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Historic Health Care Reform Signed Into Law, But What Does That Mean For You?; Obama Administration Trying to Help Homeowners Who Can't Pay Their Mortgages

Aired March 28, 2010 - 15:00   ET


ALI VELSHI, CNN HOST: The historic health care reform signed into law, but the real battle is just beginning. Welcome to "Your Money." I'm Ali Velshi.

CHRISTINE ROMANS, CNN HOST: I'm Christine Romans. The weekend after President Obama signed the bail bill into law, so many of you still have so many questions. We have those answers for you today.

VELSHI: But we begin with a bold step by the Obama administration to help some Americans who can't pay their mortgages. This deals with unemployed and underwater home owners. Underwater, of course, means that you owe more on your home than the home is actually worth.

ROMANS: And of course, unemployed homeowners are having a difficult time digging deep to try to figure out how to pay the mortgage and stay current or keep their home. Stephanie Elam is here with the very latest on the plan.

Stephanie, big question here, this is the next step in what so have far have been underwhelming efforts by the government to try to stem the tide of foreclosures.

STEPHANIE ELAM, CNN BUSINESS CORRESPONDENT: Right and I don't know if this is going to really change things for so many people, Christine, but it is definitely moving in a direction that many people think needs to happen. So what we're going to see here is that this new foreclosure fight coming from the Obama administration is going to really make it so lenders have to slash and eliminate monthly mortgage payments for unemployed borrowers.

That's what they want to do here. Here's the main points of it. They're going to go ahead and cut payments to no more than 31 percent of a borrower's income. That's typically the amount of unemployment insurance, not a random number they have chosen there. This will happen for three to six months and then they could even go ahead and let the borrowers skip payments.

Some monthly payments, in some cases, to help them get back on their feet. The government will also offer incentives to help banks help underwater borrowers but cutting loan balances. Another point to make here in case you're wondering how this is going to get paid for this will be funded by the $50 billion that was already set aside in the Troubled Asset Relief Program, which we all know as the TARP. So they're saying no new taxpayer funds will be necessary.

They're hoping this will give the unemployed a chance to find a job, get on their feet, make their payments, stay in the house. Obviously, for anyone to come out of their house is not good for the economy. It's not good for the banks. So this is the overall plan here. But the administration is admitting that after six months, there is still going to be people who are coming back saying, I need help and beyond that there is still some people who are going to lose their homes, guys.

VELSHI: Have they done the math on this to figure out about how many people might have their homes saved by this particular program?

ELAM: You know what we were looking for that number and they do not have a number yet. And remember, they're planning on this to come out over the next six months. We should be hearing more on how they want to help. You look at the Bank of America conversation that we had this week and how they're trying to help out people with their mortgages.

And the number that they're looking to help is 45,000, which is really just a small number of the number of people that originally they were supposed to help, which I believe was about 400,000. So just gives you an idea that it is not helping as much as we would like to see.

ROMANS: And that 45,000, Stephanie ...

VELSHI: That's your roman's numeral.

ROMANS: That's a roman's numeral, that's the number of people who could be getting a call from Bank of America, telling them that they don't have to pay their mortgage back in full. Here's how it works, quickly. Bank of America, this is mortgage help from the high risk loans from Countrywide, a lot of those loans written by Countrywide, cut loan balances by 30 percent.

Your loan balance has to be more than 120 percent of your home value. So think if you have a $200,000 home it's worth $200,000 now, but your mortgage is $240,000 or more, this is the kind of -- this is the kind of discrepancy they're looking to try to ameliorate and you have to be two months overdue

Ali and Stephanie, here is something interesting about this. We have seen here and there attempts to address mortgage principle, but actually cutting the principle that is owed on the mortgage, that's a new step and it makes some people nervous because what about, Ali, you and I have talked about it, the moral hazard.


ROMANS: If you're current on your loan and you're seeing other people who aren't, who are actually getting their loan value amount reduced, why would you keep paying your mortgage?

ELAM: That's actually something that is being addressed by this plan in a way. It is going to be hard to decipher who needs help in some way than others, but part of this new plan coming out does say that for people who are still making their payments but they are underwater on their homes, they would be able to refinance into a different kind of loan to help them out so that there wouldn't be that urge to go ahead and just say, let me just default since they're getting more help than I would.

VELSHI: I have one quick question. In either of these two programs, the government program, or the Bank of America program, and I know the two of you both have worked on this, does the interest rate get adjusted?

ROMANS: I'm not sure.

ELAM: And I do believe that they can get adjusted. That's one of the thing they're looking at. But the problem was people weren't responding to that one, Ali. People were saying that's not enough. I still have all of this debt, this overall debt from my mortgage, so cut that and that's the reason why they're going after it this time.

