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SUBJECTrrlTLE
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Chris Jennings, Steve Edelstein to Hillary Clinton
Re: Congressman Clay (7 pages)
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COLLECTION:
Clinton Presidential Records
Domestic Policy Council
Chris Jennings (Health Security)
OAiBox Number: 23754
FOLDER TITLE:
July 1993 HSA [5]
gf97
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�Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
AND TYPE
001. memo
w/attach
I
SUBJECTffITLE
DATE
7/28/93
Chris Jennings, Steve Edelstein to Hillary Clinton
Re: Congressman Clay (7 pages)
RESTRICTION
P5
This marker identifies the original location of the withdrawn item listed above.
For a complete list of items withdrawn from lthis folder, see the
Withdrawal/Redaction Sheet at the front of the folder.
COLLECTION:
Clinton Presidential Records
Domestic Policy Council
Chris Jennings (Health Security)
ONBox Number: 23754'
FOLDER TITLE:
July 1993 HSA [5]
gf97
RESTRICTION CODES
Presidential Records Act -[44 U.s.c. 2204(a»)
Freedom of Information Act - [5 U.S.c. 552(b»)
PI
P2
P3
P4
bel) National security classified information [(b)(I) of the FOIA)
b(2) Release would disclose internal personnel rules and practices of
an agency [(b)(2) Of the FOIA)
b(3) Release would violate a Federal statute [(b)(3) of the FOIAI
b(4) Release would disclose trade secrets or confidential or financial
information [(b)(4)1 of the FOIAI
b(6) Release would conJtitute a clearly unwarranted invasion of
personal privacy (b)(6) of the FOIA)
b(7) Release would disciose information compiled for law enforcement
I
purposes (b)(7) of Ithe FOIAI
b(8) Release would disclose information concerning the regulation of
financial institutio~s [(b)(8) of the FOIA)
b(9) Release would disclose geological or geophysical information
concerning wells l(b)(9) of the FOIA)
.
National Security Classified Information [(aXI) of the PRA)
Relating to the appointment to Federal office [(aX2) of the PRA)
Release would violate a Federal statute [(a)(3) of the PRAI
Release would disclose trade secrets or confidential commercial or
financial information [(a)(4) of the PRA)
P5 Release would disclose confidential advise between the President
and his advisors, or between such advisors [aX5) ofthe PRA]
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personal privacy [(a)(6) of the PRAI
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of gift.
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RR. Document will be reviewed upon request.
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�U.S. Department of Labor
Pension and Welfare Benefits Administration
Washington, D.C 20210
July 11, 1993
MEMORANDUM FOR:
THE FIRST LADY
FROM:
RICHARD P.
U.S.
SUBJECT:
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DEPARTMEN~~' I
HIN~/);2 -
Job Losses and National Health Care Reform
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There has been considerable speculation recently about job losses
that might result from an employer mandate cdntained in the
health care· reform proposal. Some estimates Ihave placed the
number of jobs that could be lost in the millions.
of~hese
There is little empirical basis for most
projections.
The few reputable.' analyses that have been at~empted in the
context of employer mandates contained in prior proposals have
set the number of job losses as low as 60, oo~ and as high as 1. 5
million. The attached paper provides a brief discussion of the
major issues relevant to the analysis of employment impacts and
contains summaries of the major stUdies in art appendix.
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The existing analyses may not be applicable to the
Administration's forthcoming proposal. Their conclusions are
extremely sensitive to the specific elements/ of earlier
proposals, particularly the level of benefits mandated, the
,financing mechanism (premium versus payroll) I and most importantly
the absence of subsidies for low wage workers.
All jobs impact analyses have some common el1ements. These are
discussed in greater depth' in the attached piaper. The, two key
issues are:
Who ultimately pays: Labor market theory expects workers to
pay for most of the increased benefits /through reduced
wages. The extent to which this occur~ lowers any
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employment effects. Shifting of costs from employers to
workers increases with time but is con~trained for low wage
workers. Minimum wage workers cannot ijave wages reduced.
This requires employers to pay the full amount of any
additional benefits.
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How sensitive to labor costs are emplotment levels:
Economists vary widely on the estimatelof the employment
loss that will result from labor cost increases. There is
agreement that the employment losses ftom a given level of
higher employer costs increases with time. High sensitivity
estimates use factors ten times those bf the low end.
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Mainstream estimates are that over the long-run there is a
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0.5 percent decline in employment for
in employer costs.
a one
percent increase
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The results of any analy~is are highly dependent on the
assumptions about these key variables. stuciies showing large job
impacts are. gener:ally shprt, term' projecti(:m~1 that a~sume
employers wl11 pay the f~ll cost of benefltS1, use hlgh
sensitivity to cost employment assumptions qpd presume no
subsidies. The ,studies showing minimal job:~osses are long term
projections that 'assume ~age adjustment willi be made through the
normal operation of labor markets and incorporate large
subsidies.
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Studies such as the receht NFIB sponsored r~port that purport to
to indicate "jobs at ris~" (some as high as ;:15 to 20 million)
show only workers whose penefit costs may iq~rease and
incorporate none of the lcey analytical proc~sses. These are
essentially meaningless.;
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Administration staff arelcurrentlY working ~~ a complete
employment impact projection that will be ba~ed on the specifics
of the reform proposal. I ThlS cannot be comp:leted untl1 key
design issues are resolved, most criticallylhe cost of the
benefit package and the ~ubsidies directed ~p small firms and low
wage workers. A completei analysis should beiavailable shortly
after the President reaches final decisions bn these issues.
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A reasonable expectationlis that there will !be some employment
losses concentrated among very low wage work~rs and in small
businesses because they do not currently pr6~ide health benefits
to these workers. Some of the potential emplloymentlosses can be
avoided through subsidie~ directed to the employers of low wage
workers. These types of subsidies are extremely difficult to
design, complicated to administer and can bel very expensive.
Over the long ter:m there! should be SignificJlt realignment of
employment from health insurance and other ~~ctors into direct
health care. This effecti is separate fromth~ consequences of the
employer mandate.
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A BRIEF REVIEW OF THE P01;ENTIAL
EMPLOYMENT .EFFECTS OF MANDATORY:, HEALTH BENEFITS
.
RICHARD P. HINZ
,
U.S. DEPARTMENT OF LABOR
JULY 1993
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The .imposition of' an employment based health benefits mandate
will result in a significant increase in th~ cost employers must
pay to provide benefits. This could cause ~mployers not
currently providing health benefits, -mostly !~mall businesses, to
face a major change in their cost of labor. IAn employer mandate
will also substantially alter the amount and ' pattern of health
care consumption.. Both the labor cost and li.:alth care spending
ramifications of mandatory coverage have potential employment
consequences.
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The direct labor market effects of a mandate may be considered in
terms of three closely related categories: 'I
* A potential loss of jobs. due to a higher cost of labor - A
reduction in the demand for labor.
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* Changes in the willingness of some g~oups to enter or
remain in the labor market - Labor supply effects.
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* Changes in.the number and
hea I th care industry.
distributi~n
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of jobs within the.
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LABOR DEMAND
Most analyses of employment effects focus on the general
employment demand effect of health care reform. The underlY1ng
basis of these projections is the concept that mandating benefits
that have not previously been provided, or ~hich are above the
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current level, w111 1ncrease the cost of labor. When the
utilization of labor is price sensitive (a ~ompetitive market) an
increase in costs will lower the demand for; labor and lead to
decreasing employment.
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Over the past several years a number of ana!+yses have sought to
estimate the labor demand effects of an emp:loyer mandate. These
estimates range from employment lopses as lbw as 60,000 to as
high as 1. 5 million jobs. Most of the vari'ation in these
... 1,
estimates is the result of differences in the basic
characteristics of the mandate proposal such as the generosity of
the benef1ts pac1:{ageand the nature of the ;f1nanc1ng mechan1sm
(payroll tax or prem1um). The sens1t1v1ty ito these bas1c des1gn
parameters. tends, to obscure much of the comparability of these
analyses. Several critical issues are, hovJever, common to the
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evaluation of any labor demand analysis.
WHO PAYS FOR THE BENEFITS - THE INCIDENCE OFiCOSTS.
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If the costs of the mandate are pa1d ent1rely by the employer
and, therefore, represent an increase in the: Icost of labor the
employment effects can be expected to be neg~tive and in
proportion to the cost increase. Conversely ~I if wages or other
compensation are lowered to completely offse~ any increased
benefits the total labor cost is unchanged arid there should be no
emploYment effects. The degree to which cost~ are effectively
passed, on to workers is likely to be_dependertt on the interplay
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of factors related to the t1m1ng of the mandate, underlY1ng
economic conditions and the nature of any par,ticular labor
market.
