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James Balog


August 13, 1990

Senator John D. Rockefeller, IV
The Pepper Commission
140 Cannon House Office Building
Washington, DC 20515

Dear Mr. Chairman:

First, I wish to express my admiration to you on a job well done. My admiration extends especially to your persistence in keeping the Commission moving toward satisfying its goal. Clearly, the task was formidable, and the members arrayed along a broad spectrum of ideas, with each responding to different experiences and constituencies. But the charter of the Commission was to come up with the best possible answer under the circumstances, and I congratulate you for accomplishing that goal. In this letter, I wish to comment only on some salient points--where we did a good job and also where more needs to be done. (A more detailed description of my views is contained in the enclosed report.) Naturally, in an exercise such as we have gone through, not everyone is satisfied. Indeed, compromise has been defined as a solution in which nobody is totally happy!

We began with the imperative that we had to solve the insurance coverage problem for the people not covered. This group is growing both in numbers and as a percentage of the population and is likely to continue to do so unless some policy changes are made. Indeed, the current system of insurance coverage is making it less and less economically feasible for an increasing number of small businesses. The result is that coverage is being dropped or scaled back dramatically. Especially punished in this process are the children of America. The fact that so many children are uninsured cries out for a solution, as does the need for prenatal care. We must have healthy children if we are going to tackle the problem of education, unemployment, crime, drugs and other societal ills which cannot be solved unless the young people entering our society and our economic system have good health. It makes good economic sense: we can either pay up front or pay more later--much more. The cost is not just in health care but for all sorts of societal ills that grow out of these fundamental problems.

A number of our Commission members hoped, as I did, to use the occasion of The Pepper Commission to institute some fundamental reforms of health care in this country. On the one end of that spectrum are those who hoped to create a single-payor government run health insurance program in order to "get it all over with right now." On the other end are those who wish to overturn the present system and to introduce a free market, free choice system. It became apparent to me, and I believe to the Commission as a whole, that neither approach is feasible at the present time. On a practical level, we simply cannot get there from here.



TELEPHONES: 215 963 3500 212 687 8300


Senator John D. Rockefeller, IV
The Pepper Commission

August 13, 1990

Page 2

Hence, The Pepper Commission arrived at a pragmatic solution: building upon a job-based public system. I recognize that ultimately requiring employers to provide coverage, even with the protection our recommendations include, is a rather new idea in employer/employee relations, but I think the country is ready for it, and the pragmatic solution to the access problem is in that direction.

Requiring employers to provide coverage puts a burden on all employers, and especially on small business. I start with the premise that small businessmen want to be full-fledged members of the business community and pay their full share of the cost of doing business. Over time, the small employer will become less and less able to compete for a quality, stable workforce without providing health insurance benefits. The Pepper Commission's plan provides extensive opportunities for voluntary coverage by small businesses with appropriate periods of adjustment and federally subsidized phase-ins. The availability of a public plan that employers can buy into makes coverage eminently affordable for small businesses. Unquestionably, The Pepper Commission plan presents a major challenge for small business. Yet, if the premise is correct (that small businessmen want to become full-fledged members of the business community), this plan makes that possible.

As you know from our deliberations, some of my major concerns were in the area of cost containment. We made some important steps in this direction, but more need to be made. I find it economically baffling and unacceptable that we are spending more on health care, both absolutely and as a percentage of GNP, than any country in the world, and we still have a system that is not accessible for so many and imposes such financial burdens on those that have individual plans. We can't afford not to change our health care access and delivery system but to do so will require us to confront, with some semblance of logic and plain common sense, the task of controlling costs. To begin with, we need to confront issues that have been avoided in the public arena. We need to ask some tough questions, such as:

What kind of health care does society owe its less fortunate?

How can we can control costs in a fee-for-service system where competition seemingly does not do the job and the alternative is an incredibly complex bureaucracy that increases wasteful administrative costs?

When should care be limited or withdrawn?

Is it logical to shift so many resources to sustaining the dying at the expense of not helping the living?

Can we talk openly about spreading our limited health care resources across the spectrum of health care needs?

Why should the tax code subsidize coverage for some, while millions of others are not covered?

These kinds of issues raise the bugaboo of rationing or of two-tier medicine. We have rationing nowsome people are rationed right out of access to health care on economic grounds. Needless to say, those who lack coverage, or have limited coverage, are already suffering the ultimate in two-tier medicine by not having any at all. Unless we deal with these difficult issues our whole system will sink and damage our society and competitive position in the process.

| support the provisions in the plan that will control costs, such as provisions to: override the mandates of benefits that have crept into state laws and increased the cost of coverage; increased outcomes research--which will increase our knowledge of the balance between medical cost inputs and


Senator John D. Rockefeller, IV
The Pepper Commission

August 13, 1990

Page 3

medical outcomes benefits; reform of the tax code to provide equity in the system and to encourage private sector participation; and to begin to address tort reform in the malpractice system.

In an ideal world, and if I were designing the plan myself, I would include many more measures to control costs. Practically every health care consumer knows health care costs increases are the real killer that can eventually strangle the system. Although the plan does not include everything that I would prefer, I support it. I believe that The Pepper Commission plan will shape the health care debate for many years to come it throws down the gauntlet of access to the health system so that all Americans can receive adequate health care. Any other approach will have to be measured against that standard. The need for action is urgent and compromise is necessary to get things moving. I believe that The Pepper Commission recommendations move us along that agenda and I would be more than happy to work with you and with others to enhance and refine the program. But most importantly, I look forward to continuing to work with you as you move these recommendations toward enactment. I would urge that the Congress immediately address the question of prenatal and child care. While many aspects of health care policy reforms can wait, any wait on these issues is both unconscionable and economically unwise.

I know from having observed you over these many months that you have the courage, wisdom and persistence to make things happen. And I was enormously impressed with the devotion and caring of all of the members of the Commission. It was an honor for me to have worked with them and with you.

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