ROMANS: And one person told me it is extend and pretend. They extend the length of the loan or lower the interest rate, but in the end, you still had the -- it was still the fact you owed $240,000 on a house that was worth $200,000 and maybe the house value was still falling and couldn't catch up.

ELAM: And with Bank of America, they're not going to cut it down to anything below 100 percent of what it's worth. Anybody thinking they're going to get better than what the appraisal is now, that's not going to happen.

ROMANS: All right, Stephanie Elam. Thanks, Stephanie.

ELAM: Sure.

ROMANS: It is the weekend after historic health care reform. CNN Congressional Correspondent Brianna Keilar is with us now on the hill. Brianna ...

BRIANNA KEILAR, CNN CONGRESSIONAL CORRESPONDENT: Christine, let's talk first about some of the things that go into effect immediately. A lot of this bill is going to take a few years to kick in. Right off the bat, what we're going to see going into effect this year, a number of things including a provision that says to insurance companies you cannot deny coverage on the basis of a pre-existing condition for children. It starts with children.

Also there is something in this bill that will take place this year that says you cannot cap the benefits that a person receives over the course of a year or over the course of a lifetime. Because what you have sometimes is someone who has a very serious illness like cancer and they end up with a benefit cap and then they hit that amount and then they're basically on their own and everything is out of pocket.

This is one of the nightmare stories we have heard over and over from Americans when it comes to health insurance. One of the other things to really hone in on too is a small business tax credit that is supposed to encourage small businesses to provide insurance for their employees. This is something that will be phased in over time. When it does kick in this year, it is going to be very much a fraction of what it will be over time, Christine.

VELSHI: And, Brianna, there is actually going to be a few other things that are phased in over time that you don't have to worry about immediately.

KEILAR: Yes, the big stuff has to do with what is going to happen over the course of the next several years. 2014 is a very big year for this health care reform package. First off, that is when we start seeing the mandate go into effect. The one that says you must have insurance or you have to pay a fine.

And there also are some fines for employers who aren't providing insurance. We see that go into effect. Some exceptions here for poorer Americans. Also in 2014, grown-ups as well will not be able to be denied coverage on the basis of a pre-existing condition. So kids first almost immediately and then grown-ups in 2014.

And then in 2018, we're also going to see that preventive care being freezed. We're talking about things like annual gynecological exams, routine physicals and preventive screening procedures like colonoscopies. All of those in about eight years are -- will be -- the federal government will say insurance companies, you have to provide this free.

ROMANS: And now, Brianna, this is the law of the land, we have gone from the debate about the merits or the drawbacks of health care reform and now we're really trying to figure out how it is going to be implemented, who is going to oversee it, where it is going to happen first. This is the hard part now really, I think.

KEILAR: Yes, this is it. We're not really going - I mean, we're going to see some of the effects almost immediately. This is something that you're going to see affecting you over the course of several years. Of course, it is going to play -- it is going to come into play very much almost immediately when you talk about politics here on Capitol Hill.

Congress now has a two-week recess. Members of Congress are going back to their home districts. Republicans will be railing against this plan. And the Democrats who voted for it are going to have to do their best to explain it to voter and really try to sell them on it.

ROMANS: All right, Brianna Keilar, thanks so much. Brianna on the Hill. Ali ...

VELSHI: Christine, I thought that was sweet of you saying now it was the law of the land, as if just now because the bill has passed, both Houses of Congress, just because the president has signed it, it is actually the law. There are 14 states suing to block the health care overall. Attorneys general arguing that requiring individuals to buy health insurance violates the constitution. Now, let me just tell you, of the 14 states, 13 of them have elected Republican attorneys general. Only one, Louisiana, is a Democratic attorney general. Of the 14 states, four of them have Democratic governors.

One of them, Christine Gregoire of Washington state, had no idea that this was actually going to happen. She heard about it from a newspaper. Do these states' attorneys general have a leg to stand on. Let's bring in our Lisa Bloom, our CNN Legal analyst.

Lisa, I've spoken to a lot of people you were on the side of the attorneys general who say they've got a really strong case under the constitution that the tenth amendment does not allow the federal government to just come in and either say you've got to have health care or you pay a fine or a penalty.

LISA BLOOM, CNN LEGAL ANALYST: Well, let's get real. The law is what the Supreme Court says it is. What has the Supreme Court said over the last several generations, that is that the commerce clause of the federal constitution allows Congress to broadly enact laws for the economic benefit of the entire United States.

So I think that because this line of cases stretches back to the new deal, that the Supreme Court is going to look at this law initially and say, probably it is constitutional under the commerce clause. However, there is no question that this Health Care Reform law goes further than any other economic law in the past in that it requires people to purchase insurance as its opponents say, merely just for breathing.