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The general equil~brium theory is that market forces limit the
compensation of workers to the value of thei:r·marginal
production. Externally imposed increases in ]abor costs,
therefore, require downward adjustments in c#mpensation. The
dynamics of labor markets are such that thes~ changes tend to
occur over a period of years due to rigiditi~s in the wage
structure imposed by a range of factors inclllding collective
bargaining agreements and the often less for~al, but equally
restrictive, compensation setting practices cif employers.
A mandate imposed with short notice or a greJt deal of
uncertainty regarding its cost provides mini~al opportunity for
compensating wage ,adjustments. Conversely,
long phase in
period greatly increases the likelihood that:lemployers and
workers will forgo wage increases or otherwise adjust the value
of compensation packages (labor costs) so th~t the workers bear
the full cost of the mandate.
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General economic conditions are relevant to this process. A
period of high inflation will facilitate wag~decreases by
permitting employers to achieve real wage de9lines simply by
holding nominal wages constant. Increases irt labor productivity
may similarly facilitate the shifting of cos~ burdens. During a
transitional period, productivity gains exce~ding real wage
increases can offset increased benefit.costs~ This can maintain
the marginal product of labor versus cost eqJilibrium preventing
changes in employment levels.
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The character of individual labor and produc~ markets also play a
role in the incidence of benefit costs. Work~rs are generally
presumed to accept a benefit for wage exchange to the extent they
perceive the benefits of the mandate to havelvalue equivalent to,.
the level of wage reductions required to obt,ain them. Tax
considerations and community rating requirem~nts are important to
this process. The replacement of taxable wag~s with tax preferred
benefits should be desirable to workers faci~g tax rates above
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zero providing the benefits are perceived to: exceed the
difference between their nominal cost and the tax rate (the true
after tax or wage ,equivalent cost).
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If the costs of health benefits were calculahed on an individual
basis and were perfectly aligned with each w~rkers expected
utilization of services this exchange would~esimple. Problems
arise with group rates, (in particular communlty rating) and from
workers facing low tax rates. Workers with b~low average
'utilization (young and, healthy) paying a cost averaged across a
large population may not accept wage offsetsllequal to the
employers costs because they believe _t:hat th'~ir benef i tsare not
matched with the cost. This is exacerbated by the fact that
these same workers are often those with no t,clixable income (below
$15,000) and who therefore do not effectiveJ;y obtain a subsidy in
the exchange of taxable wages for non-taxablie benefits.
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,The extent to which these circumstances mayiead to a cost
incidence on the employer, the consequent employment impact will
vary with the natur'e of the employer and th~1 labor market in
which the employer operates. Some industries may be able to pass
along the costs of mandated benefits in the ,form of higher
prices, particularly if there is no substitti~e product and all of
their competitors face equivalent increases iin labor costs.
Employers may also be able to imposewages4~creases if workers
face few alternati ves employment opportuni t~I~S (where labor
markets are highly segmented). Conversely, ;,readily available
sUbstitute products and a sellers market fO~ labor will, to a
greater extent, impose the cost on the employer.
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Constrained labor and product market conditiions may apply to the
Hawaiian experience with mandated benefits. :IThe unique geographic
circumstances place a high cost on substitut;e products,
especially in a service oriented economy. this facilitates
absorption of increased benefits costs thro\:igh higher prices.
Limited labor mobility may also enable emp19yers to more readily
impose wage constraints on workers. The interaction of these may
explain the limited employment effects of H~waii's health
benefits mandate.
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The most rigid constraint that will impose the full incidence of
a benefit mandate on employers are minimum~age laws. Employers
of minimum wage workers who provide no curr~nt health benefits
will experience an increase in labor costs bf the full amount of
the benefit mandate as they are legally con~trained from
negotiating a wage offset. Unless these emp,loyers are able to
pass along the cost in the price of product. their workers are
likely to incur the greatest level of emplotment effects.
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Labor economists generally agree that over :the long term the
compensation equilibrium will be maintained through adjustments
in prices or wages, following the imposition: of a benefits mandate
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except where specific constraints (minimum wa,ge laws) are
applicable. Most research shows that this has' generally occurred
except among younger and low wage workers. ~here is broad
agreement that any job losses that occur wil] be concentrated in
this segment of the workforce.
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The analyses of employment impacts which conSlude that there
would be modest effects (less than 100,000 jdbs) are those which
take a long term perspective and assume that tl to the extent
legally possible, the incidence will fall on1the worker'. They
conclude that employment effects will be pri~arily concentrated
in minimum wage workers, implicitly ~elieving that the effects on
, this group can be :somewhat mitigated through I ,price increases
although there is no specific analysis of individual labor and
product markets.
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Analyses concluding employment losses in exc$ss of 1 million are
generally short term in perspective. These ~tudiesassume a
highly rigid wage structure resulting in sigtiificant labor cost
increases. They generally do not take into ~ccount potential
price increases and assume that the mandate ~s imposed over a
short term and effective immediately, thus pfecluding wage
adjustments during a phase in period. Implic~tly, due to the
short term perspective, these analyses discount the effects of
productivity increases, inflation or the taxi preferred nature of
heal th benefits in facilitating compensation 'jtradeoffs that might
limit employment impacts. .
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SENSITIVITY OF EMPLOYMENT TO LABOR COST - DEMAND ELASTICITY
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The second major aspect of a labor demand an~lysis is the
sensitivity of employment to the total cost tif labor. While it
is generally accepted that increased costs l~ad to a diminished
utilization of labor there is little consensds regarding the
magnitude of these changes. One of the reas6ns for this is the
absence of any comparable experience from wh~ch to draw
conclusions. ,
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This is a problem both in.regard to.isolating the "pure labor
cost" effect from 'other factors that may be ~ffecting a natural
experiment and in the applicability of priori experience to health
care reform. It is particularly problematic: in the context of a
health benefits mandate because the potentia ill magnitude of the
cost increase that may be imposed is beyond the scope of what has
been observed. The employer of a minimum wage worker required to
provide family coverage might experience' a 4q% increase in labor
costs. Extrapolating to this level of cost ~ncreases from much
smaller increases that can be observed introduces a great deal of
uncertainty to the estimates.
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The sensitivity of employment to cost change~ is generally
expressed as a "demand elasticity", the ratip of the percent
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change in employment to the percent change i~ labor costs.
Estimates of this,relationship in recent yea~s have ranged from
as low as 1/10th of percent decline in emploYment for each one
per cent increase in costs to as high as neatly ,a 2% decline in
employment. Recent general estimates based bn observation of
mandatory benefits such as Worker's Compensation cluster around a
1/2 percent declin.e, in employment'resulting from a one percent
labor cost increase. These relationships vary for individual
markets, by wage levels and from the long to; the short term. The
short term sensitivity is generally accepted to be significantly
less than over the long term.
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The labor demand sensitivity estimate,' in, combination with the
assumption about the incidence of costs, are; 1 the crux of
virtually all analyses of the employment impact of health care
reform. An assumption that workers bear the full incidence ,of
cost ,makes the demand elasticity far less important, and of
relevance primarily to minimum wage workers.: The view that there
are significant impediments to cost 'shifting· makes the elasticity
of demand for labor paramount.
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Analyses that reach the conclusion that ther~ wil~ b 7 very large
employment effects place all or most of the Icost lncldence on
employers and posit a high sensitivity of, employment to labor
costs. These may be criticized as matching ~ short term cost
incidence assumption with a long term labor :demand elasticity.
Analyses that find minimal impacts generallYlanticipate a high
level of cost shifting and a relatively low :level of sensitivity
of employment.
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A complete analysis would provide estimates !over the short and
long term and vary the incidence and cost s~~sitivity parameters
appropriately. This would be likely to conqlude that the two
factors will tend, to offset one and other as,l they vary in '
opposite directions (cost shifting minimizing the impact while
the negative elasticity of demand is accentuated with time). The
level of cost shifting can be anticipated tqlhave a
proportionately greater effect over time as :~ full cost shift
eliminates a worker from the group potential'fY affected by labor
demand shifts. This interaction should result in a declining
employment impact; over time.
