their average incomes tend to be lower. It's also important to emphasize that what is rural in Washington, D.C., may not be rural in Vermont. I mean, it's extraordinary to have 48 doctors in a town of 7,300. But the reason is there's so many other many, many smaller towns in Vermont that you're probably serving near there. And, of course, we don't have anybody on this telephone call today that's from one of the high plain states or inner-mountain states -- a place like South Dakota or North Dakota or rural Colorado, or some of those places where you're not talking about 30 miles, you're talking about 100 miles or 150 miles or 200 miles to the nearest town of any size.

We're talking about breathtaking distances in some of our rural states which are very sparsely populated. So I think it's an astonishing thing that you were able to go from 17 to 48 doctors, and to solve those -- to do what you're doing in the 1980s. I wish I had known you 10 years ago when I had a different job. That's an amazing achievement.

SECRETARY SHALALA: How critical are you to the economy of the area that you're in, with that large of a facility?

Q St. Alban's?


Q Oh, we're about the second or third-largest employer in the county. We've got a couple of large manufacturers and some other industries. But we're consistently in the top two, three, four. And we put about, oh, $8 million and change, with payroll and stuff, back into the economy.

THE PRESIDENT: How many of those doctors are on the hospital payroll?

Q Well, just one primary care doctor and then a pathologist, that kind of thing. But most of the physicians that came here in the '80s and early '90s, it was a quality of life thing, and they set up a traditional solo practice situation. And I have to tell you, honestly, they're all -- not all of them, but a number of them are starting to question that whole aspect of life as well -- being sort of the lone cowboy out there practicing medicine.

THE PRESIDENT: And, of course, a lot of them, in addition to their hospital practice, a lot of their patients who don't come into the hospital are probably Medicare and Medicaid patients as well.

Q Oh, sure. We still have a lot of docs that do home visits. It's textbook primary care.

SECRETARY SHALALA: Not much quality of life if you don't have good health care, though.

Q No.

THE PRESIDENT: Let's go on to Todd Linden, who is the President and CEO of the Grinnell Regional Medical Center in Grinnell, Iowa. He has 81 beds and 350 employees in a community with a population of 8,900.

Mr. Linden, would you like to talk?

Q Good morning, Mr. President.

THE PRESIDENT: Good morning.

Q I am honored to have the opportunity to speak with you on behalf of the 350 employees, 27 physicians, 14 board members, 1,200 auxiliaries and most of all, the thousands of people that depend on Grinnell Regional Medical Center for quality and affordable care.

Let me start by giving you a little bit of the context. Iowa has the highest percentage of citizens over age 85 in the nation, and third highest for 65 and older. Yet, Iowa hospitals today are paid almost 20 percent less per case than the national average for Medicare recipients. It's an awful combination; one of the highest Medicare populations and one of the lowest reimbursement rates. I would echo many of the things that my colleagues have mentioned. There's simply no way that much money can be taken out of the system by the year 2002 without real reduction in patient care.

But my wife and I are both part of the baby boom generation, which is quickly becoming much more of a senior boom than a baby boom. And the only real solution --

THE PRESIDENT: I wish you hadn't said that. (Laughter.)

Q The only real solution is to begin reforming the Medicare program today. Providers understand there will be payment reductions, but we must ensure that the reductions are achieved in the most responsible manner possible. The heart of the matter, Mr. President, is, we must do a better job at getting the most out of the Medicare dollars available for the seniors that depend on care they need. Iowa health care providers need the tools to get this goal accomplished.

There seems to be a lot of interest in Washington for a voluntary movement of seniors in demand care services like HMOs. Hospitals and health systems need to be given the opportunity to contract directly with Medicare for the provision of health care services to seniors. These provider-sponsored networks would allow hospitals to more efficiently delivery appropriate care to their community.

The current Medicare managed care payment formula must be adjusted, however, to pay providers across the country more equitably. You touched on that earlier. There's no way the cost of delivering health care is really more than twice as high in Los Angeles as it is in Grinnell, for example. Our lower spending, more efficient care has severely penalized us and our seniors. If we really are to improve the system, we have to replace these flawed payment formulas.