In other words, to buy car insurance here in California, I'm required as a motorist to buy car insurance, but I can opt out of that by refusing to drive. Under the health care reform, we can't opt out. If we are breathing, we are required to buy it. So that is pretty broad.

And I think it may be a more difficult question than people on both sides agree with. I don't know how the court is going to rule. If I had to put money on it, I would say under the commerce clause they will uphold it. But they had surprising decisions in recent years, striking down campaign finance reform, for example, Bush V. Gore, so you never know what they're going to do until it is in front of them.

ROMANS: What is the obligation or responsibility of a state attorney general in a situation like this? How much of this is politics and how much is it the responsibility of the attorney general to look at a big massive law like this, big massive reform, and stand up on behalf of what they think is the best thing for their citizens and their state?

BLOOM: That's a great question and these lawsuits have been controversial in the states that are bringing them. In Michigan, for example, there's a real split of opinion as to whether this is a good idea. The attorneys general say, look, we are entrusted under the law to bring lawsuits for benefit of the people in our state and we're doing this in good faith because we think this is bad for the people of our state.

It is going to cost money for the people of our state. On the other side, however, people say, no, this is going to benefit citizens of Michigan and the other 13 states that are bringing these laws. We don't want our state tax dollars to go to fight the federal law. We want this reform. Clearly it is political, Ali, as you say, when 13 out of the 14 states are doing it because they have Republican attorneys general who simply oppose the law.

VELSHI: Very interesting discussion. It will be interesting to watch how this plays out. It won't be interesting to see how many companies get worried about the fact they don't know how they're actually supposed to proceed because this is now a court case. Lisa, always great to see you. Thanks for joining us.

BLOOM: Thank you.

ROMANS: You know, Ali, the administration has been clear that they think the law is on their side and that they're not going to have any trouble with this. So, yeah, it will play out, but the administration has been pretty optimistic over all the legality of health care reform.

VELSHI: You know Governor Gregoire was talking to me from Washington State and she was saying, they're actually going to have to be in the same courtroom on two sides of things because she is not going to take the side of her attorney general. So Washington State is going to have two positions in the courtroom.

ROMANS: In the time of budget cuts, that's interesting too. You think about how expensive all this could get. All right, will you benefit from health care reform? And how? We're going to break down exactly who stands to gain and who has a legitimate gripe. That's next on YOUR MONEY.


VELSHI: All right, you contacted us on Facebook, Twitter and e- mail, and you're all asking how the health care bill will affect you. By the way, Christine and I checked our Facebook and Twitter accounts very regularly for this information. So please, keep those questions coming in. We're listening and we're keeping track.

ROMANS: That's right and here to help answer those questions, our very good friend Andrew Rubin, VP of Clinical Affairs for NYU Landon Medical Center and host of Sirius XM, Doctor Radio. Again, all of these are questions that you have asked us that you want to know specifically, now that the debate has -- we left the debate phase and now going into how this will be implemented, what it will mean for you.

Floyd N., this is what he wants to know, Andrew, will it bring costs down for people who currently have health insurance? ANDREW RUBIN, SIRIUS XM DOCTOR RADIO: So I'm looking at this two ways. I think that you need to think between now and 2014 when all the insurance reforms kick in and then post-2014. In the short-term, no, I actually don't believe costs are going down or premiums are going down because the cost provisions of health care reform will have not kicked in yet.

So insurance companies will have the ability to keep raising premiums for people, the costs go up. Post-2014, when the cost reforms take control, the state exchanges go into play and you'll see cost stabilizing. I don't think they're going to go down, I think they're going to stabilize. That would be a pretty good accomplishment.

VELSHI: That would be a gain. Let me ask you this one, Andrew, from Carrie, if we currently have health care through work, are we able to qualify for this new insurance?

RUBIN: These are really great and tough questions. The answer is maybe, probably if your income is above -- if your portion of your premium from your employer is more than 9.8 percent, you are entitled to go out and buy insurance on the exchange.

ROMANS: That means, imagine, so, Andrew, if you make $60,000 a year, but you have to pay $7,000 out of your pocket for your share of health costs, that means you could be qualified to go out and buy cheaper insurance on the health exchange.

RUBIN: That is correct.


VELSHI: Is that necessarily going to save you money, Andrew? I mean, if my company -- I go -- you know, I work for Time Warner Corporation, aren't they going to generally get a better deal anyway than I'm going to?