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The lack of this type of dynamic projection jis a major deficiency
of the analyses to date. In addition to thejuncertainty and very
generalized assumptions about the key elements of cost incidence
and labor demand, most present either a ful~~ phased in system
that has reached an equilibrium state or pr~sumean immediate
mandate with no opportunity for compensating! adjustments in labor
markets. The former obscures what is likely to be a complex
process played out over several years in a widely varying manner
across different industries and labor marketl~. The latter is
simply an unrealistic possibility, the analy,~is of which sheds
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little light on what is likely to occur.
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The consideration of these two key determinants of possible
disemployment effects highlights the importatice of several design
aspects of a reform proposal. Any employment effects will be
directly proportional to the cost of the mandated benefit
package. In combination with a community rating requirement, as
discussed above, an expensive mandatory bene~itlevel will impose
" significant problems in regard to wage shift~ for young and low
wage workers. The degree to which legal (min~mum wage) and other
rigidities lead to increased labor costs fori this group will be
the primary determinant of job losse~~
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This makes the structure and extent of subsidies for low wage
workers a critical aspect of the system design. A design that
efficiently targets subsidies to the employe~s of workers subject
to the dual problems of wage rigidities and ~ighly,cost sensitive
labor demand can potentially mitigate most on the adverse
employment impact of a mandate. This is an ~xtremely difficult
task due to the complexity of possible subsi~y schemes and the
lack of prior experience on which to base expected outcomes and
because the level and targeting of these sub~idies is contingent
on an accurate assessment of the dynamics ofilthis segment of the
labor market. Subsidies that fully offset employment effects are
also likely to be ,very expensive.
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The manner in which dependents and part-time: workers are treated
under a reform is also important. The extent: to which employers
are required to pay the full benefit costs of less than full time
workers will create potentially significant 90st advantages for
employers to substitute fewer full time work~rs for part timers.
In general a fixed benefit cos.t for full tim~ workers and any'
cost for others will make it more attractive: Ifor employers to use
existing workers at overtime rates rather than to add to their
workforce during cyclical upswings or the ea~ly stages of an
expansion.
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The treatment of dependents under a mandate may also have
employment SUbstitution ramifications. Emplpyers facing a
differential cost for workers with and withoJt dependents may
have cost incentives to SUbstitute single wofkers for those with
families. The potential for this will be dictated by the pricing
and coverage requirements for dependents, pa*ticularly those who
are working.
LABOR SUPPLY
The imposition of; a health insurance mandate; I on employers may
also have an impact on the willingness of some workers to enter
or remain in the labor market. While a great deal of attention
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has been focussed on the consequences of labor demand changes
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these potentlal labor supply effects have been afforded little
interest.
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When the total level of labor costs maintains a long term
equilibrium through compensating adjustments lin wage levels some
workers wages may be expected to fall more th~n the value of the
additional benefits they receive. This is p~rticularly an issue
when a community rate for benefits such as he~lth insurance is
mandated·:1
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comm';ln~ty rating by definition results in hal'f of the population
recelvlng benefits below the mean. This imp61ses a potential
disincentive for young and healthy workers tol incur the average
cost in the form of a wage reduction. A family rate structure
and subsidies for non workers poses similar problems. The non
worker, through subsidies, may be able to keep coverage at no
cost. Likewise a family member'who, when not.! working, is simply
an addition to a family policy, faces a simii~r zero cost of
coverage while out of the labor force. This potentially
diminishes the incentives for some workers to! enter or remain in
the labor force.
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When the incidence of benefit costs fallon workers and coverage
is universal a mandate may function as a "tax:" on some labor
resulting in a diminution of labor supply. E~timating the,
sensitivity of labor supply to this "tax" ha!;> all of the
difficulties attendant to estimating demand+lasticities,
particularly the lack of a comparable preced$ntfrom which to
project behavior. :
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The generally accepted view is that the labo~ supply behavior of
workers who are, the sole or primary earners flor a family and who
have no alternative sources of support is un*ffected by marginal
changes in the effective tax rate at the levEh imposed by a
health insurance mandate. High wage earners (above the median)
are also presumed to be have inelastic labor supply behavior.
This leaves seyeral sub-groups on which the ~andate may have,some
effect. The two of greatest relevance are older workers nearlng
retirement and individuals currently out of the labor force and
receiving medicaid.,
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retireme~t
Currently many workers eligible for
benefits ,but not
yet eligible for medicaid (55 to 64 year old~) may be remaining
in the labor force primarily to retain healtH benefits as part of
an employment based group. Their implicit cdst of this coverage
is usually far below the benefits received arid much less than
alternatives they would face upon leaving employment. This is
especially true of those with pre existing cdnditions who could
not purchase coverage at any price upon leav~ng employment.
Universal coverage, elimination of pre eXlst~ng condition
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exclusions and community rated prices could induce many of these
older workers to leave the labor force.
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Alternatively, families now receiving medicaild often face loss of
coverage upon entering the labor force •. ThisL imposes an
effective "tax" on their labor that may be a~lhigh as 50% by some
estimates, creating a powerful disincentive tp work~ An employer
mandate with subsidies directed toward theseiJ..ow wage workers
could remove this barrier because'these famii~es would continue
to maintain coverage at presumably low costs ,'~ven upon entering
the labor force at, low wage levels. This COU~d potentialiy
create a significant positive l~bor ~upply r~sponse.
As with the labor demand analysis considerabJb uncertainty exists
regarding the magnitude of labor supply respqnses to a mandate.
There has been no significant analysis of this issue to date that
has attempted to assign a number or project 6utcomes. Because
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any supply effects are l~kely to occur pr~mar'~ly among narrow
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subgroups of the populat~on that are the focqs of some of the
major elements t:hat must be considered in thei aesign of a reform
proposal, the treatment of these groups (older workers, medicaid
recipients, low wage secondary workers) will I~Hctate any labor .
supply results.
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The conventional wisdom, to the extent it exists, is that there
are likely to be offsetting supply changes th,at will leave net
labor supply essentially constant but cause ~I relatively low
level of substitut,ion among workers. Low wage older workers
remaining in the labor force primarily to ret1ain health benefits
and low wage spous'es of high wage workers wiill depart to some
extent. Current medicaid recipients, to the: Idegree that they now
remain out of the workforce to retain healthibenefits, will
presumably replace them.
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HEALTH CARE INDUSTRY EFFECTS •
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The universal health insurance coverage that Iwill result from a
mandate and expanded programs to cover non-w9rkers has
potentially very significant consequences fO~ employment. The
utilization of health care services can be anticipated to
increase commensurately . • .
with the increased c6verage and spending.
•
I'
.
A reform wh~ch leads to changes ~n the patte~n of health care
consumption, away from acute care and toward i Ipreventative and
long term care, a~so has ramifications due to the differing level
and types of labor required for these servic+s. .
.,
ma~dated
A managed competition type of reform with
universal
coverage will likely have three types of.eff~cts on employment
within the health care industry. It will sub~tantiallyreduce
employment in the :administrative occupations Iprevalent in the
�9
I
I
current structure ·of the industry, increase ~mployment overall in
health care services, and alter the mix of jobs within the
industry. .
.
II
It reasonably 'certain that major employment ~eductions will occur
in the insurance industry and in hospital a~inistration. This
will be due to the standardization of admini~trative practices
such as claims processing and the reduction 9f experience rating
and medical underwriting in most insurance c~ntracts.
Most analysts project a significant consolidJtion in the
insurance industry as smaller insure~s face ~ncreased competition
for larger groups. Consolidation of small entployers in
.
purchasing groups will also reduce employment in the marketing
and administration of insurance. The saving~ in all of these
sectors will provide some of the resources td finance universal
coverage. The employment losses in these ar~as will be directly
proportional to the savings achieved and arelllikelY to be in the
hundreds of thousands.
:
Increased expenditures on health care (finanqed partially through
these savings) and the reallocation of resources toward health
care resulting from the mandate will lead to! sUbstantial
increases in employment in the health care industry. This
employment growth 'will be enhanced to the extent consumption of
services is r~directed toward preventive practices and long term
care both of which are relatively labor intepsive. Large
increases in the employment of nurses, nurseilpractitioners,
physicians assistants, all of the occupations related to the
operation of long term care facilities ,
can b~ expected.
,
I
As with the general labor market effects these trends will
develop over time. It is likely that the job losses in the .
administration of insurance and health care ~ill come early in
the process with the job gains occurring som~what later as
consumption of health care slowly increases.: I This time variance
will also be caused by the lags required to train workers to fill
the demand in the health care sector in occupations such as .
nursing that have often had labor' shortages ~nd which require
sUbstantial t r a i n i n g ' ! 1
.
It is not unreasonable to expect, however, tpat because the
reduction in expenditures on administration ~ill be less than the
increase in spending on health care, over th~ long term there
will be a net increase in employment in the health care sector.
