THE WHITE HOUSE

Office of the Press Secretary

                        REMARKS BY THE PRESIDENT
                        IN CONFERENCE CALL WITH 
          HEALTH CARE PROVIDERS AND SENIOR CITIZENS ROUNDTABLE
                    FROM LAWRENCE MEMORIAL HOSPITAL,
                         MEDFORD, MASSACHUSETTS                              

12:50 P.M. EST

THE PRESIDENT: I want to thank you for joining me on the conference call to talk about the proposed Medicare and Medicaid cuts in the congressional budget. And I want to apologize for not coming to Lawrence Memorial today, but I know you understand why I couldn't come.

Let me just begin by emphasizing again, the answer is not -- excuse me -- the question here in Washington we're debating is not whether we will balance the budget, but how. I've been working for three years to eliminate this deficit, and we've gone from having one of the largest deficits in the world to the point now where our budget deficit today is the smallest of any industrialized nation in the world as a percentage of our income, except for Norway; every other country has a higher deficit.

So I want to finish the job. But it seems to me clear that if you look at how the American economy is doing and if you look at how we're beginning to come to grips with some of our most serious social problems, under the system we're now operating under, it would be a great mistake to have a dramatic departure that would eliminate the deficit by undermining our values and our interests, including our obligations to our parents and our children in the area of health care.

So I want to balance the budget. I want to strengthen the Medicare Trust Fund. But I don't want to destroy Medicare or Medicaid. And that's what I want to emphasize today. I believe that the proposed congressional budget, with $440 billion in reductions in Medicare and Medicaid over the next seven years, would have quite harmful consequences. Eight million Americans could lose their Medicaid coverage. People on Medicare will be forced to pay more whether they can afford it or not. And the people who choose to stay in the Medicare program may have a program that doesn't meet their fundamental needs.

And, of course, I'm very worried about what's going to happen to hospitals and nursing homes, teaching hospitals, children's hospitals. These are the concerns that I have. And what I wanted to do today in person with you we'll now have to do over the telephone, but I want to just give all of you the chance to just specifically talk about, from your personal experience, what do you think is likely to happen here. And we'll start with our host, Charles Johnson. And let me again apologize for not being there with you. But I appreciate you taking this call and I'd like for you to go first and comment.

Q Well, thank you very much, Mr. President. I appreciate that, and needless to say, we were very disappointed that you weren't coming, but we certainly understand.

THE PRESIDENT: Give me a rain check.

Q I hope you look at it that way. Sure. Thank you.

Well, thanks for letting me go first. And I would just say on behalf of Lawrence Memorial Hospital, as well as our Massachusetts Hospital Association, I want to thank you for your continued leadership on health care issues in general, and particularly, these -- current proposal, which is you just outlined, will affect Medicare and Medicaid in a big way.

I'd like to also just recognize the good work of Senator Kennedy, Senator Kerry, as well as Congressman Markey, who have been good friends of this hospital and share your concerns and our concerns.

Medicare has been a lifeline for thousands of seniors who have received care at our hospital here in Medford. And to think that it's going to be impaired in any way is kind of difficult to think about. We understand, as you said, Medicare may need some change and that spending probably needs to be reduced in order to preserve this vital program for our seniors. I hope to live long enough myself to take advantage of it. We have looked at these proposals now before Congress and really feel the proposed cuts are too fast and too deep and would really harm the quality of care that we provide our community.

We understand the proposed cuts would result in the loss of about $3 billion to Massachusetts hospitals alone over the seven-year period. At our hospital, Lawrence Memorial, here in Medford, where two-thirds of our patients are Medicare patients, we would -- we estimate we would lose up to $17 million over this seven years.

If this occurs, we think our efforts to develop a comprehensive, cost-effective system of care, including long-term care and home care, as well as acute in-patient care will be seriously jeopardized. Our hospital is the largest employer in our community, and these reductions would also have serious impacts on our local economy. Most important of all, our seniors, we believe, would have less services available.

We're certainly committed to working with you and our congressional delegation to bring some real reform to Medicare and Medicaid that protects seniors, and hopefully will continue the legacy of the quality of care that we all hold so dear.

THE PRESIDENT: Well, thank you, sir. I just wanted to emphasize a couple of things, since you said what you did, that the medical community, the health care community in America has recognized that we can't go on for another 10 years with the costs of Medicare and Medicaid going up as much as they have in the previous 10 years.