RUBIN: It is all going to depend what your employer charges you for your portion of the premium. So you may still qualify for a subsidy. So if you work for Time Warner in this example and you're below the 400 percent of the federal poverty level, which is $88,000 for a family of four, you can go out on the exchange if you meet that criteria of 9.8 percent of your income and get a subsidy for your health insurance.

ROMANS: What happens to the small business owner, the business owner, 50 people or more to work in your company for you to qualify to be able to go off the exchange if it is more than 9.8 percent of your salary. What happens if the company, the company is pushing the costs on to you, is there a penalty for the company if you go out some place else?

RUBIN: So again, we're talking about large employers and this is where companies need to be careful because if they put too much cost on to the employee, and the employee goes out on the exchange and buys insurance and gets a subsidy, large employer will have to pay a penalty.

ROMANS: That's interesting. All right, this is from Terrence C. How much is this fine for not taking health care? Does it apply to those who have no steady income or, in other words, people who don't have a job? We're going to answer to that question on the other side of the break. Don't go away.


VELSHI: If you're just joining us here, Andrew Rubin is joining us. He's the VP of Clinical Affairs at NYU Landon Medical Center. He's also the host of XM -- on Sirius XM Doctor Radio.

Andrew, good to see you again. We're answering questions that we solicited on our Facebook pages. Terrence has this question, says how much is this fine for not taking health care? Does it apply to those who have no steady income or in other words no job?

RUBIN: The answer is people have to pay a fine, but there is some caveats to that. It starts in 2014 and year one of that fine is $95 and it goes up each year to 2015, $325, and then 2016, $695. But if you have no income, you're actually exempt from paying the fine f you're below the federal poverty level, which about $9600 this year, then you wouldn't actually have to pay the fine.

ROMANS: You wouldn't have to pay the fine. The idea here also is that if you go out and buy insurance, and you're below the poverty level or below 400 percent of the poverty level so maybe that's almost $20,000 a year, you actually get a subsidy from taxpayers to buy that insurance, right?

RUBIN: That is correct. So one is the fine and there is a criteria for paying the fine. And then if you want actually want insurance and have no income, you can go out on exchanges in 2014 and buy insurance. And if you have no income, you'll get a pretty hefty premium subsidy.

ROMANS: I want to be clear about this fine thing. I heard this a lot and people are very concerned about this. A lot of people especially low income people who have been saying wait a minute how can the government fine me for not buying insurance. I can't afford this fine. The point is, if you're below the certain level of income, there is going to be taxpayer money that is going to help you pay for insurance that is going to more than make up for this fine, is that right?

VELSHI: That said, there are 14 attorneys general who are on your side if you think how can the government fine me for it?

ROMANS: This is absolutely true.

RUBIN: But this is the underpinning of the insurance reform component of health care reform. If you don't have everybody in this game, then the -- it just doesn't work. It is that simple. We either have health insurance reform and health reform with this mandate or it doesn't work. VELSHI: Right. The economics of it only work if everybody is insured or that many people are insured because you're forcing the insurance companies to make changes they don't find palatable and the flip side of that is that they'll get a whole lot more business.

RUBIN: Yes, but, again, this works.


ROMANS: Let's move on to the next one. Eric M. has a question. Big question from some military retirees, health care is already provided so how will this new law affect current coverage policies if at all?

Andrew, the number of times I've had this question, people who are military retirees who say, look, what does this mean for me? Clear it up for us. What does this mean for, I guess, the VA system, right, and for people who are currently in the military health care programs?

RUBIN: Christine, we talked about this for a while. It means there are no changes. If you get your health care through Tricare, which is for active and disabled military veterans, it doesn't change. You still get your health care the same way. If you're a retired veteran and you get your health care at the VA system in general, it doesn't change. No changes.

ROMANS: No changes for active military, for retired military people using Tricare or the VA system.

RUBIN: No changes.

VELSHI: Christine, I know we're out of time, but I would just love to keep on encouraging our viewers to send us these questions on Facebook and Twitter because we're going to just keep on answering them. It helps us know what people -- what circumstances people are in that need answering.

ROMANS: Yes, and you can e-mail us go to, and e-mail us to let us know specifically what's going on. Because one thing, Andrew and Ali, I think it's interesting, is there was a lot of heat and human cry up until the last few days. And now the people are saying, OK, now politics aside, what happens to me and my specific situation. Andrew was saying the same thing on his radio show. People are asking very good and very precise questions, aren't they, Andrew?

RUBIN: And they're all great and unique questions pertaining just to themselves. This is what we needed to happen so people start to understand what it is all about.

ROMANS: All right, Andrew Rubin.

