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Major New Health Insurance Initiative

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THE WHITE HOUSE
Office of the Press Secretary


For Immediate Release January 19, 2000



CLINTON-GORE ADMINISTRATION UNVEILS
MAJOR NEW HEALTH INSURANCE INITIATIVE
January 19, 2000

Today, President Clinton will unveil a 10-year, $110 billion initiative that would dramatically improve the affordability of and access to health insurance. The proposal would expand coverage to at least 5 million uninsured Americans and expand access to millions more. It addresses the nationís multi-faceted coverage challenges by building on and complementing current private and public programs. Specifically, the initiative will: (1) provide a new, affordable health insurance option for families; (2) accelerate enrollment of uninsured children eligible for Medicaid and S-CHIP; (3) expand health insurance options for Americans facing unique barriers to coverage; and (4) strengthen programs that provide health care directly to the uninsured.

The Challenge of the Uninsured and Its Implications. Over 44 million Americans lack health insurance. Although there are many causes of this problem, it generally results from lack of affordability and/or access to coverage. Family health insurance premiums cost on average $5,700 -- which represents a large share of income for a family trying to make ends meet. Purchasing affordable, accessible insurance is a particular challenge for many older people, workers in transitions between jobs, and small businesses and their employees. Lacking health insurance has serious consequences. The uninsured are three times as likely not to receive needed medical care, 50 to 70 percent more likely to need hospitalization for avoidable hospital conditions like pneumonia or uncontrolled diabetes, and four times more likely to rely on an emergency room or have no regular source of care than the privately insured.

The Presidentís four-pronged initiative significantly expands coverage and improves access by:

I. Providing a new, affordable health insurance OPTION FOR families ($76 billion over 10 years, about 4 million uninsured covered). Over 80 percent of parents of uninsured children with incomes below 200 percent of poverty (about $33,000 for a family of four) are themselves uninsured. Yet, while states have aggressively expanded insurance options for children through Medicaid and the State Childrenís Health Insurance Program (S-CHIP), parents are often left behind. There are about 6.5 million uninsured parents with income in the Medicaid and S-CHIP eligibility range for children. These parents frequently do not have access to employer-based insurance, and when they do, cannot afford it. Recognizing that family coverage not only helps a large proportion of the nationís uninsured adults but increases the enrollment of children, the Vice President, the National Governorsí Association, and a wide range of groups including Families USA and the Health Insurance Association of America have called for building on S-CHIP to cover parents. The Administrationís budget adopts this approach by:

  • Creating a New "FamilyCare" Program. This proposal, which has been advocated by Vice President Gore, would provide higher Federal matching payments for state coverage of parents of children eligible for Medicaid or S-CHIP. Under FamilyCare, parents would be covered in the same plan as their children. States would use the same systems and follow most of the same rules as they do in Medicaid and S-CHIP today, and the program would be overseen by the same state agency. State spending for FamilyCare would be matched at the same higher matching rate as S-CHIP (up to 15 percentage points higher than the Medicaid rate). To ensure adequate funding, $50 billion over 10 years would be added to the current state S-CHIP allotments. To access these higher allotments, states would have to first cover children to 200 percent of poverty as 30 states now have done. Given statesí enthusiastic response to S-CHIP and the NGA support for this option, we expect strong state response and significant expansion to parents under FamilyCare. If, after 5 years, some states have not expanded coverage of parents to at least 100 percent of poverty ($16,700 for a family of 4), a fail-safe mechanism would be triggered to require states to expand coverage to that level.
  • Assisting Families in Affording Private Employer-Based Coverage. FamilyCare would also facilitate the option to pool state funding with employer contributions toward private insurance, which can be a cost-effective way to expand coverage. Under this option, families otherwise eligible for FamilyCare coverage could get assistance in purchasing their employersí health plan if it meets FamilyCare standards and their employer pays for at least half of the premium. This minimum employer contribution, along with the S-CHIP crowd-out policies, should discourage employers from reducing or dropping coverage. This option is supported by the National Governorsí Association as well.

II. Accelerating enrollment of uninsured children eligible for Medicaid and S-CHIP ($5.5 billion over 10 years, an additional 400,000 uninsured children covered). The State Childrenís Health Insurance Program (S-CHIP) helps children in families with income too high to be eligible for Medicaid but too low to afford private insurance. Enrollment in S-CHIP doubled to 2 million children in 1999. However, despite this encouraging trend, millions of children remain eligible but unenrolled in both S-CHIP and Medicaid. The Administrationís budget includes ideas advocated by the Vice President that would give states needed tools to increase coverage by:

  • Allowing School Lunch Programs to Share Information with Medicaid ($345 million over 10 years). Since 60 percent of uninsured children are in the school lunch program, sharing eligibility information can efficiently help outreach efforts.
  • Expanding Sites Authorized to Enroll Children in S-CHIP and Medicaid ($1.2 billion over 10 years). This includes schools, child care resource and referral centers, homeless programs, and other sites.
  • Requiring States to Make their Medicaid and S-CHIP Enrollment Equally Simple ($4.0 billion over 10 years). Most states have carried over their S-CHIP simplification strategies like eliminating assets tests and using mail-in applications into the Medicaid program. This proposal would have all states do so to make enrollment easier for both programs.

