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CONDITION: CRITICAL
JUNE 5, 1996
TRANSCRIPT
The Medicare Trust Fund trustees warned in their annual report that the entitlement system would be bankrupt by the year 2001, one year earlier than their last projection. Congressional Republicans and Clinton Administration officials were quick to outline their proposals to stabilize Medicare. Following a background report on Medicare, the NewsHour examines the state of the system and the proposals to change it from both political and economic perspectives.
Elizabeth Farnsworth's background report on the Medicare system
Paul Solman leads a debate between two health care economists.ELIZABETH FARNSWORTH: The political perspective comes from Laura Tyson, head of President Clinton's National Economic Council, and Bill Thomas, Republican of California, chairman of the Health Subcommittee of the House Ways & Means Committee.Welcome to both of you. Ms. Tyson, you heard that discussion. From the administration's point of view, how serious is this situation?
LAURA TYSON, National Economic Adviser: (New York) Well, I want to emphasize that the administration does have a plan that has been certified by the Congressional Budget Office that will secure the trust fund through the next decade for a full decade. That's about the same period of time that the Republican plan would secure the trust fund for.
The trust fund is a serious issue. It is not in imminent danger of bankruptcy, and I want people to understand that. On the other hand, I want people to understand that there is a plan, the administration has one that has been certified that will do the trick. The President has said numerous times the door is open, let's negotiate and let's negotiate on a balanced budget, let's deal with the problem of the Medicare Trust Fund, and one final point, the President led on the issue of the Medicare Trust Fund; by actions taken in 1993 the life of the trust fund today is three years longer than it otherwise would have been. And in that action in 1993, not a single Republican talked about the trust fund or supported the President's action. Indeed, the Republicans wished to undo what the President had done in 1993, which added three years to the life of the trust fund. So the President has been a leader on this issue.
ELIZABETH FARNSWORTH: Very briefly, Ms. Tyson, run through the elements of the plan.
MS. TYSON: The elements of our plan essentially we have put on the table a hundred and twenty-four billion dollars of cuts in Medicare. Again, that has been certified by the Congressional Budget Office, and that amount and also as balancing the budget. That includes changes in reimbursement rates and it includes moving some, as Stuart Altman said, some but not all of home health care from Part A to Part B, going back to what was the tradition of Part A having health care at the home associated with hospitalization visits and health care at the home not associated with hospitalization being covered by Part B. So it's reimbursement rates and it's a change in Part A and Part B coverage. What we see when we look at the Republican plan is structural changes in the Medicare system such as the introduction of--
ELIZABETH FARNSWORTH: I'll come back to that, I'll come back to that in one minute.
MS. TYSON: Okay.
ELIZABETH FARNSWORTH: Rep. Thomas, what do you think of what you heard of the administration plan, and what is the Republican plan?
REP. BILL THOMAS, (R) California: (Washington) Well, in 1993, although you didn't get any specifics from the economic adviser, she certainly knows what those specifics are. The way they bought three years on the trust fund was to go to seniors who were paying income taxes, who were getting Social Security, and increasing their taxes, shifting general fund taxes to cover the trust fund loss. That bought them three years. What the President's proposing now, as Stu Altman and Gail Wilensky discussed, was taking 55 billion dollars of that 124 billion solution and moving Part A trust fund home health care to Part B, which is the general fund. It's the same kind of thing that they've done in the past. They don't want to look at the program and restructure it. They want to go either through the front door, payroll taxes, or through the back door, shifting programs or money onto the general fund, to tell people things are just fine.
If we don't do anything else, Elizabeth, the trustees' report has got to sober us up. Over the last year arguing which plan was better we lost over $100 billion in the trust fund, and if you look at the last page of the trustees' report, the actuary says my belief is we're more likely to follow the most pessimistic plan, not the intermediate plan upon which this report is based. That means it could get worse, 2000 or 1999. This is 1996. That means we have three or four years to begin the adjustments in the program. I don't think the American people want to be fooled by shifting the programs by moving them to the general fund, which only exacerbate the deficit problem. What they want is a restructuring of a program to guarantee it for seniors and to make sure it's there for the people who are paying the payroll tax funds.
ELIZABETH FARNSWORTH: Briefly, what restructuring would the Republicans recommend?