VELSHI: Andrew, thanks a million, VP of Clinical Affairs at the NYU Landon Medical Center and the host of Sirius XM Doctor Radio. ROMANS: OK, so we need to talk about your savings next. You may think you're making all the right moves, but you could be paying too much in fees. All the right moves, but you're getting hit by fees. We'll explain next.


ROMANS: OK, so you think you're doing everything right for your retirement, you're investing every year in a diverse portfolio for your IRA. But you could still lose a million dollars before you retire. It all boils down to the fees, the fees, sucking away at your retirement savings and growth.

Mitch Tuchman is the founder and CEO of MarketRiders and he's here to walk us through some math he's done about how much you're paying in fees. Mitch, welcome to the program.

I want to start, first, with this portfolio you put together, for a person 35 year old, $4,000 a year annual contributions, assuming a 7.5 percent annual return, by the age of 76, wow, if you have -- walk me through what you see here, a mutual fund portfolio, a little more than $2 million, in an ETF portfolio, you would have had $3 million, so returns lost to fees, more than a million bucks. Why is this happening?

MITCH TUCHMAN, FOUNDER AND CEO, MARKETRIDERS: So what people don't understand is that when you buy a mutual fund portfolio and by the way, the portfolio that we use is all Morning Star, Four Star rated, mutual funds, the average fees on this portfolio is about 1.39 percent. And there's all kinds of hidden fees, but that's all loaded up.

Now when you look at these fees and you compound the amount of these fees over a long period of time, they literally create such a handicap on your portfolio that you lose a tremendous amount of money.

And people don't really understand this, they think, oh, what's the big deal? One percent on a mutual fund. Well when the markets are returning and in our example, 7.5 percent with bonds and stocks, that little 1.39 percent is a very big part of 7.5 percent. And that's just what happens.

ROMANS: You read it again also with mutual fund portfolio and an adviser and found that what you say is the loss is even worse. You got by the age of 76, same, age 35 you start investing $4,000 a year into your IRA, 7.5 percent return. In the end if you use mutual fund portfolio and an adviser, $1.4 million, the ETF portfolio of course would have been $3.1 million and the returns lost to fees, $1.7 million.

I should say what an ETF is, by the way, it's an exchange traded funds, these are things that typically have much lower fees because you're just tracking something in the market, it's actively managed, right?

TUCHMAN: Right, right, exactly. So the difference in fees on an ETF, ETFs tend to be 20 basis points. Now the caveat there Christine is that ETFs are now being bastardized by Wall Street. But I'm talking about the vanguard, the shares of ETFs, you don't really want an ETF if it's going to be on average more than 20 basis points.

So they're about a seventh of the cost of a mutual fund portfolio. But as you are saying, if you throw an adviser into the mix, then the fee goes from1.39 percent to 2 percent, 2.39 percent and that puts a further drag on the compounding of the portfolio and it is just devastating.

ROMANS: Let's bring in Ali because I know, Ali, you have looked and studied this before, about fees and sometimes you think it is a little overrated, right, those fees?

VELSHI: I'll tell you a couple of things. I generally agree with what Mitch is saying. I generally think ETFs are a fantastic tool for more people but ETFs are a general thing. They are becoming much more specific. There are many that are highly specific.

But at some point, Mitch, first of all, not everybody is going to pay 1.9 percent for an adviser, but let's just take that at face value. The reality is there are some mutual funds and some mutual fund advisers who are real people who have to travel around the world and really know whether this Czech pharmaceutical is better than that one or this Chinese banana farm is better than that one.

And if they are going to make me more money than a computer generated exchange traded fund is going to make me, why do I care if I'm paying for that privilege? If I'm paying for fees and an adviser but I'm actually beating the market every year, that's nothing wrong with that.

TUCHMAN: No, you're right. But Ali, the operative phrase you just said, beating the market every year. Most people I know have a time horizon on retirement of -- they're looking out even myself as a baby boomer, I'm looking out, you know, 10 or 15 years. But most people, you're 35, you're looking out 40 years, 30, 40 years.

So what is true, Ali, is that all the studies show that a mutual fund guy you described going looking at a banana farm wherever, he might do it one year, he might do it two years. But after five or 10 years, the number of people who can keep beating the market continually is less than 10 percent.

ROMANS: I think a cool takeaway for everyone here on this too is that you probably don't know what you're paying in fees. It might be a real good time to go check right now. Especially ...

VELSHI: That's the benefit that comes out of this, we'll be ahead. If everybody can just check what they're paying and at least make an informed decision about it.

ROMANS: That's absolutely right. All right, Mitch Tuchman, MarketRiders, thank you so much for stopping by. Really appreciate it.

TUCHMAN: Yes, thanks, Christine, thanks, Ali, appreciate it.

