CONDITION CRITICAL July 15, 1997 TRANSCRIPT

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As Congress continues to discuss tax cuts, the largest and most politically sensitive portion of the federal budget, Medicare, remains in legislative limbo. The Senate and the House have begun hammering out the differences between their versions of Medicare reform. Following a background report on the continuing debate, Margaret Warner leads a discussion over what should be done to manage this entitlement program.

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A RealAudio version of this NewsHour segment is available. July 15, 1997: Margaret Warner reports on the debate over Medicare reform. June 6: The House Republicans called for the creation of medical savings accounts [MSAs] in their version of health insurance reform legislation May 15: A year-old pilot project to crack down on Medicare fraud in Florida is working. March 4: The Senate passes the Kennedy-Kassebaum Bill. March '96: Explore a week of special NewsHour reports on health care issues. December 25: Cuts in Medicare take their toll on the U.S. health system's capacity to conduct graduate medical education. Browse The NewsHour's Medicare coverage.

MARGARET WARNER: And joining us now are Democratic Senator John Breaux of Louisiana, one of the signers of the letter to the President supporting the Senate's Medicare changes, and Martin Corry, director of federal affairs for the American Association of Retired Persons, better known as AARP. Senator, for the whole history of Medicare, every recipient's been charged the exact same premium. Why change that now?

SEN. JOHN BREAUX, (D) Louisiana: Well, because we have a real serious problem. Medicare is going broke by the year 2001--at the end of that year--unless we make some fundamental changes in the program, the system is not going to be there for the seniors who are now on the program or those who are getting ready to come on the program. Everybody wants us to fix it. The problem is nobody wants us to do the things that are necessary to fix it. They say fix it but don't increase my premiums; fix it but don't reduce my benefits; fix it but don't increase the retirement age. We've got to lower the rhetoric. We've got to work with people like Martin to try and come up with some suggestions on how to fix it so it'll be there in the future.

MARGARET WARNER: And give us briefly--because I know it's complicated--the scope of this means testing--the progressivity kicks in for individuals making $50,000 and up. What percentage of seniors would be covered by that, would have to pay higher premiums, and how high could the premiums go?

SEN. JOHN BREAUX: Margaret, in Louisiana, less than 5 percent of the people who are retired and on Medicare would be hit by it when it's fully phased in. We're talking about a couple that has $125,000 in income while they are retired. The average salary in Louisiana is probably about $22,000 for people that are working. And I think it's fundamentally unfair to ask a truck driver trying to support two children who may not even have, for instance, health insurance, who's making $25,000 a year, to subsidize somebody like say a Warren Buffett, who may be getting Medicare. We should make--we should make sure that those who are going to be asked to pay a little more can afford it, and I think that a limit of $125,000 a year is a fair limit, and for an individual it would only come into play after they're making $100,000 a year. That's when they're retired and on Medicare. We're just asking them to pay a little bit more of their Medicare insurance. It's still a very good deal, much better than they could get in the private sector.

MARGARET WARNER: AARP opposes this. Why?

MARTIN CORRY, American Association of Retired Persons: Well, the issue isn't about progressivity or fairness. In fact, it's rather ironic. Medicare beneficiaries at $50,000 for singles, $75,000 per couple, are not wealthy, and yet, we see members of Congress, as well as corporate executives, Fortune 500 executives, who get very generous subsidies from the federal taxpayers for their health insurance.

MARGARET WARNER: Because their employer--

MARTIN CORRY: Because their employer's deductible, and it's excludable in their income, and if you look at the federal tax code, you'll see that these health benefits are among the most expensive. And they drive the deficit just as much as Medicare or any other programs. So there's a fairness issue, but there's also an issue of will it work. The Senate provision--as the administration has noted--and I think probably some Senators, maybe even privately, have noted--doesn't work. It requires Medicare's computers to talk to IRS computers to talk to Social Security's computers. It's a real Rube Goldberg that just simply won't work on the face of it.

MARGARET WARNER: Senator, what about that point, that it makes it very complicated?

SEN. JOHN BREAUX: That's an argument without any validity. If we can agree on the policy that it's appropriate to means test Medicare, don't tell me we cannot come up with a system where the people who collect taxes cannot figure out how much someone makes and then report that to the Health & Human Services Department and have them figure it out with regard to a person's premiums that they have to pay. Every month right now when someone gets their Social Security check, a portion of it is deducted from their Part B premium costs. Now, it's very easy, I think, and it can be worked out between the Internal Revenue Service and HHS to figure out how we determine whether someone is making $125,000 when they're retired. We're talking about fairness. We're also talking about helping to save Medicare. We can't continue to not do anything to fix this system. These are difficult problems, and they're going to call for difficult solutions.

MARGARET WARNER: All right. Let me ask you about another provision that you oppose; that AARP opposes, and this has to do with raising the eligibility age. Why? What's wrong with raising it to age 67 by the year whatever it is--2026?

MARTIN CORRY: Well, this is, again, another irony. For the last three or four years Senators--including Senator Breaux, who's been a real leader in this area--have talked about reducing the number of Americans without health insurance, increasing health insurance coverage in this country. This proposal will increase the ranks of the uninsured. Medicare is the health insurance program for those beginning at age 65. There are millions of people out there now who just live to try to make it to 65 so they have health insurance coverage. This will increase the ranks of the uninsured, and what's more, the analogy that's been made to Social Security by the proponents is, frankly, a false one. Social Security's age of eligibility really begins at age 62. Most Social Security beneficiaries do not wait until 65. So the whole premise of this; that we're tracking Social Security is false.

