SEN. JOHN BREAUX: The clerk will please call the roll.
CLERK: Mr. Altman?
STUART ALTMAN: No.
MARGARET WARNER: Falling just one vote shy of a needed super-majority, the bipartisan Medicare Commission failed last night to endorse a blueprint for reform. The Commission had hoped to recommend a plan to Congress to improve benefits and shore up financing for the program used by nearly 40 million elderly Americans.
SEN. JOHN BREAUX: It is not a question of whether we have fundamental reform of this system; it is now only a question of when it occurs.
MARGARET WARNER: Its chairmen, Senator John Breaux and Congressman Bill Thomas, had proposed to shift Medicare's focus away from paying doctor and hospital bills directly. Instead, the government would help beneficiaries pay the premiums for their choice among a range of government-approved private health insurance plans, both managed care and traditional fee-for-service.The eligibility age would also rise from 65 to 67.
But the plan failed to pass when only two Democrats, Senator Breaux and Senator Bob Kerrey, joined Republicans in voting for it. Shortly before the vote, president Clinton came out to criticize the plan for not providing adequate prescription drug coverage and not earmarking part of expected future budget surpluses to shore up the Medicare Fund. The president said he would submit his own alternative to Congress this year. Leaders of the Commission said they will take their plan to Congress as well.
MARGARET WARNER: Now, for where Medicare reform goes from here, we turn to Republican Congressman Bill Thomas of California, co-chairman of the Medicare Commission and co-author of the plan defeated yesterday. He's also chairman of the House Committee that will take up Medicare legislation. And Gene Sperling, President Clinton's National Economic Advisor. Welcome, gentlemen. Mr. Sperling, the president wouldn't buy the Commission's proposal; what is he going to propose?
GENE SPERLING: Well, as the president said, this is not the end of the process, this is really the beginning. The president's very committed to having Medicare reform, bipartisan Medicare reform; he feels that the Medicare Commission did do a service -- along with his State of the Union Address, the two events have put Medicare very much on the map. And what the president's going to try to do is look at the positive parts of the Commission, as well as the negative parts of the report and see if he can put together a plan that hopefully can bring a larger amount of consensus for bringing more competition into Medicare, getting the savings we need, keeping a defined guaranteed benefit, but also having enough from our surplus for the solvency of Medicare so that we can extend the life of Medicare over a decade longer so that much of these savings could be used to finance a much-needed prescription drug benefit plan that we think would be important of an overall package.
MARGARET WARNER: How does that sound to you, Congressman?
REP. BILL THOMAS: Well, it's a little confusing, Margaret, because the proposal that was at the core of the bipartisan Breaux-Thomas package was the change that everyone agrees needs to be done -- including three of the four presidential appointees -- that is figuring out a way to make sure that Medicare is produced in the private sector with a real-world dollar cost. Currently one of the biggest problems is that the government tries to administer 10,000 prices in 3,000 counties, and it gets it wrong most of the time. But probably even worse than that, seniors aren't getting the kind of health care they deserve. And our proposal addressed that directly. What we proposed was that low-income seniors, a couple making $14,000 or less, would have all of their Medicare bills paid for, including prescription drugs. I can't believe the president doesn't think that's an adequate drug proposal. Currently seniors don't have drugs in Medicare. Under the proposal that we offered, just as most people have in their health care, we'd have a standard plan and a high-option plan. Drugs would be incorporated in the plan. They would be affordable and available for the first time.
MARGARET WARNER: Mr. Sperling, do you -- I heard you talk about wanting more competition in the plan. Does the president accept the model of turning this, really, Medicare, into a managed competition plan where the government would vet plans, but the consumer, the elderly patient, would choose among a range of these pre-negotiated plans?
GENE SPERLING: Well, there's two ways to think about getting more competition into Medicare: One is that our traditional Medicare plan has always been denied the tools it needs to bring prices down. We haven't been allowed to have the kind of competitive bidding and use the full market power, purchasing power of Medicare, to get prices down and get efficiencies. I think the Commission did some good work in that area. As opposed to the other efforts they made, the so-called premium support, we -
MARGARET WARNER: That's the sort of term of art for the Breaux-Thomas plan?
GENE SPERLING: I think what we are going to be certainly open minded about is looking to see whether there are ways of bringing more pure price competition to a specific, defined benefit package so that there is the kind of price competition, as opposed to just competition in risk selection in just choosing the healthiest participants. We do want to look that way, but we had some concerns with the way that the plan that Chairman Thomas put forward; the actuaries felt that theirs could lead to premiums going up 10 to 20 percent for people who stayed in the traditional program and I think there's some other important questions that need to be asked. But as to whether or not we should be looking for ways to bring more price competition into Medicare in a way that guarantees people a defined benefit plan and doesn't lead to premiums going up, we certainly will be looking closely at that and support that concept.
MARGARET WARNER: Was that a danger in your plan -- because some of the liberal members of the Commission said this, too, that seniors, essentially, would be paying more or paying the same for less somehow; that somehow this guarantee of at least some defined benefits would evaporate?
REP. BILL THOMAS: Margaret, I'm really concerned now, I don't think Gene read the plan. Apparently, they had some prepared notes that weren't addressed to the plan that we voted on last night. The government's so-called fee-for-service program would be available under this new model.
MARGARET WARNER: The traditional Medicare.