VELSHI: All right, Mitch. All right, after this talk about retirement and fees, I actually just want a vacation. And I'm going to come back and talk to you about how you can save some serious money on your next plane ticket.


ROMANS: So if you're a procrastinator when it come to booking an airline ticket, that strategy actually paid off last year, Ali. Maybe not this year, though.

VELSHI: Yeah. And I'm a procrastinator as you know on absolutely everything. And last year I was scoring with airline trip tickets and this year, as you know, I have to travel all the time and I'm not.

Here with everything you need to know with your upcoming travel, Rick Seaney, he's the CEO of from Dallas. Good friend of ours. Boy, things have changed. It's a new world out there, Rick. Give me some strategies because I have to be on a plane every week. What do I need to know?

RICK SEANEY, CEO, FARECOMPARE.COM: Yes, no, definitely this year, the prices are starting to tick up, the airlines are starting to, you know, get on that side of the seesaw where everything is on their advantage. So what you have to do is you have to be very diligent this year. Absolutely do not procrastinate. Start shopping a couple months before. Shopping doesn't necessarily mean buying, you need to start shopping. But absolutely buy about a month before your trip.

ROMANS: And shop Tuesday through Thursday, you say, so that usually those are the three days where the deals come?

SEANEY: Absolutely. Yes. So basically what the airlines are doing is every Tuesday launching sales, but the sales are only good for three days. So if you're shopping Tuesday through Thursday, you're getting the cheapest seats. If you're shopping on the weekend for your tickets, you're getting $50, $60, $80 round trip more for your tickets.

VELSHI: You know Rick, I'm going on a trip next month and it is the first time I'm deliberately taking a connecting flight. I normally ever, ever do that. The price difference was so dramatic, it adds about two hours to my trip, I'm going for it.

SEANEY: It is absolutely amazing. The airlines do have non- stops on their routes. They know that they're going to be full right now. And sometimes they're charging anywhere from two to three times more than a connecting flight. Typically, you know, everybody wants to fly on a nonstop. But for $200 savings or $300 savings, I'm flying connecting. Air travel is painful, but it's not that painful.

ROMANS: And you know Rick, one thing I think that is just infuriating is that you've shopped around, you've saved 80 bucks on the plane ticket but then show up with two bags and you end up having to eat half of that from the bag fees. You got to pack light.

SEANEY: Absolutely. I've seen people come and they have sent me notes and say, Rick, I paid 50 percent of my total trip costs on bag fees on this trip. You have to pack light. Be prepared, get those bags -- I've seen some people take the world's largest bags on an airplane. So know exactly what the size is and cram it full.

ROMANS: Cram it full. All right, Rick Seaney, thanks so much, CEO of Great advice as always. Remember, buy your tickets Tuesday through Thursday, Ali, and plan a couple months in advance.

VELSHI: What great -- I'm buying everything in advance. I just bought a new carry-on bag by the way so it fits on every plane I ever go to. And one of the things that's changing to is hotel room prices. I noticed they're getting more expensive.

I recently sat down with Fritz Van Paasschen who in addition to having the best name in the hotel business, is the CEO of Starwood Hotels. And you'll know Starwood because it's Westin, Sheraton, Four Points, St. Regis, hotels like that. I asked him about his strategy for keeping up with the industry and the change in the client base.

Listen to our conversation.


FRITZ VAN PAASSCHEN, CEO, STARWOOD: Well, first of all what is really interesting about our business is we do think day to day, are we full tonight, what rates should we charge tomorrow. At the same time, we open hotels with an eye towards the next 20, 30, or 40 years. And so we need to think in terms of what people will want.

VELSHI: Really for the younger group that you're perhaps trying to appeal to for the future, the Generation Y, their view of technology is about customization, it's about a whole range of things. What are you doing to attract that clientele?

VAN PAASSCHEN: I think the key for us is to make the changes in technology seamless with the overall hotel experience. Certainly in generations, Gen Y, Gen X and beyond, is this notion that I'm going to multitask at the same time.

So I might be checking my e-mail or logging on to find out about what the weather is like in the next city I'm going to travel to. At the same time I'm ordering a drink, I've got a game on in the background and I'm meeting someone for the first time and talking on the phone.

And I think that that incorporation of those different activities where that blend between leisure and work is, in another way, seamless. So am I working or am I hanging out right now? I'm doing a little bit of both and creating environments where people feel comfortable to do that.

VELSHI: Let's talk about globalization. This is an issue for your industry because in the recession, what has happened is so many people have chosen not to travel, particularly that 75 percent of your clientele that is a business traveler. They have had to cut costs. And yet you are increasingly a global company.