On the other hand, as you know better than anyone, there are changes now occurring every day which are bringing the inflation rate down. Last year, for the first time in a decade, private insurance premiums went up less than the rate of inflation. And if, together, we can continue to manage these changes in a responsible way, then the inflation in health care costs will come down, but they will come down as people in the health care sector of our economy learn to cope and to find other options for dealing with these problems so that we won't say, well, we're going to cut an arbitrary amount of money and we don't care about the consequences.

That's what our plan is focused on. It's focused on giving people more choices, more options, including giving hospitals and doctors the options to do more participation in managed care options. But I also think we have to leave these seniors with a good, vital, vibrant Medicare program that operates in the way the present one does. After all, it has lower administrative costs than any private insurance plan, and the inflation per Medicare recipient has not gone up more than the general rate of inflation and health care.

So I think we need to give you the chance to keep dealing with and implementing the changes that we've got. We need to give you some more options. But I think you've made it clear that, just to pick an arbitrary number like this without any knowledge that it can be reached is a hazardous undertaking.

Mr. Hall, perhaps you'd like to comment. I know that you live in a state like my home state that has an awful lot of people in small towns and rural areas, and I can tell you from 15 years of experience I know what a hard time real hospitals had just staying open in the '80s and meeting all of the needs of their people, and I know what kinds of changes you must have already undertaken. But perhaps you could talk a little about the impact of Medicare and Medicaid on your hospital.

Q Well, thank you, Mr. President. I'd be pleased to. We are a rural hospital, as you said, and probably fairly typical of many rural hospitals around the country. We provide physician services, hospital services and long-term care services to approximately 65,000 people who live in 26 different small communities, which includes the capital of Montpelier, which is only about 8,000 people in itself.

About 60 percent of our patients are Medicare/Medicaid, and about five percent are charity or are otherwise unable to pay, so when Medicare and Medicaid, which currently pay about 75 percent of our actual costs, carry that big a percentage of our population, we make up the shortfall by shifting the costs to about 35 percent of the patients who are insured.

Over the past two years, we've found ourselves employing 80 percent of the obstetricians and pediatricians in our community, as well as 25 percent of the family practitioners and internists, and we've found ourselves doing this because those physician practices develop such a high percentage of Medicare and Medicaid patients that they couldn't succeed on their own in the hospital, in part at the request of the states, stepped in to ensure that women and children and the poor and the elderly in our county could continue to have access to physicians.

We have, in our hospital, one of the strongest balance sheets and operating statements of any rural hospital in the state. But we project that if the cuts proposed by Congress are implemented, we will need to drastically change the way we serve our community. And if we don't, we will violate our master bond indenture in two years and we will be out of business in five or six years.

We know that it is necessary to significantly slow the rate of increase in Medicare spending, but in rural communities such as ours, the infrastructure is just not in place yet to move patients -- or populations -- to managed care. And if the changes contemplated by Congress were implemented, I don't think the infrastructure would ever be build.

So, with the current proposal, our options would be to increase the cost shift to patients who are insured and reduce services to those whose health care is subsidized by the cost shift, and that's elderly, low-income women and children.

So I think it's really important to work to decrease the reductions in Medicare payments to hospitals and also to reduce the impact on individual Medicare enrolles so that there's fairness in the reductions, and there's fairness in the impact on the people that we serve.

And, finally, I'd like to add that the entire Vermont congressional delegation, that is, Senator Jeffords and Senator Leahy, and Congressman Sanders, are also sharing your concerns and our concerns and they are also supportive of that direction.

THE PRESIDENT: Thank you very much. You've made a very important point that I want to emphasize because I think it's been lost in this debate a little bit over the understandable concentration of what's in the federal budget, and that is that if we move too far too fast, and we put a lot of these hospitals at risk, one of two things is going to happen. Since there are plainly limits to how much more money can be taken out of the Medicare and Medicaid population, either the hospitals won't have the money they need to stay open and they'll close, which will cause a lot of disruption and a cost to our society far greater than any benefit to these cuts, or you will have to cost shift on to people with private insurance, which will aggravate a problem that already exists where a lot of private employers and their employees are paying more than they should today.