This will be preceded, however, by a period 6f some employment
losses in conjunction with dislocation and r~training of workers
before anew, stable, and potentially higherl level of employment
is reached.
!
�10
CONCLUSIONS
A definitive analysis of the total employmen~ effects of health
care reform has yet to be developed. The re~ults of any analysis
are highly sensitive to the specifics of fun4amental design
issues such as benefit levels and the subsid[,es afforded low
income workers. Projections made in the context of prior
proposals are, therefore, generally not appl~cable to alternative
designs.
I,
Ii
.
Previous studies have provided estimates addressing only the
effects of an employer mandate on the overal:i demand for labor.
These analyses project a decline in labor de~and ranging from
60,000 jobs to up to 1.5 million jobs. Thes~ projections
incorporate widely varying assumptions abouti the, ability of
employers to shift costs and the sensitivityi of employment to
these costs, factors about which there is nol broad consensus
among analysts. The high job loss analyses u~e worst case
assumptions and make a short term point in time estimate. The low
estimates are long term equilibrium state pr~jections. This
fundamental difference further obviates thei~ comparability.
~ome
It can be expected that a mandate will have
negative
employment consequences as employers (primar;ily small businesses)
react to increased benefits costs. These canilbe minimized with a
transition period that facilitates wage adjustments and
effectively targeted subsidies, particularly;lif the subsidies
efficiently reach employers of low and minimum wage workers.
These types of subsidies ar<e complicated and~ Ipotentially very
expensive but are the key element of a syste~ design in regard
it's employment effects.
11
A complete picture of employment effects sho4ld incorporate an
analysis of labor supply shifts and changes in the health care
industry. Universal coverage may induce move~ents both in and out
of the labor force that could be offsetting. :IThe health care
industry can be expected to increase its shape of employment
after a period of· some dislocation. Some of:lthis increased
employment will be a realignment from other indus.tries, however,
which decline in size as the health care indUstry grows.
..
:1
'
A reasonable expectat10n of the employment consequences of health
care reform would anticipate some job losses:1 in general and
considerable short term dislocation within the health care
industry. This would be followed by conside~able job growth in
the health care industry, as people enter wo~k there instead of
other industries.' The long term'result of the reform would,
therefore, be the, job losses associated with:lthe increased
employer costs of hiring workers and some degree of shifting of
employment into the health care industry.
�APPENDIX
SUMMARY OF STUDIES AND TESTIMONY OF THE EMPLOYMENT IMPACT OF
,I.
MANDATED BENEFITS
i'
o
Sheils, John. Vice President,Lewin-IC~. Testimony 'before
the united states Senate committee on Fi!nance, June 9, 1992.
potentia~
The witness was asked to discuss the
for lost
,
II
employment under the Health America Act, a p9-y-or-play plan under
which employers would face the option of pro¥liding health
insurance or covering workers under a payroll tax contemplated to
be about 8 percent of payroll. Most _economi~:ts agree that any
loss of employment resulting from this plan WIOUld be concentrated
primarily among minimum wage workers. It isibelieved that most
employers of low-wage workers would choose t9 pay the tax rather
than provide insurance.
:1,'
1:
There is remarkable consensus among economists that the loss of
employment due to increases in the minimum w~ge has historically
been small, with most of the impact concentr~ted among young
teens. Lewin-ICF estimates that the loss of: lemployment under the
Health America Act would be between 23,000 and 63,000 jobs. This
estimate is consistent with independent job loss estimates
developed by Dr. Kenneth Thorpe, Dr. Karen D~vis, and the
Congressional Budget Office.
!
o
Custer, William S. Director of Researcp, Employee Benefit
Research Institute. Testimony before the United States
Senate Committee on Finance, June 9, 1992.
Based on a simulation done by the Employee BJnefit Research
Inst1tute (EBRI), between 200,000 and,1.2 m1~110n workers could
become unemployed as a result of a mandate that employers,
provided health benefits. These estimates a~sume that wages and
other benefits do 'not change as health benef:its are added.
•
•
I
•
' .
'I
Under a play-or-pay plan, w1th a 9 percent payroll tax, EBRI
estimates that between 130,000 and 965,000 jbbs could be lost if
wages and other components of total compensation do not adjust.
:1
'
I
o
il
ItRun From Coverage: Job Destruction from a Play or Pay
,Health Care Mandate. It Prepared for Ric:*ard A. Armey, Joint
Economic Committee (1992), April 9, 199,T'
"
This study estimates that according to conservative estimates, a
payor play mandate with a 7% tax will caus~lover 712,742 workers
to lose their 'jobs in the first year of impl;ementation, with 43%
of this job loss falling on workers in busiti~sses with under 20
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,
2
I '
I'
employees. The four states of California, T~~as, New York, and
Florida would account for 42% of these job losses. A 9% payroll
tax would result i;n the loss of 807,416 jObsi
I"
This study utilized data on payroll costs from the paper, "Payor
Play E~ployer Mand~tes: Effects on Insurance I;coverage and c<?sts,"
by Shel.la Zedlewskl., Gregory P. Acs, Laura Wh'eaton, and Coll.n
Winterbottom, published in the U.S. Departmenit of Labor's Health
Benefits and the Workforce. :It then took the1se costs and .
calculated firm-specific costs and the negati.~e employment
'
effects they generated by'assuming a demand elasticity of -.73
for those workers 'currently uninsured and a dlemand elasticity of
-.40 for those workers requiring upgraded itit1surance. These '
estimates of de.and ~lasticity were consider~d to be conservative
in light of the evidence that the short run'demand is very, ,
elastic, (-0.87 to-l.20) for workers with th~ characteristics of
uninsured workers.
I,
o
The followingI. three studies by CONSAD R~search 'Corporation
1:"
,,
were each desl.gned to measure the poten1;:.l.al l.mpact of an
employer mandate on the levels of emploYment for different
groups. Information from each study is I ,partly taken from
.previous CONSAD studies.
,,
"
.!
'
o
.
flJObS-A~-Risk
I
and Their DemOgraPhi~ Char~cteri~tics' '
Assocl.ated Wl.th Mandated Employer ¥-ealth Insurance."
Prepared by CONSAD Research Corpor~tion for The
Partnership on Health Care and Emp+oyment, April 1992.
"
. , . '
I,
I!
Findings i.ndicatethat unde~' a federal payor play health
insurance plan, about 9.i million jobs ~ould be at-risk (12%
of private sector jobs where workers ar~ employed more than
18 hours per :week). "At-risk" entails dramatic changes in
.
11
the employee ' .
icompensatl.on package through wages, hours,
benefits and/or loss of job. It is measured by comparing
the additional premium costs to wages. i!BY definition, only
workers earning under $10,000 can be cohsidered to hold'an
at-risk job. One-third of all emJ?loyee~working more than
18 hours per :week who do not rec.el.ve own-employer coverage
would be part'of this at-risk group.
I,'
. .
Slightly more than half of the jobs-at-~isk ar~ held by
workers ages :19-34 and 57% are held by women. Three-,fourths
of the jobs-at-risk are held by white wdrkers, while one
fifth are held by people who have not cdmpleted high school.
'28% of jobs-at-risk are'held by members I of families with
annual incomes less than $10,000."
1,
II'
Id .
'
Th ree-fourt h s' kers ages 18 an d younger h 0 ) 0 b s-at
of wor
risk. 18% of women (9% of men), 16% ofl'African-Americans
I
I
,
I
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risk. 18% of. women (9% of men), 16% of I.~frican-Americans
and Hispanics (12% of white workers), artd 83% of workers
earning less than $5,000 per year also ?jiOld jobs-at-risk.
This analysis excludes workers employed': less than 17.5 hours
per week and ,assumes an employer premium share of 75%.
o
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/
"Employment Impacts Associated Wit~ Proposed Employer
Health Insurance Options." Prepar~dby CONSAD Research
Corporation for the Health Care Financing corporation,
March 1, 1993.
..
I
'/
.
This study estimates the effects of fOU~ health care reform
proposals on employment- H.R. 5936, S. 1227, the California
'I
proposal, and the Jackson Hole Group proposal. The study
concludes that H.R. 5936 would have the'/smallest impact on
employment (200,000 to 400,000 jobs-at-risk), the California
proposal would have the second smallest!j impact (7.3 to 9.4
million jobs~at-risk), S. 1227 would hare the third smallest
impact (12.5 to 15.6 million jobs-at-r~~k), and the Jackson
Hole proposal would have the largest impact (20.1 to 21.8
million jobs-at~risk). By comparison, ~he study estimates
the number of jobs-at-risk to be 16.3 million in a scenario
where employers would be required to co»tribute all .
employees' health care coverage at the.!?ame rate they
currently contribute to their insured employees.
