President Backs Tax on Health Care Providers

The Administration hopes to finance a major part of its national health care package with new taxes on hospitals, insurance companies and other health care providers, President Clinton indicated Tuesday.

Health care reform “will save massive amounts of money immediately to some of the health care providers,” Clinton said. “I will not ask the American people to pay for a health care plan until the people who . . . will be making money out of the changes that we propose are asked to give back some of the money they will make.”

The President’s statement, which confirmed a plan that his advisers have hinted at privately for weeks, provides the clearest statement so far of how the Administration hopes to finance its health plan. Administration advisers said they hope that aiming taxes at health care providers will prove far more palatable politically than directly taxing voters. Nonetheless, the idea is certain to spark strong opposition from the targets of the new taxes.

Clinton’s remarks came as part of a broad-ranging 40-minute press conference covering subjects as diverse as Boris N. Yeltsin’s future in Russia, campaign finance reform in the United States, American trade with Japan and Mexico, appointments to the Supreme Court and environmental conflict in the Pacific Northwest.

On campaign finance reform, Clinton revealed that he plans to propose new restrictions on so-called “soft money” donations to presidential campaigns--the provision that allows wealthy individuals and corporations to donate unlimited funds by using political parties as a conduit. Aides said that they hope to unveil the plan early in April.

On trade, Clinton had conciliatory words for Mexico, praising policies that, he said, had led to a major increase in U.S. exports.

But he offered harsh criticism of Japan. Nations such as South Korea and Taiwan have reduced their trade surpluses with the United States, while the Japanese trade imbalance has stubbornly remained, Clinton said. That difference “can only lead one to the conclusion that the possibility of obtaining real, even, access to the Japanese market is somewhat remote.”

A spokesman for the Japanese Embassy later sought to rebut that argument, noting that the U.S. deficit with Japan has declined substantially since the mid-1980s.

“Big warships cannot change direction as quickly as smaller ships,” said Hiroshi Hirobayashi, deputy chief of mission at the embassy, in response to Clinton’s comparison of Japan with Taiwan and Korea. “As our (Japan’s) economy picks up, the surplus situation will improve,” he said.

On the Supreme Court, Clinton pledged not to ask prospective nominees how they would vote on abortion or any other pending issue but said that he will seek a nominee “who has certain deep convictions about the Constitution.” He specifically mentioned both the right to privacy, which has been the foundation of abortion-rights decisions, and the First Amendment’s guarantees of religious freedom.

Although many observers have said that they believe Clinton may pick a woman or member of a minority group to replace retiring Justice Byron R. White, he avoided a question about whether his first nomination to the high court would be guided by his goal of having a government that “looks like America.”

“I’m going to appoint someone I think will be a great justice,” he said, an answer that seemed calibrated to give him more room to maneuver than he had during his Cabinet selections.

“I will not discriminate against people who are older than I am,” the 46-year-old President joked.

On the Northwest, where logging interests have battled environmentalists over timber sales and endangered species, Clinton said that he hopes to “hammer out a solution” to the conflict, beginning with a regional conference scheduled for Portland, Ore., April 2.

“A lot of people--everybody--may be somewhat disappointed” by whatever compromise the Administration eventually will propose, he said, “but the paralysis now gripping the lives of the people out there is totally unacceptable.”

Clinton’s press conference was his first such formal session with reporters since the inauguration, although he has taken questions from the press on several occasions in recent weeks.

Standing at a lectern in the White House East Room, Clinton appeared relaxed and his confident answers to such a wide range of questions clearly pleased aides who had pushed last week to place a press conference on his schedule.

The President appeared to stiffen only once during the session--when asked whether his poor relations with many members of the armed services might create a problem for him in his role as commander in chief.

“No. No, I don’t have a problem being commander in chief,” he said.

On the related question of service by gays in the military, Clinton said that he would not rule out a plan that would allow gay men and lesbians to serve but would restrict their assignments--barring them from combat, perhaps, or from shipboard duty.

“The courts have historically given quite wide berth to the military to make judgments of that kind in terms of duty assignments,” he said, adding that he would not resolve the issue until he receives the military’s report on the subject this summer.

But unlike Clinton’s early encounters with the press, which were dominated by questions of that sort, this session focused on the President’s agenda--particularly relations with Russia, the economy and health care.

On health care, Clinton argued that the public will accept new taxes to pay for reform. “All the surveys show a lopsided majority of the American people willing to pay somewhat more, a little more, if they were guaranteed the security of health care coverage when they change jobs (or) when someone in their family’s been sick.”

But rather than add a new broad-based tax--on top of the taxes already proposed in Clinton’s economic plan--the Administration has looked for indirect sources of revenue.

The theory behind taxing health care providers is that many parts of the health care industry stand to gain substantial new income from a system that will guarantee insurance to all. Insurance companies, for example, will have millions of new customers as the government requires employers to offer insurance to all full-time workers. And hospitals, which now provide tens of billions of dollars a year in uncompensated care to people without insurance, would receive reimbursement for those services.

Administration planners have been looking for ways to capture some of that revenue and use it to cover the cost of providing insurance to the unemployed and subsidizing insurance for employees of small businesses.

But health care experts pointed out that much of the windfall the Administration would like to tax may never materialize, given the Administration’s other proposals to strictly regulate how much hospitals, insurance companies and other providers can charge.

On the subject of campaign reform, Clinton’s comments were a victory for his political advisers, who had strongly argued that he must address the issue, in part because of its appeal to voters who backed independent candidate Ross Perot in the last election.

Clinton’s pledge to “do away with” soft money was his most direct statement on that issue, which he had largely avoided during the campaign. So-called soft money is donated directly to political parties rather than to candidates themselves and is not subject to the same kinds of stringent limitations under federal campaign financing laws.

Such donations have been controversial because of the large sums involved--as much as $450,000 from some individuals in the last campaign--because the money can come directly from corporations and union treasuries, which are otherwise banned from contributing to federal campaigns, and because some contributions escape public disclosure altogether.

Clinton’s advisers have in mind a plan, developed by National Democratic Committee Chairman David C. Wilhelm, that would allow individuals to give up to $25,000 to federal candidates, and another $25,000 to national party committees, sources said. The proposal would limit “soft money” contributions to national parties at $50,000, with the cap phasing downward to zero over a number of years. Direct contributions from unions and corporations would be banned.

Times staff writer Sara Fritz contributed to this story.

MEDICAL COVERAGE: Clinton advisers differ on who should be given priority, the poor or middle class. A14