And if that happens, in the end that's a defeating strategy, too, because as I'm sure you know, we have a million Americans a year in working families who are losing their health insurance because their employers can't afford to maintain it. Now that have inflation coming down in private health insurance premiums and we've got -- we're trying to steer more and more of the smaller employees into big buying pools so they can buy competitive insurance at competitive rates, it would be a terrible mistake to do something that we know will accelerate the number of Americans losing their health insurance.

This is the only advanced country in the world where more people are losing their health insurance every year, and there are a smaller percentage of people who are non-seniors, that is, who don't have Medicare; smaller percentage of people with health insurance today than there were 10 years ago. And I really appreciate your saying that because that's an important thing that we've lost too much. This is not just something that will affect the senior population or the poor. It will affect the middle class who have health insurance for the very reason you said. And I appreciate that.

I'd like to go on now to Barbara Corey, who is a senior activist with the Quabbin Community Coalition in Peterson, Massachusetts. And, Barbara, you're on the line, and I wish you would talk to us about what you think the impact of these cuts will be on the people you represent.

Q I will, and thank you very much. And I'm on this line as a community voice. We need your help, Mr. President. Cuts -- will cause human misery and suffering, suffering that will be visible to us. We cannot deny that it exists. Everybody will know it. We're going to have to explain it to our children, we are going to be asked why it happened. How will we feel? How can this be justified?

We can look at other developed nations. The mark of a civilized people is how it treats its elderly and its young. Over the years, we have had social reform. Are we going to go back into the Dark Ages? We need you to stand firm and strong against the Republican bullies.

The working men and women, the retired who have worked long and hard need you. We can't foster this environment that gives to the rich and takes from the poor. We know that tax breaks for the wealthy and for corporations are growing. Let's put a cap on these tax escape hatches.

I think it was Colin Powell in September who criticized the welfare kings of K Street who are securing and protecting their corporate and upper-income bracket clients. And in my community, in my work here, I know many people who depend on Medicare. They're great people. They're not lazy. They need you to protect them.

Just last week, my friend, George, spoke compellingly to me of his 76-year-old mother who is arthritic, living alone, no savings account, and exists on a Social Security check of $400 per month. She pays $120 every quarter for extra health insurance. She can't swing that without help from her son, George. He's working hard to keep his family of four safe. And in both households now you have people who worry incessantly about paying their current bills, and how they're worrying about these increased costs.

Our wonderful local community hospital, Athol Memorial, will surely close. Its affiliate, UMass Medical Center, which is a critically important teaching hospital, will also be severely impacted. And this will end up by devastating our local rural people. We need your help.

THE PRESIDENT: Thank you very much. I'd like to just sort of emphasize one of the things you said there, and that is that I don't think many Americans yet, unless they have parents who relied on Medicare and Medicaid, have really grasped the fact that there are an enormous percentage of these seniors out here who have a decent life --

Q That's right.

THE PRESIDENT: -- on a low income, only because of Social Security and Medicare.

Q That's right.

THE PRESIDENT: And that we have to make sure that as we lower the rate of increase in Medicare that we're doing it in a fair way. And $400 a month is not a lot to live on, but there are -- there are not just a few, there are millions and millions of seniors out there living on that.

Q That's right. That's right. Good people. And real people.

THE PRESIDENT: And their children.

Q Absolutely. And you're right when you talk about the fact that it's all the generations. It's the elder population's children that are going to be devastated by this as well. It's a tough time.

THE PRESIDENT: It is a tough time. But the other thing I'd like to emphasize is that we don't have to do this. That's another thing I'd like to say.

Q That's right.

THE PRESIDENT: We are succeeding in slowing the rate of medical inflation.

Q Exactly.

THE PRESIDENT: Creative people -- not the government, but all these creative people out here working together in the hospitals, in the nursing homes, are finding ways to lower costs. We can do this, that if we go too far too fast, we're going to hurt not just the elderly, but we're going to hurt their children and their children's children. You think about all the middle-class children of these folks in the nursing homes, just for example, or the -- all the money they then have to give to their parents is money they won't be able to invest in their children's education.

So this is not just an elderly issue. This is an issue for all Americans, and it's not just a poor person's issue, it's a middle-class issue.

Q Exactly. And I'm grateful to you for the concerns that you're showing.

THE PRESIDENT: Thank you so much.