Here's the main point. If we want to provide seniors with more options to be more effective purchasers of health care, such as providing them with vouchers, retirees in the Midwest would receive vouchers worth only about half as those received by their counterparts on the West Coast, despite the fact that all citizens pay the same Medicare tax. It's really a fairness issue.

I'll give you an example just to bring this point home. I saw an ad for an East Coast Medicare HMO this past week which highlighted outstanding benefits for seniors. It included such things as $500 per year for prescription medicine, annual eye and hearing exams, routine dental care, unlimited physician visits at $5 a visit, even a $450 cash incentive for weight loss programs and fitness classes. Wow, that's exciting. What a wonderful deal for Medicare patients in that part of the country. I only wish Grinnell Regional Medical Center could offer such great benefits to our seniors. The only problem is we would receive less than half the premium from Medicare than the New York plan. Our seniors come out on the short end of the stick.

There's lots of examples of things we need to do to reform Medicare. We need to work on ways to get the health care costs down in this country. Telemedicine, for example, offers great potential to support rural health care, to improve access and quality, reduce isolation felt by some of our providers and costs in travel and duplication. So support for continued research in telemedicine is one example of the kinds of things, along with dealing with these devastating cuts, that's extraordinarily important for us to be able to have the tools to really be able to take care of our patients.

THE PRESIDENT: I want to thank you for what you said. Let me -- you made a point that I want to reemphasize that everybody who talked today did. No one questions the fact that we have to slow the rate of medical inflation. That is not an issue here. The issue is -- and no one knows, frankly, how much more progress we might make with telemedicine, with HMOs. And all of us recognize that you need to have more options, like for providers to directly sponsor managed care plans. And I certainly agree with you, we need to constantly review the equity of the reimbursement system.

There is -- however, one thing has been -- there has been a consensus on one thing in this entire debate, which is that the number selected by the majority in Congress for their medical cuts in Medicare and Medicaid had nothing to do with a study of what the system would bear and what it could accommodate over the next seven years. It was a number picked out of the air arbitrarily to fit a certain set of economic assumptions, which are questionable, a seven-year balanced budget, and a tax cut of $250 billion. And then -- so they said, well, that leads us to these cuts, and so we're going to make them even though we have no idea what the impact on the system will be.

The people I talk to all across America -- I was with senior citizens in Florida the other day -- everybody in America is willing to make an effort to do what it takes to bring medical inflation down. Everybody knows that we can't continue to have medical inflation continue to go up to three times the rate of inflation. But enormous efforts have been made by health care providers, especially in rural areas, in the last several years. And there is a consensus among providers with whom I talk that no one knows how and no one believes that this volume of cuts can be just taken out of the system in the next seven years without severe adverse impact.

And so I think it's important again to say this is not about ideology and this is certainly not about irresponsibility. The health care providers, the seniors in this country, everybody is trying to respond to this situation in a responsible way, but nobody, nobody believes that this arbitrary very high number can be reached, based on all the evidence and the experience we have today. That is the important thing.

We have to do this in a way that is consistent with what we believe the facts and evidence are. We have to be honest and we have to be concerned about our primary mission, which is to provide decent health care. We don't want to make it worse.

There's one other point I want to make about Iowa that relates to a lot of other states. I have been a big proponent of managed care as an option for seniors. And I'm glad that the Congress -- the congressional majority now supports that. But I think we have to go into this with our eyes wide open. If we sell this as an end-all and be-all, what's going to happen is, a lot of these networks -- if there's not some real discipline here in how we do it -- will cream the healthiest seniors. And the oldest seniors that have the highest health care costs will be left not in managed care networks, and will be back either dependent on the government -- which either means they won't get health care, or we'll wind up spending a lot more than we think we will on the system because of that. And because Iowa has the highest percentage of Americans over 80, I think that's worth focusing on.

It depends on who sets up these networks and how they serve them, whether everybody really gets served. This thing can get out of hand, and a lot of older people could get -- and less healthy seniors could get left in the dust of this managed care movement if we don't do it in a decent and humane way.