VAN PAASSCHEN: Notwithstanding the great recession and the financial crisis that we have lived through, the growth in prosperity around the world in places like China and India is inexorable. So today as we speak, 40 percent of the world's population is living in countries where GDP is growing at 8 percent a year and what that is creating is an emerging middle class, a desire for infrastructure, a desire to get out and have jobs where we're traveling. And a big part of that is growing hotels.

One of the great advantages for us of this growth in a global platform isn't just creation of new markets, but it is creation of travelers that are outbound from those markets to the rest of the world. I read recently, for example, that in about 10 years there will be 100 million outbound travelers from China to the rest of the world including the U.S.

VELSHI: So from an American perspective, that's an opportunity. For a lot of people who look at China, perhaps from the news, as something to be feared for the last few years, knowing that these outbound tourists from China will be inbound to the United States creates a whole lot of opportunity for Americans.

VAN PAASSCHEN: It absolutely does and what is interesting is because our hotel base in China is so strong right now, because most of those hotels are new, and today we're building incredible hotels in China, it has forced us to look at making sure that we upgrade our presence everywhere else including the U.S.


VELSHI: OK Christine, here is something that I took away from this whole thing. If Sheraton and Starwood are retooling to sort of keep in mind those outbound travelers from China, well that means that the motel owner in Atlanta or Houston or wherever here in America might want to be thinking about that trend too. They have all got to refit their hotels and renovate them every 10 years or so. Might be worth thinking about how you might appeal to a growing market from another part of the world that could be your business base in 10 years.

ROMANS: And all of that is economic activity, isn't it, Ali? Retooling and tweaking and changing your 10-year strategies. All right. They are two of most powerful entities in the world. One is a country, one is a company, and they're going head to head. Why you should care next.


VELSHI: Time now to go beyond the headlines. Joining us from London is our good friend and regular to the show Richard Quest, he's the host of CNNI's "QUEST MEANS BUSINESS." Now hard for anybody in the world to miss this story. Google tried to go around what many people are calling the great firewall of China. It didn't work. The company redirected all mainland China traffic to its servers in Hong Kong because it is not required in Hong Kong to self-censor.

If you looked at Google, versus, you'll notice if you Google something like Tiananmen Square, totally different responses. China's response to Google's effort, well they partially blocked access to that too. So what if anything was gained by either party in the end? Richard, what do you think?

RICHARD QUEST, CNN HOST: That's a very good question. Not a great deal. And one of the reasons is because there wasn't a huge amount of agreement on what Google's aim and object was. The way Google did this, some suggested was a way of like giving the Chinese something so that they could save a little bit of face. But the Chinese clearly didn't see it that way and they acted as if they had been deeply offended and shut off large parts of it.

So you've got to ask yourself, who got what out of this nasty spat? And if Google did manage to offend the Chinese, and has put itself in a disadvantage, what is the long-term damage? Now at the moment, Google, they don't split up the numbers but it is believed to make $200 million, $300 million, $400 million in China.

But China, Ali, as you know, is the growing area. So have they shot themselves in the foot? And then, and then you've got the purists who say Google sacrificed its censorship ability by going into China. Well guess what, it blew up in its face and now it has got all the dirt all over it.

ROMANS: Well the question is how can you be Google, which is dedicated to information, unfiltered information, and you filter information? You just go back to that basic premise and you wonder how long that could have gone on. Yahoo! had an issue where it actually cooperated with the communist authorities and turned in some democracy people last year, right, and this is something that has hurt the reputation of that company.

VELSHI: Which I think is a bigger problem than simply censoring the results.

ROMANS: Right, Richard Quest, stick around because that's something to chew over. Next, Richard is going to show you how high fashion is coming face to face with the friendly skies. But first, how creative hands on marketing helped one small business launch a global brand in this week's "Turnaround."


IDO LEFFLER, YES TO: I think we're going to start ...

ROMANS (voice-over): Ido Leffler is in the business of saying yes. Yes to carrots, yes to tomatoes, and yes to cucumbers.

LEFFLER: We really see ourselves as being a relentlessly optimistic brand.

ROMANS: Leffler and his business partner Lance Kallish took over Yes To in 2006 and moved this tiny natural beauty brand from Israel to the U.S. The big break came in 2007 when Walgreens decided to plan the veggie inspired line in its stores across the country.

LEFFLER: We really saw this as a dream come true. When they first placed their first order, the quantities in itself when you go from 16 stores to 5,800 stores, that was our first pressure.

ROMANS: But in the $8 billion natural beauty business, it's getting off store shelves and into shopping carts that really matters.

LEFFLER: Walgreens like most retailers in the country have a simple philosophy. If it doesn't sell, they can return that stock back to you. At stake is really the entire community.