REP. THOMAS: What we need to do is to remove that 10 percent growth, get it out of a 1960's fee-for-service program, and pick up some of the changes that have occurred in the private sector like HMO's that you've discussed, create a choice structure so that seniors can choose the program that they want, and contrary to Sec. Shalala's statement at the press conference today, under the Republican program, if a senior chooses to try an HMO, they certainly can come back into the regular fee-for-service program. She said they couldn't come back; that's just not true. Choice, creating an opportunity for the marketplace to act, and if, in fact, an HMO gets too expensive for a senior, it's going to be too expensive for a lot of seniors. That means someone's going to be scrambling to offer a new program that gives you a better deal at a cheaper cost, and they'll attract the beneficiaries to that program. We've got to get out of a dictated top-down government program and let the marketplace assist us in creating a good buy for our seniors.
ELIZABETH FARNSWORTH: Ms. Tyson, your response to that and also your response to the criticism of the administration program.
MS. TYSON: Well, first of all, let's just be straight on this structuring, restructuring issue. There is a movement today going on of senior citizens on a voluntary basis to health management organizations, HMO's. In fact, this year, there will be a 20 percent increase in the number of Medicare beneficiaries who choose HMO's. The administration plan allows people to go into HMO's. It allows people to go into preferred provider networks. It has choice. The issue is not the difference in choice. The point about the choices being offered by the Republicans, for example, a choice to have medical savings accounts, or a choice to go into private Medicare systems that allow for balanced billing, i.e., for doctors to charge considerably in excess of Medicare reimbursement rates, those kinds of choices are not scored by the Congressional Budget Office or anyone else as saving money for the Medicare system. Indeed, the medical--the medical savings accounts would actually increase according to the Congressional Budget Office Medicare spending, so let's make clear here that that is not an issue of choice.
The second thing is, as Stuart Altman suggested, whether someone has choice or not depends upon how many resources are put into the Medicare system. What our concern is about the Republican proposal, is that they're saying on the one hand, here are some choices; on the other hand, we're not going to give you enough resources to exercise those choices. We're going to cap the rate of growth of Medicare spending. We're going to put a hard cap on that, and we're going to slow it down so much that by the year 2002, $1,122 per beneficiary lower than the projected spending is today. Now what does that mean? That means either an elderly person will not be able to get the services they get today in 2002--
REP. THOMAS: Which really isn't true.
MS. TYSON: --or they will have to pay more. The resources that the cuts or the slowdown in growth that the Republicans are proposing means that in terms of real purchasing power, the real ability of the elderly to purchase medical services, that ability will not be maintained over time. What they can get in 2002 will not be what they can get today.
Meanwhile, the President has proposed a plan which will balance the budget. There's no question here about balancing the budget. The Congressional Budget Office has certified that. We'll secure the trust fund for 10 years, we'll offer the elderly choice, they have it today, but will not segment the Medicare system in such a way through medical savings accounts and balanced billing, private Medicare systems that will result in a balkanization of Medicare with the sickest and poorest elderly left in the traditional Medicare system and the wealthiest, healthy of the Medicare beneficiaries leaving it, causing the Medicare system to wither on the vine.
ELIZABETH FARNSWORTH: Let me interrupt one minute, Rep. Thomas, I know you want to respond to that but I also--
REP. THOMAS: Yes.
ELIZABETH FARNSWORTH: --want you both--we only have a little bit of time--
REP. THOMAS: I would like to respond.
ELIZABETH FARNSWORTH: Is there any sign, respond and then please answer very briefly if you both would--that you can--that you can come together on this? Last year you deadlocked the two sides. Now we have currently more of a crisis. Is there any side--sign that there's some room for compromise?
REP. THOMAS: Elizabeth, Ms. Tyson said that--let's get straight here--Stu Altman said that the seniors who are wealthy should be paying more. We had a structure which required them to pay more. The President has stonewalled on that. It seems to me that the seniors would rather have a program in which they have to make choices and augment it a little bit than to have no program at all. The real problem with the President's proposal, and she focused on the year 2002, as you might notice, as you get out to 2006, the actuaries including the trustees' actuaries, said that the shortfall after 2006 is going to be $500 billion if you don't begin to make changes now. The structural changes we make now not only save the program through 2002, but it means you have to make less drastic choices in those years in which Clinton probably cannot be in the White House. Our job is to save the Medicare program beyond any particular Presidency. It is to save it for the American people, not to use it as a political pawn.
ELIZABETH FARNSWORTH: Okay. We're out of time. I'll get you--we'll get you both back on to talk about room for compromise. Thank you both very much.
MS. TYSON: Thank you.
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