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President Clinton Warns Governors that Congress Risks Nation's Fiscal Discipline

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National Economic Council

July 10, 2000

Today, at the National Governors' Association summer conference, the President will challenge the Congress to reject fiscally irresponsible tax cuts that would threaten investments in urgent health care priorities such as a voluntary and affordable Medicare prescription drug benefit. He will make the case that the Republican leadership's tax strategy threatens Medicare reforms, insurance coverage expansions, and long-term care initiatives that represent sound economic and social policy. He will point out that, because of the reforms brought to the Medicaid and Medicare programs, and the surpluses they helped create, the nation can add a voluntary prescription drug benefit to Medicare and still spend substantially less on health care over the next decade than was projected when he first came into office.

The President will also highlight the progress states have made in extending affordable insurance for more than 2 million children. However, he will encourage the nation's Governors to move aggressively take advantage of existing options to streamline eligibility and enrollment processes to enroll all those eligible for Medicaid and S-CHIP. To that end, the President will reiterate his opposition to Congressional proposals to reduce state funding for S-CHIP and state welfare programs, release a report promoting school-based outreach and announce that this month, the Department of Health and Human Services will issue guidance on approving S-CHIP 1115 demonstration waivers that expand coverage to uninsured children and their parents.

CONGRESS RISKS THE NATION'S FISCAL DISCIPLINE: TAX PLANS WOULD JEOPARDIZE CRITICAL INVESTMENTS IN HEALTH CARE. The Congress has adopted a strategy of passing tax cuts piece by piece. The tax cuts already passed by the House would spend over $550 billion of the surplus. If the Republican Congress continues on this path, they could pass tax cuts that would spend the entire on-budget surplus and more leaving no money for America's priorities, including crucial investments in health care.

  • The estate tax bill the Senate will vote on this week is backloaded and fiscally irresponsible. According to estimates by the Joint Committee on Taxation and the Department of the Treasury, the cost would explode from about $100 billion from 2001-10 to about $750 billion from 2011-20. In 2010, the entire benefit of estate tax repeal would go to only 54,000 of the wealthiest estates, two percent of all decedents, providing them with an average tax cut of $800,000. This would cost $50 billion, substantially more than the cost of the President's prescription drug proposal, which would potentially benefit more than 40 million people. Only a tiny fraction of the total benefits small businesses and family farms. Furthermore, studies by economists have found that repealing the estate tax would reduce charitable donations by $5 billion to $6 billion per year.

MORE EFFICIENT MEDICARE AND MEDICAID SPENDING HAS MADE A MAJOR CONTRIBUTION TO TODAY'S SURPLUS. The Clinton-Gore Administration has overseen the biggest economic turnaround in the nation's history. The success in slowing health inflation has strengthened the economy, helped balance the budget and pay down the national debt, and extended the life of the Medicare Trust Fund, while saving hundreds of billions of dollars that should be used to help meet the nation's health care challenges.

When the President took office, spending in Federal health programs was growing at over 12 percent per year. Because of strong program management, improved efficiency, reductions in fraud, and low health care inflation, federal health spending for 1993 through 2000 has been a total of a half a trillion dollars lower than projected. Similarly, reduced Medicare and Medicaid spending projections account for nearly one-third of the improvement in the projected federal budget outlook since 1993. Not only has this has helped to eliminate the deficit and buy down the national debt, it has extended the life of the Trust Fund by 25 years. He will stress that Medicare and Medicaid should continue to be prudently managed through competitive reforms.

TAKING MEDICARE OFF-BUDGET AND INVESTING IN HEALTH CARE IS SOUND ECONOMIC AND SOCIAL POLICY. Now that the Federal government is on a fiscally sound path, Medicaid and Medicare programs have become more efficient, and the life of the Medicare Trust Fund has been secured for a quarter century, the President will issue a prescription for maintaining fiscal discipline while investing in health care. He will:

  • Advocate that the best policy for the economy and the Medicare program is to follow the Vice President's lead and take Medicare off budget. Taking the Trust Fund off-budget will ensure that payroll taxes contributing to today's Medicare surplus will not be diverted to pay for tax cuts or spending increases. Instead they will be used to pay down the debt in order to help strengthen Medicare. This will contribute to the President's commitment to retire the nation's debt by 2012. In addition, the interest savings achieved by protecting the Medicare surplus will help extend the life of the Trust Fund to at least 2030.
  • Make the case that targeted and significant investments in health care are good economic and social policy. Children without health insurance often don't get glasses or treatments for ear infections, limiting their ability to see the blackboard or hear their teachers. Adults without health insurance are 50 to 70 percent more likely to be hospitalized for treatable conditions like pneumonia. Allowing people with disabilities to keep their Federal health insurance when they return to work brings untapped talent to our workforce. And, older Americans who can't afford prescription drugs are more likely to end up in nursing homes. Recognizing the need to invest in health care, the President will highlight his budget investments in:
  • A long-overdue, voluntary, affordable prescription drug benefit in Medicare. The President has proposed to invest $250 billion over 10 years to create a voluntary Medicare prescription drug benefit. This benefit would begin in 2002 and, in return for a $25 premium, provide prescription drug coverage that would have a zero deductible and cover half of all prescription drug costs up to $5,000 when fully phased in as well as limiting all out-of-pocket medication costs to $4,000. This optional benefit would also provide negotiated discounts to ensure that Medicare beneficiaries no longer pay the highest prices in the marketplace. The Administration's proposal is part of a broader set of reforms that would make the program more efficient and competitive, and dedicate $40 billion over 10 years to improve health care provider payment rates. The President will highlight the fact that these major investments in Medicare can be made while program spending would still be substantially less on health care over the next decade than was projected when he took office.
  • Health insurance coverage for millions of uninsured Americans. The President has proposed a major, $110 billion initiative to address the nation's multi-faceted problem of the uninsured. It builds on and complements current private and public programs. The initiative would: provide a new, affordable health insurance option for parents; accelerate enrollment of uninsured children eligible for Medicaid and S-CHIP; and expand health insurance options for Americans facing unique barriers to coverage, including children aged 19 and 20, Americans aged 55 to 65, workers in small businesses and in-between jobs, and people leaving welfare for work as well as legal immigrants. Building on S-CHIP and dedicating more resources for parents is a policy that has been endorsed by both the NGA and Vice President Gore.
  • New assistance for individuals with long-term care needs and their caregivers. The President's 2001 budget included a $3,000 tax credit for people with long-term care needs or their caregivers – tripling the credit over last year's proposal and increasing the total investment in long-term care to $28 billion over 10 years. In addition, the initiative would establish: a new Older Americans Act family caregivers support program; enhanced flexibility for home and community-based alternatives in Medicaid; and new private long-term care insurance options for Federal employees.

PRAISE STATES WITH INNOVATIVE S-CHIP ENROLLMENT AND OUTREACH PRACTICES. The President will praise states for their progress in implementing the S-CHIP program, and note that the strong enrollment trends reported over the past year appear to be continuing into 2000 (although data from all states is not yet in). From the first quarter of FY 1999 to the first quarter of 2000, enrollment increased by more than 80 percent in 43 states. During that time period, 19 states reported that their enrollment had more than doubled, and 9 of those states reported that their program enrollment had tripled. The President will commend states that have eliminated burdensome eligibility requirements, shortened application forms, and streamlined the enrollment process.

In addition, the President will release a new report by the Departments of Health and Human Services, Education, and Agriculture that details recommendations and best practices for school-based outreach activities. This new report details strategies for motivating schools to adopt outreach as part of their mission and highlights promising state practices for identifying and enrolling eligible children through school systems.

CHALLENGE STATES TO SHOULDER THE RESPONSIBILITIES ASSOCIATED WITH THE IMPLEMENTATION OF WELFARE REFORM. While committing to protect S-CHIP and TANF funding from devastating cuts, the President will reiterate his concerns about families inappropriately losing their Medicaid when they leave welfare and enter the workforce. He will also call on the states to use TANF dollars responsibly and not as a means to reduce their own investment in welfare reform. Although states have cut the welfare rolls in half and millions of families have moved from welfare to work, more needs to be done to help those families remaining on welfare to move into the workforce and to help low-income working families succeed on the job. The President will also praise states that have responded to these challenges by identifying existing problems and redesigning their eligibility systems to correct them.

ANNOUNCE NEW S-CHIP WAIVER POLICY. The President will also announce that, later this month, the Department of Health and Human Services will release guidance on its new 1115 waiver policy for the State Children's Health Insurance Program (S-CHIP). The Administration will approve waivers that demonstrate innovative approaches to covering uninsured children and, to the extent that states have succeeded in covering uninsured children, uninsured parents. States can access unused state allotments for this purpose. This flexibility will help meet the mutual goal of using state-based approaches to reducing the number of uninsured.



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