I'd like to ask Alan Solomon, whom I've known for some years now and who does a very good job of running a significant number of nursing homes, to talk a little bit about the impact of these cuts on his employees and perhaps on the quality of service that the patients get.

What do you think is going to happen with the Medicaid cuts? We've heard a lot about Medicare, and not so much about Medicaid, perhaps because the program's not as familiar to the American people, so maybe you could talk a little about that, Alan.

Q Well, you're right, Mr. President. First of all, let me thank you for taking the time to speak with us this morning. And you started to touch on it, but let me single out the Medicaid cuts as being, I think, especially harmful, not only to seniors and not only to providers, frankly. You know, a lot of people think that these cuts are about, you know, well, we're going to cut the payment that we make to providers and somehow they'll figure out how to make it work. But our concern is that the real losers, and particularly with respect to the $172 billion in Medicaid cuts that are proposed, are middle-class families and low-income workers.

You know, you and I, Mr. President, are part of the first generation of middle-aged couples who have more parents than children. People we care for, the families that we take care of are squeezed between raising their kids and taking care of their elders. And Medicaid is the largest source of financial support for those middle class families whose relatives need to be in nursing facilities. And I would add that that represents about one in four Americans over the age of 85. This is a very old and a very frail population.

In Massachusetts, where we have a system of long-term care that is especially dependent upon Medicaid, seven out of our ten nursing home residents depend upon Medicaid for their care. You cut that program by one-third, which is what is proposed, and we will turn our nursing homes in America into warehouses, and we're going to deny the families of this country the care that they want for their elderly relatives.

I'm taking this call today here at Lawrence Memorial Hospital with Charles Johnson because we own, as partners, a 224-bed nursing home on this campus. We take care of 224 frail elders for really slightly more than $100 a day. I don't think anybody has accused of there of spending too much money. That facility is likely to lose over the six year period in the budget cuts that are proposed, close to $4 million. And that's going to make it impossible to deliver the quality services that we're very proud that we're delivering today.

And the other group that's going to lose in that equation are the people who work in that nursing home and others. You know, about 95 percent of nursing home employees in this country are women. And although in Massachusetts we're very proud of what we've done to raise wages and to provide health insurance, by the way, employer paid health insurance to our workers in nursing homes, the majority of them are service workers. Many of them are single parents; many are new Americans. We think that nursing homes may be the largest employers in America of people who were formally on welfare.

The Medicaid cuts are going to restrict those wages, reduce those jobs and really threaten that lifeline for people who are really struggling to make ends meet, and who are working successfully to stay out of poverty. We just -- we can't tolerate it. And I know how strongly you feel, particularly about Medicaid. You know we have 30 years of social progress on the line. And I applaud you for what you've done.

I just want to add, if I might, that I'm very proud in Massachusetts to be part of a coalition for responsible Medicare and Medicaid reform. This is a coalition that includes our medical society here in Massachusetts, our hospital association, our nursing home association and consumer advocates. We are among the strongest voices in the nation opposing these budget cuts and I think we've shown what leadership providers can -- what leadership role providers can play. And I hope that's an example to providers in other parts of the country who really need to begin to articulate this message and join with you in trying to protect these vital programs for our seniors, for our families, for our working people.

THE PRESIDENT: Thank you very much. And I want to thank you and your employees, through you, for the quality of care you are providing. You know, I'm old enough to know -- to remember now -- and I've been involved in public life for about 20 years now -- I remember what nursing homes were like when there was no Medicaid investment and no standards. And we've seen a combination of appropriate standards and better investment over the last 20 years, and a dramatic increase in the professionalization of the care in nursing homes. And that's something, I think -- I'd just like to ask all of our countrymen and women who are old enough to remember this, to remember what it was like before this sort of this happened.

And we now have -- we're a fortunate nation; we're getting older, we're living longer, we can look forward to longer lives. But the fast growing group of Americans are people over 80. And there is no quick or easy way to avoid the fact that we need to be providing adequate, appropriate levels of care. And as you well know, a lot of people in nursing homes have done all kinds of things to be more efficient; forming partnerships with hospitals, having boarding homes, doing more -- sometimes doing more home health care. But in the end, there are people who need to be in the homes and they need to be properly cared for.