•
I,
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I'
The study found that the demographic ch:aracteristics' of
workers who experience the greatest job,limpact for one
health proposal would be most affected ,by the other
proposa Is .
i
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o
tiThe Employment Impact of Proposed Health Care Reform
on Small Business." Prepared by CONSAD Research
Corporation for The NFIB Foundation, May 6, 1993.
'.
i
This study utilizes the same methods asl CONSAD's earlier
report for HCFA, only this report also ,includes the Heritage
Foundation proposal.
.
iI '
.
In establishments with fewer than 500 employees
(representing 68.7 million private-sectbr workers), it was
concluded that both the Her1tage Foundat10n proposal and the
House proposal would result in a neglig'ible total of jobs at
risk, while the California proposal worl~d result in 9.6% of
total private sector employment in jobs:-at:-risk (6.6 million
workers), the Senate proposal wOuld result in 16.7% in jobs
at-risk (11.5 million workers),and th~ Jackson Hole Group
proposal would result in 23.6% in jobs+at-risk (16.3 million
workers) .
"
•
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•
�4
o
Mitchell, Olivia. "The Effects of Mand~tory Benefits
Packages." In Research in Labor EconomlJcs. Eds. L. Bassi,
D. Crawford and R. Ehrenberg. Greenwic~" CT: JAI Press, ,
1991: 297-320.
. '
:1
,.
In general, the literature suggests th~t whel1 labor costs rise by
10 percent, overall labor demand will be red~ced by 1 to 5
percent. Mandating employers to provide hea~th benefits is
likely to alter relative labor costs in addition to overall labor
costs; thlS wll1 11kely lnduce employers to Substltute away from
low-wage, low-skiiled employees toward more highly-skilled labor
and c a p i t a l . .
. -',
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,
•
•
' • •
; I
•
Many researchers have equated the mandating pf health benefits to
an increase in the minimum wage. Nearly every study done in this
area has concluded that raising the minimum ~ageby 10 percent
results in a 0.5 to 3 percent reduction in e~ployment among
teenagers, with a ,much lesser effect among apults.
I: .
The literature also suggests that absenteeis~ would increase as a
•
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"
result of an employer mandate, Slnce the value of the beneflt to
workers is not affected by a few additional absences. If health
coverage were mandated, changing jobs would be made easier,
leading to higher recruitment and training dDsts, which reduces
productivity and output. In addition, more people might be
induced to enter the labor force, as was see,~ in a study where an
increase in unemployment insurance payments Iby 20 percent
increased the fraction of womeri working by 1i percent and raised
the hours worked by women by 12%.
.
o
Klerman, Jacob Alex. "Employment Effects of Mandated Health
Beneflts." In Health Beneflts and the Workforce. U.S.
Department of Labor, Pension and Welfar.e Benefits
Administration, 1992. . .
:1
•
•
,I
In this study, Klerman compares the firstoraer effects of
mandated health benefits to the impact of r~~sing the effective
minimum wage. Estimates of the employer co~~ of mandated
coverage range from 10 to 40 percent of the annual wages of full
time workers earning the minimum wage. Fro~1 this, it was
concluded that a ten percent rise in the mi~imum wage would yield
a less than two percent decrease in employm~!nt. However, it
should be noted that the recent increase in,~he'minimum wage
combined with the potential imposition of a I ,mandated benefit will
result in increas'ed uncertainty as to the eiact magnitude of the
employment e,ffects..
'I
In terms of the a!ffected population, workers who would lose their
jobs and/or wages will be concentrated amon~ those who currently
do not have employer-provided insurance (abqut 13 percent of all
:1
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,!
5
"
I
workers), as well ,as among those who 'are curr;ently covered by
another family member's employer (about 25% o.f all workers).
These workers are likely to be young and part~time workers of
small employers, many of ,the same workers who are currently
uninsured.
'
o
I:
Karen Davis, Professor of Economics and Ilchairman, Department
of Health Policy and Management, Johns Hopkins University
School of Hygiene and Public Health. 'T~stimony before the
United States Senate Committee on Labor 1 and Human Resources,
100th Congress, November 4, 198i.
:
I .
The testimony was 'regarding S. 1265, the Minimum Health Benefits
For All Workers Act of 1987. In her testimorty, Ms. Davis cited a
study which used the Data Resources
Institut~ econometric model
,
' .
I I ·
to predlct that there would be a loss of about 100,000 to 120,000
jobs from mandating insurance coverage on employers (adding about
• '
,
,I
.1 percentage pOlnts to the unemployment rate). Much of the
unemployment effect will be concentrated amortg African American
teenagers. It was emphasized that this stud¥ may actually
overestimate the loss of jobs, since it, doesi Inot consider the
creation of .jobs from new health services (wlilich Davis estimates
to be about 100,000 new jobs).
I
The sectors of the economy most likely to be: affected by the
mandate are retail trade, the service sector: ,and the
constructlon sector--sectors WhlCh have les~ lmpact on
international competitiveness.
'
•
•
I
•
In her tes~imonYI Davis criticized a study dpne by Gary and
Aldana Robbins for the Institute for Research on the Economics of
Taxation (IRET), which estimated a loss of dhe million jobs from
the same proposed legislation. Davis claimed that the IRET study
overestimated the per worker cost of the S. ::1265 benefit package,
it assumed that m,ost employers would have tol upgrade existing
coverage, it failed to account for coordination of benefits to
avoid duplicate coverage', and it did not co~sider the creation of
any hea 1th services employment.
II
,
I
I
1
o
Dr. Edward M. Gramlich, Acting Directo~ Congressional Budget
Office. Testimony before the United States senate Committee
,I
on Labor and Human Resources, 100th Congress, November 4,
1987.
'
"
:1
,
While the testimony does not focus on unempruoyment resulting from
'mandated benefits as much as it does on cost'estimates, some
unemployment estimates are provided. Gramlich believes that
Karen Davis is likely to be close to reality in her estimate of a
,
!
i
�6
loss of 100,000 jobs from an employer
insurance package.
mandat~
of a minimum health
Gramli'ch also cited the Minimum Wage study c6mmission, which
concluded from the existing literature that ~i ten percent rise in
the minimum wage would reduce total employme~t among teenage
workers by one percent to three percent. The overall effect on
adults would l1kely be m1n1mal.
4'
o
•
I
•
Gary Robbinsi President of Fiscal Associates, Incorporated.
Testimony before the united states senate committee on Labor
I
and Human Resources, 100th congress,November 4, 1987.
Gary Robbins and Aldona Robbins are co-authoJs of Mandating
Health Insurance, a project done for the Institute 'for Research
on the Economics of Taxation (IRET). They e~timated that S. 1265
would result in a loss of 1 million jobs {largely'as a result of
an estimated $100 billion increase in employ~r-provided health
.
.
I
1nsurance cos t s.
;
In reconciling the differences between thei~ estimates and the
estimates of researchers who found less of ain impact on .
employment, Robbins claimed that survey dat~1 indicate that many
existing employer-provided plans would not meet the minimums
specified in S.1265.
;1
,
I
The burden of increased payroll costs would ifall more on those in
labor intensive sectors of the economy, morejon small businesses,
and more on low w~ge workers.
I
o
:
Brown, Charles. "Minimum Wage Laws: Are They Overrated?"
Journal of Economic Perspectives, VOlum1e 2, Number 3 , Summer
1988, pp. 133-145.
:1
The author point~ out that the literature o~ the impact of
raising the minimum wage on employment is generally in agreement.
The more than two dozen time series studies lion the estimated
impact of a 10 p~rcent increase in the mini~um wage on teenage
employment find that the reduction in emploiment amounts to 1 to
3 percent." This translates into anestimatfEid increase in the
teenage unemployment rate ina rapge from o:lto 3 percentage
points. The popular belief that these emplpyment effects
adversely affect ,African American teenagers1more than white
teenagers has only been verified from about I half of the studies
done.
:
I
The author also indicates that the reduction in .employment
predicted is not:nec~ssarily caused by workkrs being discharged,
�7
since turnover rates in minimum wage jobs are very high.
