Good News and Bad in State of the Union Address

Published March 1, 2002

Following President George W. Bush’s State of the Union address, delivered on January 29, there’s been a whirlwind of news about the administration’s health policy initiatives. Among the highlights:

  • Twice in his State of the Union address, Bush called attention to his plan “to give uninsured workers credits to help buy health coverage,” making the issue a top domestic policy priority. The White House and allies on Capitol Hill believe they have a winning idea to extend private health insurance to millions of Americans currently shut out of the system. The President will put $89 billion in his budget for the credits.
  • The Bush plan also would loosen the choking regulations on Medical Savings Accounts, making them available to millions more Americans. He also would end the indefensible use-it-or-lose-it provision for job-based health spending accounts and allow workers to roll over up to $500 a year tax-free. This is all good.
  • Then the President turned to Medicare, saying he wants Congress to help him “give seniors a sound and modern Medicare system that includes coverage for prescription drugs.” The rhetoric was fine … but then the White House released details of the proposal.

The White House plan would give waivers and extra money to states to expand drug-only coverage to seniors and the disabled through Medicaid, the joint federal-state health care program for the poor. The plan does not advance the President’s stated goal of a Medicare system with an integrated drug benefit.

The Medicaid expansion will only exacerbate the massive problems states are already having with Medicaid expenses that are gobbling up their budgets. And it will put millions of senior citizens into an entitlement program that is developing many of the restrictions and price controls that burden all other government-controlled health programs. Medicaid expansion moves away, not toward, market-based reform.

  • And finally, the President said again he wants a patients’ bill of rights enacted this year.

A new Bureau of Labor Statistics report reveals the burden employers already face with rising benefit costs. Those data clearly show what a bad idea the PBOR bill would be, especially now.

For the last five years, according to the BLS, wages and salaries have risen at a consistent rate of about 3.5 percent a year. Benefit costs rose at a slightly lower rate of 2.0 to 2.5 percent a year from 1996-98. But in the last two years, the rate of increase in benefit costs has more than doubled, to more than 5 percent a year.

Clearly, benefit costs are outstripping wage and salary costs. This is not the time to impose more costs on employers with an expensive patients’ bill of rights.

For more information …

The full text of the President’s State of the Union address is available on the Internet at

A Department of Health and Human Services press release describing the President’s budget can be found at

A White House fact sheet on strengthening Medicare is available at

The Bureau of Labor Statistics’ new employment cost index is on the Internet at