Can the White House Reduce Future Health Cuts While Maintaining Quality?

This is a rush transcript from "Your World With Neil Cavuto," May 11, 2009. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: They are pledging to cut the rate of growth of national health care spending by 1.5 percentage each year, an amount that is equal to over $2 trillion.

(END VIDEO CLIP)

BRIAN SULLIVAN, GUEST HOST: The president today praising a private partnership aimed at cutting $2 trillion in future health care costs over the next 10 years. The president says it will pave the way for comprehensive health care reform.

But can you cut costs and still maintain quality? That's the key, right?

Let us ask White House economic adviser Austan Goolsbee.

Austan, welcome back to "Your World."

Listen, it is a start, but it goes to show how high health care inflation has been, pretty much the most inflationary sub-sector, maybe aside from education, that we have in the United States. It's a start, but what is the next step?

AUSTAN GOOLSBEE, WHITE HOUSE ECONOMIC ADVISER: Well, look, it's a big start. It's $2 trillion.

And what — these various stakeholders in the industry came to the president and said, look, we want to be part of the solution. We don't want to be opposing to the solution. Some of these were the same people who sort of led the opposition the — 15, 20 years ago.

And that — the costs that they are describing that they could save adds up to about $2,500 per family. And I think that is a great place to start. Then, the next thing that you have to do, after you start getting the costs down, is start expanding the pie, and making sure that everybody has access to at least what they have now, and preferably with more choices that they can choose from.

SULLIVAN: OK.

So, if the quality stays the same, if they gain more choices, but their costs go down, you are either...

GOOLSBEE: Yes.

SULLIVAN: ... going to make that up in productivity, or somebody else is going have to cover that $2,500. Who eats the $2,500? Who covers it?

GOOLSBEE: Well, what the — it's a perfectly good issue to raise.

And what they were saying today, these private industry participants, is that there is a great deal of inefficiency in the system, which is the first place you turn.

And, according to them, they were pledging to the president that, just on their own, they can save $2 trillion. So, I think, for sure, efficiency is the first place you turn. So, they had various examples, like the $100 billion to $300 billion of additional costs that we have because we don't get everybody to follow their full regimens of their medicine. And they stop taking their medicines, and then they develop other illnesses and things like that.

SULLIVAN: Who is your model, Austan, when you guys are deciding about health care costs? I know a lot of people here look at Canada and look at Europe. Of course, the Canadians and the Europeans look at us, because their systems are going broke.

You look at England, with their high rates of obesity now. Their system is almost bust. Ireland is having the same problems. Rich Canadians come here.

Do you have a model that you can look at, that we can figure out where you guys are going?

GOOLSBEE: Well, I think it's a mixture. Well, look, it's — clearly has to be a mixture.

And a bunch of the countries that you are citing, they don't have an employer-based system. There are some other countries of the world that do have an employer-based system, but have not had the problems with costs that we have, be they in Switzerland or other places. So, I think it's a mixture.

You look at some lessons internationally, but I think most of the lessons that we are learning are just, let's go into detail in looking at our own system. And how do we — you know, how do we try to improve it?

Because, for whatever problems they have had in — in other countries, we have had as — just as many problems, if not more problems, here. And our costs are well higher than everywhere else in the world. So, the issue of how we get the costs down for ordinary Americans in health care, I mean, that is the centerpiece of the effort.

And it's also the centerpiece of the budget effort. You know, you were talking about the budget. It is clear that, over the long run, the most pressing fiscal issue facing the country's budget, separate from the individual's budget, is how do we slow the growth rate of our health care costs?

SULLIVAN: Well, that's it, right?

And I know, listen, you have written a lot on tax policy, capital overhang, the Web, all kinds of stuff at the University of Chicago. What taxes are going to go up?

GOOLSBEE: Well...

SULLIVAN: Is it just going to be on the people that make more than $250,000 a year? What else has to go else? Are we going to have a VAT? What are you guys looking at?

GOOLSBEE: Well, the president has not advocated any of those things.

What he has said is, for people making more than a quarter-million dollars a year, the rates should go back to what they were in the '90s. He's called for and got in the recovery package a tax cut for most 95 percent of workers.

(CROSSTALK)

SULLIVAN: Even at 91 percent on the high tax rate, before JFK lowered it to 77 percent, you know better than I do that the rate of income tax, the percentage of income and GDP never changes. If you tax the rich more, it doesn't mean you get more money in the long run.

Is that a factual statement?

GOOLSBEE: Well, I don't know that I agree with that. That's certainly — well, I don't — I don't agree that that is a factual statement.

There's a whole lot of research on that subject which I don't think comports with what you are saying.

SULLIVAN: Well, I guess the money...

(CROSSTALK)

GOOLSBEE: Certainly, in the '90s, revenues...

SULLIVAN: Yes.

GOOLSBEE: ... were higher when the rates were on the people who make than a quarter-million a year at the slightly higher level.

SULLIVAN: Well, revenues will always go up as a measure of inflation. I meant as a percentage of GDP or as a percentage of government income from income taxes.

(CROSSTALK)

GOOLSBEE: In the '90s under Clinton, in the '90s under Clinton, the top marginal rate at the very — for the very, very high-income people was 39.6 percent, instead of 35 percent.

SULLIVAN: Thirty-nine-point-six.

GOOLSBEE: ... instead of 35 percent. And they brought in a whole lot more money.

SULLIVAN: Well, the government also only spent about 3 percent more every year on the fiscal budget, not 14.5 percent more, Austan.

GOOLSBEE: OK.

SULLIVAN: The highest was, I think, 5.1 percent in the last year of Clinton's term, as we rolled into the — the Internet bubble.

We will talk more about — taxes is a favorite topic of mine, too.

GOOLSBEE: OK. All right. Any time.

SULLIVAN: Austan Goolsbee, thank you very much. All right.

GOOLSBEE: Take care.

SULLIVAN: All right.

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