One surprising conclusion is that even under'lltqe assumption that
the minimum wage had no employment effect, its effect on poverty
or the income distribution is not very large +1 For example, in
1976 when the minimum wage was $2.30, earnings of workers making
less than $2.80 per hour accounted for only ~1 percent of the
after-tax, after-transfer income of the poor~st fifth of all
households. ThUS, raising the minimum wage;s,ubstantially does
not raise the income of the poorest househol1s by much at all.
o
Chollet, Deborah. "Public Policy optioJs To Expand Health
Insurance Coverage Among the Nonelderlyilpopulation." In
Government Mandating of Employee Benefits. Edited by Dallas
Salisbury. Washington D.C.: Employee Benefit Research
Institute, 1987.
II ' .
Imposing a mandatory minimum health insuranc:e benefit is
presumably equivalent to raising the minimum! I wage in its effect
on employment in low-wage jobs. In reviewing the literature,
among teenagers, a.10 percent lncrease ln th~ mlnlmum wage
reduces employment by 1 to 3 percent. Thisifigure, however,
might be somewhat misleading because many te~nagers who would
otherwise look for work, stop looking for jobs and thus are not
counted in unemployment statistics. The une~ployment effect
might actually be' greater a~ong adults with 'I
!~imilar wages to
teenagers, because these adults have a stronger attachment to the
labor force.
•
• .
•
!I
iii
iii
:1
Workers in retail trade, services, and low-~age manufacturing may
be particularly vulnerable to reduced employkent. The author
believes that the' estimates provided arecoI)lservative.
o
Anderson, Joseph. "Effects of Mandato~IY Pensions on Firms,
Workers and .the Economy." In Government Mandatina of
Employee Benefits. Edited by Dallas Sciilisbury. Washington
D.C.: Employee Benefit Research Instit~te, 1987.
.
w~uld
The effect ofa mandatory universal pension:lthat
provide
for a minimum 3 percent defined contributioh each year and a
participation standard of age 20, one year of service, and 500
hours worked, with 5 year vesting would hav~ cost $12 billion in
1982. The author estimates that this would:lhave resulted in an
increase of .05 of one percentage point in the unemployment rate
in the first year. In the short run, 160,000 jobs would have
been lost, while in the long run, 60,000 jo~s would have been
lost. One half of jobs lost would be lost ~y ~orkers in firms of
fewer than 25' employees and another 21 perc:~nt would be lost by
workers in firms.of·25 to 99 employees.
'
�8
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i
The data for this analysis was produced by tqe ItF Employee
Benefits cost Allocation Model, 1979-1980, us~ng the quarterly
model of the U..S. economy developed by Data Rbsources, Inc.
I
(DRI) •
o
Mitchell, Bridger M. and Charles E. Phelps. "National
Health Insurance: Some costs and EffectsI l of Mandated
Employee Coverage," Journal of Political Economy, Vol. 84,
No. 3 (1976),: pp. 553-571.
: .
0~1
·This pal?er 7stimates that th7 consequences
mandating employers
to provl.de l.nsurance for thel.r employees and: Idependents would
cause a short-run increase in the unemploymen~ rate of 0.3
percentage points 'for a low~coverage plan andl an increase of 1.4
percentage points for a high cost plan. Mosti likely, employers
would accomplish the change in the employmen~1 pattern by reducing
the rate of new hiring and postponing the rep:lacement of
employees who quit. Essentially there would!ibe no long term
effects on employment, except for workers atlior near the minimum
,!
wage.
I·
I
I
The sectors with relatively large unemploymerit effeots are
agriculture, const;ruction, wholesale and ret<;l!il trade, and
services. If payroll taxes were used instead of an employer
mandate, similar but less pronounced employm~nt effects would
result. In addition, the authors predict th~t for a high
coverage plan, the average increase in mandated premiums would be
.
2.9 percent of wages, whl.ch would be recoupe~' l.n 4 to 5 months of
no nominal wage increases if inflation and p~oductivity increase
at a combined 8 percent annual rate.
.
J
The data for this paper are 1975 projections'of data from the
1970 Health Care Survey_
I
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MEMORANDUM
,.)
July 12, 1993
Jeff Eller
Christine Heenan
Ira Magaziner
Karen Po11itz
Me1anne Verveer
TO:
Steve Edelstein
Judy Feder
Jerry K1epner
Lynn Margario
Steve Ricchetti
FR:
Chris Jennings
RE:
Thursday's 3:30-5:30 Planning Meeting for Congressional
Health Care'Po1icy Briefings (Form~r1Y:IKnown as the Health
Care University) in the First Lady's Office--Room 100 OEOB.
I
As you all know, the Congressional Lea?ership ~- in
particular, Majority Leader Gephardt, Major~ty Leader Mitchell,
and Senator Dasch1e have suggested and are enthused about the
establishment of a health care briefing propess for the Members.
They believe it will serve the important pu~pose of educating the
.
I
Members about the many problems with the he~lth care system, the
policy the President is coming up with to a:cjidress the problems,
and the rationale behind the various proposals.
.
.
:1
.
The First Lady believes the health car,e briefings have great
potential and has asked that we immediate1~lmoveto set up the
mechanism to be responsive to the Congress~ona1 Leadership's
idea. As the attached agenda for the meet.lJng helps illustrate,
much has to be done in order to establish ~ workable briefing
process.
In order to be responsive to Mrs .. C1i1f~on's desire that we
be well on our way to finalizing the groundwork for the briefings
by the time she returns, we have set aside
two hour block (3:30
to 5:30) for a Thursday meeting on this. subdect. In addition to
the agenda, we are attaching the latest dra:ft of the memo that
was written, in conjunction with Jerry K1epher's shop at the
Department, to give broad suggestions as tol how to best implement
the briefing process.
'a
If there is anyone else you believe s~ou1d attend this
I
meeting, please contact me. Look forward.to seeing you on
Thursday. Thanks.
�I,
Meeting on "Health Care Univers:ity"
July 15, 1993 -- 3:30-5:30
p.ml
I,
I:·
AGENDA
•
NewNameforHCU
•
Topics for Briefings
•
Speakers
External Experts
Process for Selection
Names
•
Briefing Materials
Type of Materials
Handouts
Charts and graphs
Who prepares
Speakers,
Health Care Staff
Role ofDPClDemocratic Caucus
Time Line for Production
•
•
Sessions
Administration Briefings
Congressional Briefings
Scheduling
Set Dates
Scheduling through DPCI Dem. Caucus
Cabinet Affairs
• Follow-up Meetings, on set up of "University
Schedule
Participants
I
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HEALTH CARE UNIVERSITY CONCEPT/IMPLEMENTATION PROPOSAL
Majority Leader Gephardt. Majority Leader Mitchell. and Senator Daschle
have repeatedly raised concerns about the limited ed~CatiOn level of Members
as it relates to health care. Senator Daschle and Congressman Gephardt have
promoted the establishment of a kind of "health care university" for Members
of Congress. They believe the "classes" should be open to Members of both
parties. The First Lady believes that the Leadership'~ suggestion is excellent
and should be implemented as soon as practical and :adv1sab}(~.
1
pro~sal
Mrs. Clinton has asked. that the following
for a series of health
care briefings (she would prefer to use a title other than Health Care
I
University) by Administration health policy and legislative affairs
·
1
representatives be given to and reviewed by the Con~essional Leadership and
their staffs. Before proceeding with the outline, ho~ever, we wish to stress
that the Administration believes these important presentations should be
viewed as a supplement to, and nota substitute fQ:f, the consultations
that have and will continue to take place with the Congressional
Leadership.
We believe that the establishment of a health c¥e univerSity-like entity
(from now on referred to -- at least temporarily -- aSI health care briermgs)
has great potential. If done well; it the process shoulcl.:
'.'
,I
(1)
Reinvigorate the "need for action" mentality that. until very
recently~ had been effectively fanning the; Iflames of desire for
comprehensive health reform in the Congress:
(2)
Ease CongreSSional concerns about. and, raise Member comfort
levels with. the President's proposal to ad1dress the problems;
:1
.
I
·1
(3)
Better enable prospective Congressional supporters to explain.
defend. and sell the President's propoSaliland
(4)
Be utilized to help educate surrogates in home CongreSSional
'I
districts.