REP. BILL THOMAS: And we worked with the actuaries to make sure that there would not be the kind of impact that was described. He's talking about a plan of about four months ago in which some of his own appointees worked with us to make sure that that would not occur. But more importantly -
GENE SPERLING: Margaret, could I reply to that, please?
REP. BILL THOMAS: Could we focus -
MARGARET WARNER: Just a sec, Mr. Sperling. Go ahead.
REP. BILL THOMAS: -- on the fact that our plan is available today? We're going to introduce legislation and move it today. The biggest problem with the president's proposal about that transfer of funds is that it doesn't reform Medicare. And probably, as Mr. Walker, said head of the government accounting office, that it, in fact, creates a false complacency that we have addressed the problem. What we really need are specifics, rather than general statements. The Medicare proposal, the bipartisan Breaux-Thomas proposal is ready to go. What does the president want and when ask he going to show us?
MARGARET WARNER: You want to answer that, Mr. Sperling?
GENE SPERLING: Two points. One, I don't think Chairman Thomas is being straightforward when he says that there's no danger of the premiums going up in his plan. What they said is that if there's no private plan, they'll have some protection. But if you live in a place where there's one HMO that you think is harmful, you have no protection that the cost of your premium could not go up. So there is that danger. There is that risk and the independent actuaries did find that, first of all. Second of all, after all, after all the --
REP. BILL THOMAS: That's not correct, Gene.
GENE SPERLING: After all the work that they've done, they were able to come up with $100 billion in savings over ten years -- really only $60 billion because $40 billion they're just shifting to another account. How can -- with that difficulty in getting just $60 billion in savings, how can Chairman Thomas responsibly say that it's not important to dedicate the $680 billion in surpluses that the president's suggesting? The Republican budget right now says that all of the on-budget surpluses, the so-called surpluses that don't count Social Security, should virtually go to a large tax cut; that none of that should go to Medicare. I think it's fiscally responsible and irresponsible for the Medicare program for our country to be looking at a huge surplus and decide in the midst of this very important Medicare challenge that not a penny of that surplus should go to Medicare. The president's commitment is to have Medicare surpluses going to Medicare in addition to reform -- more money, more funds together with reform. That's the only way we'll have a viable plan that will have real reforms and allow more meaningful prescription drugs.
REP. BILL THOMAS: Well, unfortunately, Gene hasn't talked to Senator Kerrey, who represents a rural area and who made sure -- because he supported for the plan -- that those areas that don't have competition are guaranteed that the only price the beneficiaries would pay would be that share of the premium which is fixed, the 12 percent. It is not true what Gene just said. We have a guarantee where there is not competition to protect the beneficiary from the price. The point I want to make is the president has no plan. You just heard a lot of words without substance. And if we simply transfer the money without reforming the program, we do not solve the problem. We have to slow the growth rate of Medicare. The bipartisan Breaux-Thomas proposal offers a slowdown in the growth. $102 billion is not money to be sneezed at. But, more importantly, it reforms the program to provide a better product for seniors with drugs integrated in the program and a complete 100 percent protection for low-income seniors on all their costs, including drugs.
MARGARET WARNER: Let me just follow up on that, though. What about the point Mr. Sperling made that $100 billion is a drop in the bucket if you're looking at the baby boomers coming into Medicare and that you would need more -- a lot more revenues?
REP. BILL THOMAS: The report says over and over we need more revenue but we need it later. What we need to do is begin to change the program. And when you need revenue, it will be available. No one said you aren't going to need more revenue, but if you change the program now, you will need less than you otherwise would. The president's only substantive proposal is to transfer the money. And it simply spends all that money on the current program that doesn't change.
MARGARET WARNER: Okay. Mr. Sperling, that seems to be the central critique that he's making. Is the president going to propose a fundamental restructuring of this program, or is he going to simply transfer this money to shore up essentially the same existing one?
GENE SPERLING: Let me reassure Chairman Thomas and others. When we come forward with a plan, it is going to include real reforms. It is going to include some tough choices and some real reforms. But there is no way that one can suggest that we can get the long-term solvency that we need in Medicare and use all of the on-budget surplus for a tabs cut. Now, the chairman said we need that revenues for later. Yet, the Republican budgets that are being considered right now are going to take all of that money and give it to a tax cut at the expense of Medicare. Now, I don't understand why we can't agree together that Medicare needs both reforms and it needs at least 15 percent of our surplus other the next 15 years.
MARGARET WARNER: Let him answer that quickly because we're just about out of time.
REP. BILL THOMAS: Gene, please, tell the American people that the president is cutting Medicare in current budget. He cuts it below the current amount. If he wants to save Medicare, why is he cutting it? Secondly, if he's going to have a program, prescription drugs are key, but in his budget that he's submitted, he has no money for prescription drugs. They talk about it, but there is no substance. The bipartisan Breaux-Thomas plan is real, we're going to introduce it in the Senate and the House.
MARGARET WARNER: All right. Gentlemen, we're out of time. Mr. Sperling, when will we see the president's plan?
GENE SPERLING: Well, in fairness to the president this Commission -
MARGARET WARNER: Briefly.
GENE SPERLING: -- just failed to meet their report. The very day it happened -- when the whole process it could have died down -- the president came out and committed that he was going to come forward with his own specific plan.
MARGARET WARNER: And do you have a date?
GENE SPERLING: I don't have an exact date but we'll be working on it immediately.
MARGARET WARNER: All right, gentlemen, we have to leave it there, I'm terribly sorry. Thank you both very much.