Q Yes. Oh, you're right, Mr. President. And it really gets back to why a lot of reform efforts last year had difficulty. This is an extraordinarily complex issue. There are so many reasons why health care costs are what they are today and why they continue to grow. But the senior population, the one that's growing as quickly as any other segment of our population, is really at risk. And we've got to focus on many of these important issues to get that.

I ran across a quote yesterday that I think is apropos. It comes from 170 A.D., from Galen. And he wrote: "Since both in importance and time health precedes disease, so we ought to consider first how health may be preserved, and then how one may best cure disease." That's another example of we need to begin focusing on how we can save health care dollars and get seniors the care they really need.

SECRETARY SHALALA: There are a lot of reasons why we have to save health care dollars; balancing the budget is one. The other is the trust fund, Mr. President. And I think you've made the point very clearly that $90 billion will give us 10 years on the trust fund. The Republicans want to cut the program by $270 billion to get the same number of years. And it's unnecessary, unless, of course, you want a tax cut for very wealthy people.

THE PRESIDENT: Let me say to all of you how much I appreciate the time you've given this, and even more, how much I appreciate the work you've done with your lives. As I said, because of the job I had before I became President, because I lived in a rural state, I know how hard it's been for you in the last 10 years and I know what dramatic advances have been made in the face of these difficulties and challenges.

And we can do more, we can do better -- and we will. But it is important that when we have this budget finalized that we don't have an arbitrary number, that we make an honest effort to discipline this system in a way that will save the Medicare Trust Fund, slow the rate of medical inflation, but do it in a way that will enable us to enhance the quality of medicare care and the quality of life for seniors, for children and for poor people, particularly those that are in more isolated areas and the rural areas.

I'm going to do my best to take care of those concerns here and to defend them. And we will do our very, very best to achieve in the end a balanced budget that is decent and fair and based our values when it comes to health care, and that's based on the evidence that you've given us. And I can't thank you enough.

But if I could just say one thing in closing, I would implore you to personally contact the members of the Congress in your area without regard to their party and say that you have done your part in the '80s, you are willing to your part in the '90s, you understand why we want to balance the budget, but we have to do it in a prudent, disciplined way that does not wreck the health care system. We have worked so hard to reconstruct a comprehensive health care network in rural America and there's still great difficulties in maintaining it. And to take it out now would be a tragedy. And it would be wrong and it is not necessary to balance the budget.

So I thank you from the bottom of my heart. And I just want to urge you to share your experiences and your knowledge with the members of Congress, because many of them are having to vote on these issues without the experience base that you have -- or that I have, frankly, or that any of who have actually been through this and lived through it. So I would just close with that.

There are a lot of good people up here trying to do the right thing and we've got to just stick to our values, stick to the evidence and do what it doable.

And so -- but, please, please, continue to reach out to the Congress in these next few weeks so that we can make the right kind of decisions for our country.

Q Mr. President.


Q This is John Kelly up in Penn Yan. Could you just tell us what do you think the next step would be from your perspective in this process?

THE PRESIDENT: Well, I keep trying to engage the Congress in this. They're going to have to decide when and how they want to work with us to try to come to some agreement. But meanwhile, I think the next step is that will either happen or they'll pass a budget that I find unacceptable, and I will manifest that with a veto, and then we'll talk about it then.

And I don't know how this is going to unfold. But I do know this -- the more information you can get for the members of Congress, based on what is real and what is going on in their districts and what their constituents are living with, the better chance we have to do the right thing on this budget.

It is not clear to me yet exactly how the congressional leaders will determine they're going to proceed. But however it's going to proceed, in the end, I'm going to do my part in this process. And my responsibility is to basically advance the values and the interests of the American people and stand up for the people who I believe have been left behind in this process. That is what I'm going to do; that's my responsibility.