MARGARET WARNER: You mean, because Social Security--the optional retirement age is going to increase.

MARTIN CORRY: Right. In fact, the average age of retirement today in this country is about 61 1/2. And this will mean that people will be without health insurance coverage.

MARGARET WARNER: All right. Well, let me let the proponent speak in favor of it. Why raise the eligibility age? Address those criticisms, if you would.

SEN. JOHN BREAUX: Well, Margaret, he makes an argument without any evidence to support it. No. 1, when we passed Medicare back in 1965, the average life expectancy for a male was about 66 years old. Today the average life expectancy for a woman, in comparison, is almost 80 years old. So I think it's totally appropriate that we just really try and have some relation that is current between the age that someone becomes eligible for Medicare and their life expectancy. That's how it was started off in 1965, No. 1. The second point is that already about 78 percent of the people in this country retire before they're eligible for Medicare. There's already a gap. And our phase-in takes 24 years to reach what it would kick in totally. And it would not even start for another seven years. So we have time with working with the Social Security Commission to make recommendations on how people can buy into the Medicare program before they become eligible at the age of 65 or 67 years of age. So we have the time to try and figure out how we can help those people. But I tell you what. The big problem is if we do nothing, it's not going to be around for anybody. We have to have some help from people in solving these difficult problems. The worst thing we could do would be to break the commitment we made to have this program around for senior citizens.

MARTIN CORRY: The Senator makes the point that if we do nothing. And that's just really not the case. The House bill achieves just as much, if not more, savings as the Senate bill. It extends Medicare solvency until 2007 to give us time to take on some of the legitimate issues the Senator raises. But it does it without these controversial issues.

SEN. JOHN BREAUX: That's the old argument of fix it but don't fix it now; fix it later. Don't you fix it. Let somebody else fix it. Don't fix it with this plan. Fix it with some other plan. I would suggest that the time is now for us to act and make the tough decisions now.

MARGARET WARNER: Senator, the President has also argued that--the House Bill--he hasn't applauded the House bill--but those changes that you all have pretty much agreed on would keep it solvent to 2007, and that these bigger ones could be put off to take care of the baby boomers. What is wrong with that argument?

SEN. JOHN BREAUX: That argument is delay it. That argument is saying, don't do it now; do it later, because we don't want to take the political heat to fix the problem now. We need the lead time to start doing these things now so we can figure out how we can allow people to buy into the program when they retire early. We cannot continue to postpone the decisions on these problems. What Martin is suggesting, that we can save $115 billion by just doing what we've done every year, cut doctors, cut hospitals, payments until the points that they're not going to want to take senior citizens anymore. We can't continue to do it the same old, the same old way.

MARTIN CORRY: No. 1, the House does accomplish it, and No. 2, this is not about delay. This is about doing it right. We need to have a debate that includes a baby boom generation. Many of the changes the Senator's talked about deserve to be debated, but we'd better hear from the generation that is going to be most affected by them. And they haven't yet been heard from in this debate. We need to reach out--

SEN. JOHN BREAUX: That is simply not correct. In last year's centrist budget they got 46 votes in the Senate in the last Congress. Both of these provisions were in our bill, fully debated, and people talked about them and made suggestions. It's already been--

MARGARET WARNER: Before we run out of time, I do want to hit the last issue, the third issue, which is charging $5 per visit for elderly who get home health care. Briefly, Senator, what's the argument for that?

SEN. JOHN BREAUX: No. 1, we have co-payments on other programs. It's the fastest increasing program. It's increasing at about 49 percent a year, the home health care is, and most of the people, 90 percent would not be affected by it, because they're either covered by Medicaid or by Medigap insurance policies. It is not $5. I want it to be at least maybe a dollar to have some relation between getting health care and the fact that it costs something for it to allow people to take that into consideration. The first 100 visits would be totally exempt from any co-payment whatsoever.

MARGARET WARNER: Is that unreasonable?

MARTIN CORRY: It is unreasonable because it will increase the cost to widows, people with ten, twelve thousand dollars in income, who can't barely afford their bills now. And it's not $5 a visit. It's $760 maximum in the first year. At that age, if you're using home health that much, it is a very large burden. And what's more, the whole premise of home health is to get people out of more expensive care, keep them out of nursing homes. If they can't get home health care because they can't afford it, they're going to end up as a more expensive burden for us in the Medicaid program, which will affect not only the federal government but also the states.

MARGARET WARNER: Brief response on that point; that it could just put people into more expensive care?

SEN. JOHN BREAUX: Martin wants us to fix it all, but he doesn't want us to do anything necessary to fix it, other than cutting doctors and hospitals, which has the real potential of destroying the program. Like I said, if you are poor, you'd be covered by Medicaid. Other people would be covered by their Medigap policies, which would cover the co-payment. The first 100 visits would be totally exempt from any co-payment whatsoever.

MARGARET WARNER: And, Senator, briefly, your prediction of what's going to happen out of this conference.

SEN. JOHN BREAUX: I would think that we will come together and hopefully make some of these difficult decisions. It may not be just like the Senate bill that we passed, but I think it will look somewhat like it.

MARTIN CORRY: We know people will look at the effect on the beneficiaries, not just today but in the future, and look at how all of these proposals interact, so that it is not burdensome.

MARGARET WARNER: All right, gentlemen, thank you both very much.

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