III. Expanding health insurance options for AMERICANS facing unique barriers to coverage ($28.7 billion over 10 years, about 600,000 million uninsured people covered). Some vulnerable groups of Americans lack access to employer-sponsored insurance and insurance programs like Medicare or Medicaid. These include older Americans, people in transition (between jobs, turning 19 and entering the workforce, leaving welfare for work), and workers in small businesses. This plan addresses these and other problems by:

  • Establishing a Medicare Buy-In Option and Making It More Affordable Through a Tax Credit ($5.4 billion for both the buy-in and credit over 10 years). The rate of uninsured is growing fastest among people ages 55 to 65 and is expected to increase even faster in the future. Recognizing this, the President and Vice President are calling on Congress to pass legislation that allows people ages 62 through 65 and displaced workers ages 55 to 65 to pay premiums to buy into Medicare. The proposal also would require employers who drop previously-promised retiree coverage to allow early retirees with limited alternatives to have access to COBRA continuation coverage until they reach age 65 and qualify for Medicare. This year, to make this policy more affordable, the President proposes a tax credit, equal to 25 percent of the premium, for participants in the Medicare buy-in. Coupled with the tax credit for COBRA (described below), this policy will address access to and the affordability of health insurance for this vulnerable group.
  • Making COBRA Continuation Coverage More Affordable ($10.3 billion over 10 years). Consolidated Omnibus Budget Reconciliation Act (COBRA), passed in 1985, allows workers in firms with greater than 20 employees to pay a full premium (102 percent of the average cost of group health insurance) to buy into their employersí health plan for up to 18 to 36 months after leaving their job. This policy is intended to improve the continuity of health coverage as workers change jobs. However, fewer than 25 percent of people eligible for this coverage participate, in part due to cost. The Administrationís budget includes a 25 percent tax credit for COBRA premiums to reduce the number of Americans who experience a gap in coverage due to job change.
  • Improving Access to Affordable Insurance for Workers in Small Businesses ($313 million over 10 years). Nearly half of uninsured workers are in firms with fewer than 25 employees. The President proposes to give small firms that have not previously offered health insurance a tax credit equal to 20 percent their contribution -- twice the credit he proposed last year -- towards health insurance obtained through purchasing coalitions. In additional, tax incentives would be given to foundations to help pay for start-up costs of these coalitions, and the Federal Employeesí Health Benefits Program would make available technical assistance to purchasing coalitions.
  • Expanding State Options to Insure Children Through Age 20 ($1.9 billion over 10 years). Nearly one in three people ages 18 to 24 are uninsured mostly because they age out of Medicaid or S-CHIP or no longer are dependents in private plans. However, they often do not have jobs that offer affordable coverage. The budget would gives states the option to cover people ages 19 and 20 through Medicaid and FamilyCare.
  • Extending Transitional Medicaid ($4.3 billion over 10 years). Many people leaving welfare for work take first jobs that do not offer affordable health insurance. Recognizing this, Congress passed a requirement in 1988 that extends Medicaid coverage for up to a year for those losing it due to increased earnings. This provision was extended in the welfare reform law to 2001. The Presidentís budget makes this provision permanent and simplifies the state and family requirements to promote enrollment.
  • Restoring State Options to Insure Legal Immigrants ($6.5 billion over 10 years). States are prohibited from providing health insurance for certain legal immigrants who entered the U.S. after the enactment of welfare reform. The uninsured rate for people of Hispanic origin, some of whom are legal immigrants, was 35 percent in 1998 -- over twice the national average of 16 percent. The proposal would give states the option to insure children and pregnant women in Medicaid and S-CHIP regardless of their date of entry. It would eliminate the 5-year ban, deeming, and affidavit of support provisions. The proposal would also require states to provide Medicaid coverage to disabled immigrants who would be made eligible for SSI by the FY 2001 budgetís SSI restoration proposal.

IV. Strengthening Programs that Provide Health Care Directly to the Uninsured (At least $1 billion over 10 years). In the absence of a universal health insurance system, public hospitals, clinics, and thousands of health care providers give health care of the uninsured and receive inadequate compensation for doing so. Despite a rising need, reductions in government spending and aggressive cost cutting by private insurers has left less money in the health care system to address these needs. The President will renew his commitment to helping these providers by:

  • Increasing Funding for Increasing Access to Health Care for the Uninsured (+$100 million for FY 2001, $1 billion over 5 years). Last year, the President and Secretary Shalala proposed an historic new program to coordinate systems of care, increase the number of services delivered and establish an accountability system to assure adequate patient care for the uninsured and low-income. The Congress funded an initial $25 million investment for this program. This year, the President proposes funding this initiative at $125 million, a $100 million increase over 2000, representing a down payment on the Presidentís proposal to invest $1 billion over 5 years. The Administration will also aggressively pursue an authorization to ensure that the program becomes a core element of the health care safety net.
  • Investing in Community Health Centers (+$50 million for FY 2001). The budget proposes an increase of $50 million to support and enhance the network of community health centers that serve millions of low-income and uninsured Americans -- for total funding of over $1.069 billion in FY 2001.


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