But the mechanics of it are not yet clear because we're in somewhat of an unprecedented situation now. We're already past the time when the budgets are normally done. So I can't tell you that. But I can tell you this -- it is never too late for you to contact them and explain your experiences and say, look, this is just not doable; these numbers are arbitrary and they're not achievable. We're willing to help, we're willing to contribute, but we can't do that. And I urge you to do it.

Thank you very much.

Q Thank you, Mr. President.


SECRETARY SHALALA: You know the story about Mark Twain -- he swore all the time and his wife tried to stop him from swearing. So he spent two days of swearing up a storm, and he finally said, "Honey," he said, "I got the words right, but I got the melody wrong." (Laughter.) Republicans have the words right, but they have the melody wrong.

Q Mr. President, a short time ago, Speaker Gingrich said of you -- and I quote -- "If he plans to run for reelection, I think it's a very big step for him to say 'I'm going to veto balanced budget tax cuts, welfare reform and save Medicare.' I'm not at all certain by the time we're done in early November that he is not going to sign these things." Could you react to that?

THE PRESIDENT: Well, those words sound good, but what stands behind them? What kind of balanced budget plan? What kind of tax cuts?

My job is to protect the families of this country, the children of this country, and the future of this country -- the elderly. The President's job is to stand up for the fundamental values of the country. Those are nothing more than slogans. There are ways -- if what the Speaker wants to achieve is a balanced budget with tax cut that secures the Medicare Trust Fund, well, I'm for that. And I will work with him to help him to achieve that. But underneath that very appealing slogan there are $148 billion in taxes and fee increases on the elderly and on working people with very low incomes.

This budget would take people out of the middle class and put them back into poverty. This budget would jerk up the ladder that poor people are now using to work their own way into the middle class. This budget would say, we're going to cut taxes on the President if he has capital gains income, but we're going to raise taxes on working people with children living on $15,000 bucks a year.

This budget would say, if you're a senior citizen now on Medicare and you're living on $300 bucks a month, we're no longer going to make your co-pay from the Medicare program, we're going to raise your cost of living, even if you're living on $300 or $400 a month.

This budget would say, if you're going to college, we're going to charge you more for your college loan and make it more expensive and make it more difficult for you to get. And we're going to give more money that we used to allocate to students and their loved ones to the middle man like banks and others in the middle of the process.

I don't believe that's consistent with American values. I just -- and it is not necessary. And so, these goals sound very good, but how you achieve them is very important. And they have, apparently, very little confidence -- much less confidence than I have -- that a balanced budget would lead to a growth in the economy. I mean, they say they want to grow the economy, but they have given us a budget that says if you adopt our budget just like we've given it to you, we're going to have a big tax cut including -- that goes to some people that don't want it and don't need it, and we're going to have huge cuts in Medicare and Medicaid, and we're going to balance the budget, and it's going to give America the slowest economic growth it's had in 25 years. That's the message of their budget.

You know, I'd be proud of it if I were them. Now, what I did to show fiscal prudence was to give them a budget which says that I am assuming only that we will grow as fast as we have for the last 25 years, when we've had some very, very bad years. I believe we're going to grow faster than that, but I wanted to be prudent. But they say, no, adopt our budget, do all these really tough things to the middle class, to the elderly, to the children, and we will slow the economy down. That's your reward, America, for adopting our budget. I think that's a very curious message.

So, you know, I don't want to get into a shouting match on this, but would I sign a budget like this because they would maybe hide some of the severe consequences in the election year just to get reelected? The answer is, no. I won't do that. Because whether I get reelected, or not, I hope to live to be an old man, I hope to live to see my grandchildren grow up in the America of the 21st century, and I want it to be a country with opportunity for everybody, with strong families and strong communities leading the world, that's a place where the things that we all believe in are alive and well. And I would gladly, gladly terminate my tenure here if the price of continuing it was just shelving everything I believe in about this country.

So we need to take this debate out of the politics of it and take it out of the ideology, and let's talk about the facts. You heard these people. They're running these rural hospitals. They've all slowed their cost of inflation down. They're all willing to do more. None of them believe they can make the numbers in the congressional budget. Let's get out of politics and ideology and personal gain and all this rhetoric, and let's talk about what the impact is going to be as a factual matter on the American people, and how we can sign a credible budget that will grow the economy. Grow the economy, create jobs, raise incomes. We're going to be able to balance the budget quite easily, and we don't have to do all this.