,
fl
Achieving success in briefing Administration. Gpngressional. and other
influential indiViduals will depend on the ability of th~ health care briefings to:
(1) communicate our message in a simple. understandable way; (2) utilize staff
resources most effectively; and (3) be responsive to thr information needs and
time constraints of those we will rely on to support tile President's health
I
reform initiative. To develop and ~plement an effective educational briefing
process we will have, to successfully:
I
�•
Target the Issues
•
Target the Best Personnel to Make Presentations
•
Establish a Staff/Intake and Scheduling Process
•
Prepare the Briefing Materials and Presentations
•
Brief and Train the Briefers
•
Develop a Workable Timetable
I
,
:1
TARGET THE ISSUES
The briefings should convey a Simple. concise ritessage and be
responsive to what we know to be the major thematic priorities and
I
interests of the majority of the Congress. As a fir~t cut, we propose limiting
the briefings to no more than 10 broad-based issues:
(1)
An Overview of the Plan, its Design and its Philosophy;
(2)
Consumers in the New System;
(3)
Cost Containment and Budgets;
(4)
Savings, Costs and Financing;
(5)
Small and Large Businesses in the New System;
(6)
Health Care Providers in the New System;
(7)
Federal/State Roles;
(8)
The Elderly in the New System;
,
i
ii
i'
(9)
Rural Communities and the New System; and
(10)
'I
Urban Communities, Underserved, and the New System.
1
Issues such as Medicare. Medicaid. Veterans. F~deral Employees Health
Benefits. medical malpractice. anti-trust. qUality. publiC health. benefits, etc.
would be incorporat~d into the above mentioned categories. SpeCial and more
detailed briefings on these and the whole range of otJ?'er issues would be
provided to Administration representatives, Congressibnal Members and staff
on an as-needed and requested basis.
I
i
�'t
,
TARGET THE BEST PERSONNEL TO MAKE PRESENTATIONS
,
, I
Briefing Members of Congress always has the P?tentlal for great benefits,
as well as great risks. The key Is for Members to leave the presentations both
impressed with the substance of the information given and the competence
(and likabiltty) of the presenters.
1
Included .in the definition of a competent Congr~ssional briefer is
knowing -- going in -- what are the historic sensitivities of the Members
present, in other words. to know what to say and howi to say it and to know
what not to say. If the personnel chosen meet these criteria. the benefits of
these briefings are almost boundless. If, on the other Ihand. Members leave
presentations with a sense that briefers are either incompetent. arrogant,
condescending. and/or disrespectful. an effort with t~~ best of intentions could
well turn out to be a total disaster. All of this is to say that the personnel
chosen for Congressional briefings is critically important.
Policy Expert Resources
:I
Within the White House health care working grqups and the
Departments (in particular, HHS) , the Administratlonlhas an impressive array
'I
of health care policy experts who could serve in briefiq.g roles extremely well.
(In most cases. Ira and Judy -- in particular -- have peen, and likely will
continue to be. very well received.) Having said this, ~he other briefers that we
will need must be evaluated carefully -- keeping in mind not only how
competent they are. but how well they will be receivedl by different collections
of Members. (We have prepared a tentative staff res04rce list linked to the ten
topiCS previously mentioned, but it is undergoing final review by the White
House and HHS; in any event, it will be a continuallyiupdated list based on the
briefers' performance and Congressional reception.)
Legislative/Policy Resources
i
We strongly advise that those most familiar wit4 the Congress and their
predilections -- the Administration's Legislative Affan;-s staff -- playa major
role in briefing the Members and the staff on this iSSU~. The White House and
Departmental Legislative Affairs staff (particularly at HHS) have strong and
long-standing relationships with the Members and supr that should be utilized
to the benefit of the Administration's health reform effort.
,
1
:1
At every briefing. there should be one Legislative Affairs Administration
representative who has equal status to the policy pre~~riter. This Is absolutely
necessary to best assure that no situation gets out of; rand , that there is a
politically sensitive individual always present. that there are careful notes of
the meeting. and that responsive follow-up occurs. '
�'J
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ESTABLISH A STAFF AND SCHEDULING PROCESS
:1
The schedullng of the university and other req~ested briefings should be
coordinated out of the War Room. This work should ,be closely coordinated
with the Department of Health and Human Services' bmce of the Assistant
Secretary for Legislation (ASL and other Departments as necessary).
In addition, we should work closely with the House Democratic Caucus and
the Senate Democratic Pollcy Committee to h,elp coor~inate topics. schedules.
and rooms. The schedule of all briefings should be updated daily. provided to
Steve Rtcchetti/Chris J./Jerry K./Karen P.. and announced at the morning
Communications meeting.
,
.1
I
,
,I
I
To ensure that the briefing operation is a success requires an' .
experienced and politically sensitive staff person whd Ican work closely with the
Congressional Leadership and Administration personpel in meeting the
scheduling and substantive needs of the Members. We propose that Steve
Edelstein take on this role (in addition to his other responsibilities) and work
with lori Davis and other staff at HHS to assist him.! I Depending on the
volume of and desire for briefings. additional staff (perhaps a full-time intern
who Is mature and responsIble) may be required.
PREPARE THE BRIEFING MATERIALS
ANri, PRESENTATIONS
In order to ensure the delivery of a consistent. i~imple. understandable
message. we need to prepare educational materials for the presenters in
advance of the briefings that all staff can and should luse. Educational
materials should include charts. graphs. detailed outlines to guide
presentations. questions and answers as approprIate! These materIals and
, presentations should be user friendly and targeted t9 specific audiences.
Working with the Initial approval of Ira and JUGy. as well as the
I
Legislative Affairs staff. Steve E. will assign one policy expert to each of the
issues chosen for briefings to take the lead in preparIng the substance of the
briefing materials and their presentation. He will make certain that each
,
'I
presentation is finalized on time and In the best format possible. The
Communications staff will review and edit the briefing materials for clarity.
directness. and consistency of message.
'
,I
,
!
The presentations will also be screened by Legislative Affairs staff to
ensure that they meet the needs of the audience. (They will know who is
,
:1
attending because we propose to limit the size of each briefing to between 25
,
I
35 Members and have them signed up in advance of:fhe briefing; we belleve
that such a small structure will best assure a less lecture-like atmosphere and
I
better encourage a give and take constructive discus~ion.)
�\
Each "class" will be structured to briefly outline the problem(s) with the
current system. how the President's proposal addres~es the problem(s) (if
relatively non-controversial), and the rationale behind. the Administration's
proposal. The briefings will be designed to last no loiigerthan 60 minutes:
20-30 minutes (at most) of presentation and 30-40 n'tinutes for questions and
,I
answers. On an as needed basis. these classes will be repeated.
.,
,I
Substantive and detailed presentations about the most controversial
policy recommendations -- if they are even available; :-- of the President's
proposal should be avoided. There is great concern among the Congressional
II
Leadership that controversial recommendations -- s~ch as financing. exact
cost containment mechanisms. etc. -- could lead to public and potentially
problematic disclosure. Instead. the Majority Leaders have suggested that we
.
.
II
detail the options we are considering to address the most challenging issues.
.
I
:1
BRIEF AND TRAIN THE
.
BRIE~ERS
il
Communications staff will be needed to provid~, gUidance to all briefers
on how to orally deliver their presentations in an easUy understandable
'I
manner. In addition. before each presentation. the I1gislative Affairs staff
from either the White House or the appropriate Department (usually Jerry
Klepner's shop) will brief the presenters on who will ~e in the audience. what
issues are particularly sensitive. what issues to highlight. and how best to
present complex. potentially controversicil materials. :
,
DEVELOP A WORKABLE
TIME~ABLE
I
We need to make a final deciSion as to when itirould be most
appropriate and useful to commence the health care seminars. Senator
Daschle originally envisioned the "classes" beginning: :after the legislation had
been introduced. Majority Leader Gephardt believes it is advisable to hold a
series of briefings in one or two days of presentationsl in an attempt to hold a
dry run -- presentiIlg options not final decisions -- ~r an effort to begin to
work out the kinks and determine what briefing for~ft will work the best in
. September. We need to discuss the best start-up tinie with the Leadership.
J
Lastly. Congressman Gephardt has Initiated
Invitation for the First
Lady to speak before the House Democratic Caucus sbon after she returns
from her July trip (roughly the 21 st). The goal for thi!S presentation is for Mrs.
Clinton to reinvigorate the Members into feeling that health care reform is a
political and economic imperative.
!
If the President is going to unveil his package by not later than late
September. the implementation of the start-up recommendations for the
health care briefings must occur almost immediately; I The following outlines a
possible workplan timeline to help with tentative scheduling.
�JIi.I
WORKPLANTIMELINE
Activity
6/27 7Lfl 7/12 7/19 7/26
Target Issues
l-------I
Target Personnel
1------------:
,
,-------,,
Finaiize Staffing
Prepare Briefing
Materials
8/2- 8130
9.L6
9/13 9/20 9/27
l--------------I
Brief the Briefers
Hone the Message
HRC CAUCUS PRESENTATION
CONGRESSIONAL BRIEFINGS
: ----------: (on how best to communicate/
legislative prep).