WALGREENS: Leffler and Kallish bet the cash crop on print, spending almost all of their marketing budget on a national magazine campaign, but the spike in sales never came.

LEFFLER: We had committed the vast majority of our cash into this promotional campaign. It wasn't moving the needle. It nearly got to a stage where we didn't even have money to pay our salaries.

ROMANS: So Yes To got their hands dirty with an interactive marketing campaign. They launched a social media contest to be the face of the brand, attracting 150,000 fans. Started a forum for consumer feedback and handed out a million samples.

LEFFLER: I like this card.

ROMANS: And the seeds began to sprout.

LEFFLER: Using that small little funds we had left paid significant dividends. It was phenomenal.

ROMANS: Sales doubled in six months and Yes To has seen explosive growth since then. The owners that wouldn't say no report they've seen their products reach 25,000 stores in 29 countries. Christine Romans, CNN, New York.



VELSHI: We are back with our great friend Richard Quest. He's going to tell us about how air travel is about to get a lot more stylish. And it's not just that Richard is going to be on more planes.

QUEST: This is a story that, guys, I know you two will absolutely adore because we are all geeks when it comes to the travel industry. If there is one job that we look at and all think, what must it be like to be a flight attendant?



QUEST (voice-over): This is the look that said it all -- the 1960s flight attendant featured here in Spielberg's "Catch Me if You Can" -- white gloves, fitted skirt, dainty hats -- guaranteed to capture attention and adoration all around.

And this is the reality -- the decade-old United Airlines uniform. The designer, Cynthia Rowley, has been hired to transform.

CYNTHIA ROWLEY, DESIGNER: I've been flying all over the world talking to people.

QUEST: Employees are telling her what they want.

UNIDENTIFIED FEMALE: I want a business suit cut for a woman.


UNIDENTIFIED FEMALE: I want to look like a professional.

UNIDENTIFIED MALE: I want to look the part. I mean, we are professionals and we have a tremendous amount of responsibility and I want that confidence to be reflected through our uniform.

UNIDENTIFIED FEMALE: And I want someone, when they see me walking through the airport, to say, "What airline does she work for?"

ROWLEY: It's a huge challenge, a huge challenge. I mean it's trying to -- you know, I have to make a lot of people -- try to make a lot of people happy.

QUEST: Cynthia is more used to cutting couture for the catwalk than attire for airlines. But by next year, Cynthia will have designed 10 different uniforms that will have been made into 96,000 items.

The challenge is to be fashionable but always functional.

ROWLEY: I've been thinking about like when the flight attendants reach up, you see the linings in their jackets. So I want to encourage that so I have like really beautiful print linings that will show.

QUEST: Pioneering and practical.

ROWLEY: They have a very tiny little space to work in. So things -- you know, I've been thinking about things like the skirts are narrow, so maybe they have a zipper that can unzip so that they can bend down.

I want it to be something that's never been done before. I want it to be sportswear, dresses and things that will give United a cohesive look.

QUEST: For United, image is paramount. UNIDENTIFIED MALE: If you put new uniforms on folks and help them look and feel better, they're set up for success, which leads to better customer service, which leads to more customer loyalty.

QUEST: New uniforms don't come around very often for good reason. It's the sheer size and scope of the operation. From maintenance to flight attendants, the customer service and cabin crew, Cynthia has her work cut out.


QUEST: And the very thought of what's involved, the stakes are high, the risks are great and the people involved will love it or hate it.

ROMANS: Ooh, the stakes are high. I like that. That is such a beautiful pun. You can write that in. The stakes are -- Cynthia Rowley, she is actually one of the original kind of brand people with Target. Remember a few years ago? She is somebody who was couture who went and helped design for the masses. So this is not really all that unusual for her, I think.

VELSHI: Richard, when I heard something in there when she was describing how when the flight attendants reached, you could see the linings. I'm just wearing a new suit today and it has this lining inside that has this nice outline, this yellow, you see orange there. And I thought to myself when I got it, why is that necessary? Now I realize if I lean up and somebody sees me, it will look better. I learned something from you, Richard. I learned something from you about fashion, which is interesting.

QUEST: Hey, Christine, look at his lining. Come on. Look at his lining. Now look at mine.

VELSHI: Richard, on that note, very stylish. Good to see you, as always.

ROMANS: All right, thanks for joining us on YOUR MONEY, guys. You can follow us on Facebook and Twitter, @AliVelshi and @ChristineRomans. This conversation, especially about health care, continues. We want to know what you want to know about how your health care is going to change.

VELSHI: Make sure you join us every week for YOUR MONEY, Saturdays at 1 p.m. Eastern, Sundays at 3. Log on 24/7 to and have a fantastic weekend.