Q What do you think about the AMA, Mr. President? What do you think about the AMA?

Q Mr. President, how do you suggest that the White House works with Republicans and vice versa? The two sides aren't even talking at this point.

THE PRESIDENT: I have a conversation with the Speaker every week about a lot of things. And we try to find ways that we can work together. But they have tensions within their own caucus, as you know. They have ideological tensions in the House and they have in the Senate -- they have ideological tensions and political tensions that I can't reach or influence at this moment because they're sort of encased in the way the Republican Party is today.

A genuine discussion and negotiation about what we can do involving the leaders of the Republican Party -- there are a lot of Democrats who want to vote for a balanced budget, a ton of them. You know, it's been largely ignored here, but the Democrats in the Congress took the lead in reducing the deficit. They took it without any support from the Republican Party. They took the deficit from $290 billion down to $160 billion. So there are a whole bunch of Democrats that are literally yearning to vote for a bipartisan budget that reflects the best of the budget I put forward and the best of the budget they put forward, and is better than both of them. We're not talking about a compromise that just splits the difference, we're talking about something that is better for America.

So we can have these conversations before, during and after they cast whatever votes they're going to take, but we have to get beyond this sort of line-in-the-sand rhetoric where -- my door's been open since I gave my budget. That's why --

Q Will it take a budget summit, Mr. President?

Q Why don't you invite them over for a budget summit here? You're getting the Bosnians --

Q Will it take a budget summit?

THE PRESIDENT: I don't know. I don't know.

Q -- for peace talks. Why don't you have peace talks with the Republicans?

THE PRESIDENT: Well, you know, like I said -- I try to talk to as many of them as I can, all the time. I think, to be fair to them in terms of the timetable, to be fair to them, they have to -- they're in a better position than we were two years ago, because two years ago, the week I got here, I was informed by the Republican leaders that there would be no motion on my budget. Whatever I did, there would be no votes. And so what we had to do was to work through our budget and figure out how to cut the deficit by $500 billion with Democrats only, which made it -- which meant, compared to what I wished, there was a little more tax on upper-income people, and a little less cuts than I wanted. But we passed it. And it had a terrific impact.

It drove down interest rates. It drove up the economy. It got us where we are today, with 7.5 million jobs and 2.5 million new homeowners, and 2 million new small businesses.

What they have to do -- the timing on this will be, I think, determined as much by -- will have to be determined by where they are within their own caucus. But they know something that we didn't know two years ago. They know that we want to balance the budget, too -- not just the President, but a large number of Democrats in Congress in both Houses are willing to work with them. But there has -- but they can't say, working with us is we're going to pass what we want, we're going to put it on your desk and you will sign it or veto it. That's not my idea of working together.

We can be -- if their real objectives are a balanced budget, tax cuts that are reasonable, extending the life of the Medicare Trust Fund, we can achieve those objectives. But we cannot do it if the objective -- or the real objective is to raise taxes on the lowest income working families of the country, to raise the cost of living to the poorest elderly people of America, do significant damage to the health care system, and to undermine the education investments of America, the environmental responsibilities of America, just because there's an ideological desire to wreck the federal government. And they have to work through that.

But at some point, we'll all get together and work this out. I believe -- I believe in the system and I wouldn't -- and I don't think you all should over-react to this. We're going to -- I believe we're going to work this out. But meanwhile, I'm going to do my best to take care of the American people.

THE PRESS: Thank you, Mr. President.

Q What did you get for your anniversary? (Laughter.)

THE PRESIDENT: I got a number of things, but one of the most interesting things I got was from my wife -- it was two old pictures of us together 20 years ago blown up.

Q Show us. (Laughter.)

THE PRESIDENT: My daughter has unfavorable comments on men's styles in the 1970s. (Laughter.)

THE PRESS: Thank you.

END 1:00 P.M. EDT