1-----------:
(communication
and leg. prep
continues)
:--------------------:
:---------:
: ---: Dry run
1st briefing
before recess
1----------------1
RETURN TO briefings
and continue them
even after
introduction on a
bipartisan basis.
••
)
J
..
�.'
July 8
TO:
FROM:
RE:
Chris Jennings
Marilyn Yager
Small Business strategy
Having read through the material lou provided, I found
that your memo from last October :ti.s still amazingly
current. I would guess that onlyl one item has really
changed: nervousness about being rolled. As the
momentum has changed, and the dyn~mics of
reconciliation play out, I believb the small business
organizations are feeling more and. more confident that
total opposition to our reform prbposal is a
p~li tically acceptable strategy.: I
We have already seen this with NF[B, it is very likley
with the Chamber of Commerce, and l unless we are able to
stop tpe pulling back by Small Business United and the
Small Business Legislative Councia. they will feel
compelled to oppose as well.
,I
Otherwise I would reemphasize a
outlined by you last Fall:
s~rategy
:!
largely
\
'!
1). Addressing current and future affordability
issues. We need to believe that:bur changes will be
affordable to the average small b~sinessl and we need
to aggressively make that argumen~. Everything else
will just be frosting.
A.
Our data needs to be belJievable.
B.
Our rhetoric needs to be convincing.
I
2). The frosting: the other selilable parts of the
package need to be aggressively ~arketed.
A.
Outlaw insurance abuse 1
B.
Rolling workman's comp into the plan.
C.
Administrative simplification.
D.
Stabilize premium costs.
E.
Employees will
F.
Medicaid and federal emloyees will be
included.
:1
financi~II
costs.
'[
�'.
'I
.-
3). At every turn we need to stress that we will not
leave businesses financially stre~sed as a result of
these changes out are their own: the rainy day fund
provide assistance.
4). As with large business, we will probably need to
bypass small business organizatiohs and go directly to
'I
the small business owners for su~port.
We will need credible spoke~people for the plan:
5).
•
I
: I
A. Sec. Bentsen and ErsklneBowles need to be
prepared to be on the stump :all during the fall.
B~
·1
Possibly establish a sm~ll business team
(supportive small business owners) in each state
to talk to chamber of commer-be meetings and local
newspapers. This topic wil:( be addressed at every
single chamber commerce meeting following our
introduction of the plan.
;I
C.
Give every member of corigress a clear
understanding of the pros oflthe clinton plan for
small businesses: talking points and whatever else
is necessary to give them coVer. Target the
traditional friends of small business: small
business committee members.
6). We will need to speak at every small business
1
conference held by members of congress.
f~lm
7). Despite likely opposition
the larger small
bUSlness groups, we should not bY.!..1pass speaklng
opportunities at large gatherings.
•
I I
•
:1
8). Throughout August, work clos'ely with the smaller
small business groups. If they are unable to fully
support the plan, we should seek support for sections
of the. plan, otherwise neutrality 1
9). Keep reminding small busines:~es the price of doing
nothing and place the onus on tho'~e opposing our plan
to do better.
'
:1
10). Hold a series of small business town hall meetings
to explain and respond.
Hopefully televised.
�SMALL BUSINESS AND HEALTH CARE REFORM
:1
I;
As the National Restaurant Association statbd in their March 18
testimony "true cost containment will come,~rom an interrelated
series of changes, including, but not limitbd to: managed
competition, insurance reforms, tax incentires, advanced
technologies, and medical malpractice reforms." We agree.
m~~t
The Clinton Administration believes that
small business want
to provide health benefits -- and most do. 'I' The barrier is cost
and a burdensome administrative framework. ,Our health care plan
will work for small business, ensuring the security of
affordable, predictable health care coveragb, and taking away the
hassle.
.1
For businesses currently unable to provide ~nsurance coverage,
our reform will protect them while they makb the transition.
These small businesses are clearly at an enbrmous disadvantage in
trying to attract and compete for workers wlth larger businesses
that can afford a health care plan for their employees. While we
phase-in coverage for these businesses and ,extend financial
assistance for the changes necessary, health care costs will be
curtailed and their ability to compete for :workers throughout the
marketplace will vastly improve.
In weighing the risks of supporting change,; we must constantly
remember where we are headed without health care reform. Small
businesses that are able to still offer health insurance have
seen thelr costs,rlse at an annual rate of 20% to 50% per year.
On average small businesses pay 30% more fot the same insurance
compared to their big businesses counterparts. Small businesses'
rate of growth in the cost of their insuranbe has increased at a
50% higher rate annually than that of big ~Osiness.
Unfortunately, the smaller the company, th~ more disproportionate
is the cost of their insurance.
'
.
,
;1
Small business sensitivity to price and premium changes, as well
as economic conditions, result in rollar co~ster cash flow
struggles. They bear the burden of cost shifting from both
government payers'and the clout of the selfrinsured plans. Their
administrative and marketing costs are disp:roportionately higher,
and all this without full-time benefit staff. Periods of
satisfaction with insurance policies can bel shattered when they
or their employees develope costly illnesses, adding new risk to
either the cost or renewal of their policie~.
.
:1
Small business has tri'ed almost everything i~ t can to control the
skyrocketing cost of health insurance. They have tried changing
programs, managed care, self-insurance, and! cost sharing. They
have tried lowering benefits and asking thelr employees to bear a
bigger share of the cost.
';
�.
so, is the risk for change worth it? As Yogi Beara once said,
"if you don't watch out where you are going, you are going to end
up where you are headed."
The Clinton reform plan;
o
Aggressively controls costs: through marketplace
competition, global budgets, eliminat~bn of cost-shifting,
regulatory and administrative reductions, and medical
malpractice reforms.
;1
o
Outlaws insurance abuse such as redlining, underwriting, and
experience ratings.
·1
o
.
.
.
'I . .
Premlum costs wll1 be curtalled and stablllzed.
o
Eliminates the duplicative costs and plp erwork of workers
compensation by rolling it into the health plan.
o
cuts administrative burdens, as the he,alth alliances assume
the paperwork and negotiations.
:1
I
o
o
The workplace mandate assumes a shared responsibility by
employer and employee on cost and heal~hy lifestyles.
Reduces the differences between the pU~lic and private
marktetplace by including Medicaid and'ipublic employees in
the reform plan, and phasing in Medica~e over the long term.
Helping small businesses make the change:
,I
o
The required health care coverage would be phased in over a
significant period of time while health care costs are
curtailed.
I
o
The benefit package would be basic, with emphasis on
prevention; not a 'cadillac' package.
o
A rainy day fund would be established,:similar to the one
currently in place in Hawaii, thereby providing assistance
to small employers who demonstrate rea] need.
I
�
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Chris Jennings - Health Securities Act
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Chris Jennings
Health Securities Act
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<a href="http://clinton.presidentiallibraries.us/items/show/36173" target="_blank">Collection Finding Aid</a>
<a href="https://catalog.archives.gov/id/647904" target="_blank">National Archives Catalog Description</a>
Description
An account of the resource
The Health Security Act (HSA) was an effort by the Clinton Administration to provide universal health care in the form of a comprehensive national health care bill which emphasized managed care and called for the creation of regional health care alliances. This series contains material which provides a detailed analysis of the Health Security Act. A chronological subseries within this file focuses on legislative strategies to enact the HSA, as well as efforts on the part of the Clinton Administration and its supporters to counter intense opposition to the legislation from opponents in Congress and powerful interest groups. This file also contains material which examines in detail the alternatives to the Health Security Act, particularly single-payer plans and a compromise proposal from a bipartisan group of moderates in Congress called the Mainstream Coalition. This series contains memoranda, correspondence, reports, press releases, briefing papers, statistical data, graphs, legislative drafts, publications, and news clippings related to the Health Security Act.
Provenance
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Clinton Presidential Records: White House Staff and Office Files
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293 folders in 16 boxes
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July 1993 HSA [5]
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Domestic Policy Council
Chris Jennings
Health Securities Act
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Box 40
<a href="http://clintonlibrary.gov/assets/Documents/Finding-Aids/Systematic/JenningsHSA.pdf" target="_blank">Collection Finding Aid</a>
<a href="https://catalog.archives.gov/id/647904" target="_blank">National Archives Catalog Description</a>
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Clinton Presidential Records: White House Staff and Office Files
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647904-july-1993-hsa-5.pdf
647904