I also appreciate what you said about the people you're hiring. The Republican Congress and I, we both say we want to move more people from welfare to work. If you look at the realistic options for moving people from welfare to work, among those are in the caring profession, particularly moving into nursing homes, or on the other end of the age spectrum, into child care and to helping our young children.

When I was governor, I sponsored a whole program to try to create more child care training slots and put child care centers in our training schools so that -- our technical schools -- so that welfare mothers could begin to get jobs there and then the nursing homes were hiring them when they got out of the training program.

These are the kinds of things that we have to do. So if we expect to have welfare reform, we have to have jobs for these people when they get out. And we need these jobs in the caring professions. And we will need more of them, not fewer of them, as time goes on.

There again, I would say, that's why you don't want to cut too much too fact before you know what the consequences will be because we do not know -- these budget numbers were basically plucked out of thin air once they decided that they were going to have a seven year balanced budget with unrealistic economic assumptions and a $250 billion tax cut. And we -- that is not -- we ought to put health first and say how are we going to lower the rate of inflation. That's what I tried to do in the budget that I presented.

So I thank you for what you said, because I think it's important that people focus on these employees as well as on the fact that, you know, this budget will not repeal demographic trends in the United States.

Q That's right.

THE PRESIDENT: People over 80 continue to be the fastest-growing group of our population.

Q Absolutely.

THE PRESIDENT: Mr. McDowell?

Q Yes, sir. Mr. President, I want to thank you for taking the time out of your busy day. I understand you have other issues there in Washington to deal with today, besides just the health care issues. But I want you to know that the people of Maine are as interested in balancing the budget as I think the Congress or you are, Mr. President.

We also understand that the health care system is going to have to do their share in helping to solve that budgetary problem, but today, without being redundant from what others have seen. I'd like to speak quickly to three issues -- access, structure and education.

I think that access is an important issue. The Medicare and Medicaid funding of the health care system has become an integral part of that funding. If one changes it too rapidly, we really believe we're going to impact access.

Medicare and Medicaid system now, at least by our calculations, are not paying the costs of the services at the present time. Any further reductions, even if those are reductions, of growth rather than real reductions, which we hear a lot of. The reduction of growth, if, in fact, the cost continues to grow, we'll put significant pressure on our hospitals in the state.

Medicare cuts that are now proposed by the Senate bill would impact the state of Maine by $400 million over the next several years. Since we're a state, primarily, of small hospitals, half of our hospitals have fewer than 55 beds, and a large geographic area with only 42 hospitals covering the entire state, we really can't afford to lose any of those institutions.

The average hit on a small hospital in the State of Maine is approximately $3 million over the next several years. That is a significant portion of their total budget. That makes it an access issue. This makes it a people issue. Small hospitals will not be there in their communities, and believe me, Mr. President, the 50-mile drive in Maine in February is not fun, so we really need to keep the access issue prime here.

On the issue of structure, I think that we haven't talked about this yet today, but we really need to be able to have the freedom to restructure the health care delivery system, we really must be able to work with other providers, work with the insurance companies, develop our own approach to managed care, directly contract through hospital physician networks, and we really have to be able to compete in that environment, if, in fact, health care industry is going to maintain a relative position in the economy. We really need some relief in legislation that's being talked about now for some antitrust laws that really don't reflect the reality of the health care business today.

Lastly, I'd like to speak just a second on education. I know that Mitch Rabkin is on the phone, and Mitch can speak far more eloquently to some of these problems than I can, but the residency program, the graduate medical education program in Maine is of vital importance to the state of Maine and it provides a real pipeline to the smaller communities and the smaller community hospitals. I think the studies show that physicians tend to stay in the area in which they are trained. At least in Maine, 70 percent of the Maine trained physicians stay in the state of Maine. We really need some help in the area of graduate medical education funding, both direct and indirect, and as I said before, I'm sure Mitch Rabkin* can speak to this more directly. But we need help in education in Maine.

THE PRESIDENT: Thank you. I'd just like to make two comments -- one hopeful and one sort of on the lines we're talking about here. The hopeful comment is that I do believe this is one area where we can reach agreement with the Congress. I have long advocated changes in the present law which would permit doctors and hospitals to have the flexibility they need to establish their managed care networks and to provide the most cost-effective direct way to provide these kinds of services to patients.

So I think that in the end, we might be able to get some very good legislation on that, and I am encouraged by that. I do think that we'll have broad agreement on that.

But, again, I go back to the point you made about doctors staying where they're trained. It's not just that. You know, in my rural state when I worked for years and years to get doctors out all across the state and we had all kinds of regional educational programs and outreach programs and rural training programs, we also found that doctors simply would not stay where they did not have adequate support.

So if there is no hospital, if they don't have that clinical support, if they don't have the things that make it possible for them to know they can succeed in family practice, you may wind up with a serious doctor shortage no matter where you train them. And so, that's another argument for making sure that before we just kind of jump off a cliff here, we know exactly what we're doing and that we're going to have the necessary physicians that work out there in rural America.

Q I think those that say that we have too many doctors in America need to visit a Arista County, Maine.

THE PRESIDENT: You've got it. No rural resident of the United States believes that we have too many family practitioners in this country and out there serving people, and I appreciate you saying that.

Mr. MacLeod?

Q Thank you, Mr. President. I think you're hearing and I would like to reiterate a consensus on the too-far-too-fast theme. I think those of us that are working in the field see it perhaps a little more clearly than many others. Up here in New Hampshire, the proposed legislation would reduce Medicare income by about $300 million over the six-year period, and that's about 12 percent of our normal Medicare income. I think -- I doubt if there is a hospital in this state where that wouldn't have a serious impact, but particularly I think it would impact on our rural facilities.

The point I would like to make about that is, most all our hospitals in New Hampshire are community voluntary hospitals, and we also serve as an important part of the community's basic infrastructure, much the same way as the school or the church or police or fire. We're not just another business in that respect. We tend to be much more of an integral part of the entire socioeconomic structure of the community, as well as being the primary source of health care.

What impacts on the hospital will very likely have a significant ripple effect throughout the entire community. The issues in our state are not as simple as merely cutting budgets, there are other very important interdependency issues that need to be recognized and planned for. And I think that certainly a more gradual approach to the budget reductions would help serve that purpose. And simply cutting the budget may provide some short-term relief, but I happened to be convinced that in the long run it will prove to be short-sighted.

I'd also like to make one quick comment about who should bear this burden. I think there's general agreement of what needs to be done, and we're now focusing on how it should be done. The cost issues in health care have been largely a provider problem, and we need to bear a significant amount of that responsibility. The senior citizens in this country, to a large degree, have been bystanders to this issue. And yet they're being asked to step up to the plate in a major way and bear some responsibility for things that they've had little connection with.

And I think the seniors in this country, today's senior citizens are a very special group of people. They're not, for the most part, people who have come from a lot of other countries and have been grateful for being accepted. Today's seniors are people that have built this country from the bottom up that put a lot of hard work and toil, and I think we owe them a huge debt of gratitude. And now that they've put in their toil and are about to have some well-earned relaxation, we're turning to them and saying that our Medicare contract, if you will, it wasn't a contract at all, and the ink isn't really dry, and we've still got some changes to make. And I think this will leave people with a sense of lack of appreciation, if anything, for a lot of what's been done in the past.

THE PRESIDENT: Thank you for making that point. You know, I just have two observations about what you just said. First of all, I have been impressed by the extent to which seniors all over the country are willing to do their part to try to help this country slow the rate of medical inflation and make sure that we have money to invest in education and technology and the future of the country. But they just don't want to be asked to jump off a cliff to go into a forest with no path to the other side. And that's what I think we're all concerned about.

When I went to Florida a few weeks ago, I was so impressed by the willingness of the seniors there to try to -- based on their own personal experience, to suggest ways that we might reduce costs. But no one -- no serious student of this subject believes that cuts of this magnitude can be absorbed without serious adverse consequences, both to the seniors and the health care system. And I think that's -- you have articulately said why that's not fair.

The other point I want to emphasize -- because there will be people all across America who will read about this -- is that these comments will be coming in part from people who come from the three northeasternmost states in our country -- Maine, Vermont and New Hampshire -- where Yankee frugality is still alive and well, where people don't want a big federal government, where they want to the budget balanced, where they expect us to stop wasting money.

But it's important that we recognize that Yankee frugality is something that is consistent with living by basic values and I want to say again, we've reduced the size of this federal government by 200,000 people since I've been president, and as a percentage of the civilian work force, your federal government is the smallest it's been since 1933 as a percentage of the work force.

We are bringing down the government. But we're doing it in a disciplined way that has -- frankly, almost no one in America has noticed that we've downsized it this much because we've done it in a way that enabled us to maintain services with higher productivity and to treat the federal employees who left our federal service with dignity and honor.

That's the way we ought to approach the health care issue. We ought to be able to slow the rate of inflation in ways that people won't notice because we will do it at a pace and a way that will continue to enhance the quality of health care and meet the challenges that we face. And I think that's what you're all telling me. You think you could do it if people don't throw an arbitrary number at you that no serious student of health care believes can be absorbed.

There's one serious issue we really haven't talked about yet, and I want Dr. Rabkin to rap up this conversation by dealing with that -- the whole issue of medical education and how these programs have worked to further that.

Q Well, thank you, Mr. President. As you know, I'm the CEO of Boston's Beth Israel Hospital which is a major teaching hospital of Harvard Medial School. I'm also chairman-elect of the Association of American Medical Colleges. A significant proportion of the best doctors across the nation -- practitioners, researchers, and their teachers -- have spent at least a part of their formative years learning, training and practicing medicine here in Boston. As for research, examples of major advances, such as the cardiac pacemaker and the defibrillator developed at my own institution, Boston's Beth-Israel, well, such examples can be found at each of Boston's teaching hospitals.

Not only then do the academic medical centers of Boston -- the quality of care their medical knowledge across the nation, but we and related medical schools also empower the economic engines of the biotech industry throughout New England. Now, we have responded to present economic pressures. For example, in the past three years, Boston's ten major teaching hospitals have reduced operating expenses by $315 million, by about 5 percent, and reduced employment by 3,100 full-time equivalent positions, about 7 percent.

We are applying the simple rule that no business can continue unless revenue exceeds expenses by enough to keep on operating tomorrow. And for teaching hospitals, operating tomorrow includes teaching and research for the nation, as well as care of our own communities and beyond. For the teaching hospitals of Massachusetts, the proposed House and Senate cuts -- about $1.2 to $1.4 billion over seven years -- are too great a hit to take. For Beth-Israel alone, the amount is about $140 million. And as you say, Mr. President, this is too far too fast.

The House bill has taken a step toward building shared responsibility for teaching with its teaching hospital general medical education fund. We do appreciate such considerations. But when you think of what presently appears likely to be taken from payments related to medical education and disproportionate share considerations for all the hospitals with high numbers of uninsured patients on top of the inevitable reductions that all hospitals have to face, one can anticipate an unraveling of teaching, training and biomedical research that may become impossible to reconstruct.

Now, the teaching hospitals are prepared to do their fair share. We're asking only for moderation and a level playing field.

Well, thank you, Mr. President, for your position on these issues and, of course, for the opportunity to voice these concerns of the teaching hospitals not only in Boston, but nationwide.

THE PRESIDENT: Thank you very much. Let me say that I believe that this is one aspect of this debate that most Americans don't know about -- that the Medicare and Medicaid programs over time have been used by the Congress to funnel some extra money to our teaching hospitals, our children's hospitals in the form of the disproportionate share payments, among others, to support medical education and to make sure that the patients are there for the young doctors to treat. And I think it would be fair to say that not more than five or 10 percent of the people in the United States would be aware of that. There's no reason they should be.

But when Congress decided to support medical education in this way it served as a vital lifeline to keep our medical schools going and doing well and also meeting an important community need. And again, just to cut at this level and this way will really be a blow to the medical schools.

As you well know, we've tightened up on those payments in the last several years anyway. We've tried to practice certain economies. But to put what is clearly the world's finest system of medical education at risk I think would be a grave error. And that's another reason that I don't want to see cuts of this magnitude, because every -- every -- American, even Americans who may never spend a dollar of the government's money through the Medicare program and certainly may never be eligible for Medicaid -- every American has a clear interest in having the best-trained doctors in the world.

And Medicare and Medicaid have contributed to that and need to be able to continue to contribute to that in an appropriate way.

And I thank you.

Q Well, thank you, Mr. President.

THE PRESIDENT: I thank all of you. I've enjoyed this conversation very much. I wish it had happened face to face. And I thank you for your concern and your interest. Just keep speaking up, keep going forward. And we'll keep working here to make sure that we do the right thing.

Q Good luck.

Q Absolutely good luck. Thank you.

END 1:40 P.M. EST