The congressional debate over Medicare has been loud, and angry. Charges and countercharges surrounding Medicare reform have made analysts uncertain about what exactly will change if the Republican reforms pass. Elizabeth Farnsworth spoke with Susan Dentzer, chief economics correspondent of "U.S. News & World Report." about what reform might really mean.

ELIZABETH FARNSWORTH: Welcome, Susan.

SUSAN DENTZER: Nice to be here.

ELIZABETH FARNSWORTH: Let's start by looking at two statements from a story that we aired last week when representatives went home to talk to constituents about Medicare.

REP. NANCY JOHNSON, (R) Connecticut: You can choose to stay in the current Medicare program, and at the same premiums you're paying now. Now in the last few years, ever year the premium goes up a little bit. That will be true under the new program if you stay in Medicare. The premiums will go up a little bit, no more than the past. So there is truly nothing to fear. You can stay in the current program. Your premiums will grow only the same way they've been growing.

Now, why can I do that? Why can I guarantee you that? I can guarantee you no change. How can I do that and still save money? I'll tell you why. Because the new programs that come on the market that you're going to have the right to choose are going to offer you better benefits. And anyone, for instance, who has high drug costs is going to look at those programs.

Now, if you look at that program and you decide to join a managed care plan that offers drug benefits, and you don't like it, you can get out. You can get out absolutely the first 90 days, and every year you can make a new choice. And you can always choose Medicare fee-for-service again.

REP. BEN CARDIN, (D) Maryland: We've calculated that for you to maintain the same benefits by the year 2002--that's when the plan is fully implemented--it's going to cost you $1,000 a year more for Medicare. Now, maybe you can afford another $1,000 a year. Is that okay, another $1,000 a year? So if you're going to stay in Medicare, you've got to pay the full cost of the co-payments and deductibles.

The seniors with low income can't afford that. They're forced into HMO-type plans, where they can't choose their own doctor and hospital. That's what they want you to do. They don't want you to be able to keep your own doctor. They want you to go into these HMO plans. It's one thing if you choose to go into an HMO plan. You like the network, that's fine. But how many of you like the idea of choosing your own doctor? How many of you are willing to give that up? I don't see many takers.

ELIZABETH FARNSWORTH: Okay. Let's start with the question of premiums. Rep. Johnson says a Medicare beneficiary will have a minimal rise in premiums, nothing any greater than is currently happening, and Ben Cardin says that within seven years, Medicare beneficiaries will be paying $1,000 a year more. That's a lot of money. Who's right?

MS. DENTZER: Well, as usual, Elizabeth, in Washington, there are elements of truth in what both people say and also some elements that are very misleading. In effect, premiums would go up under the Republican plan about 7 to 10 dollars a year on average, which is about the rate that they have been going up recently; however, it's also true that the Republicans would change current law so that people are going to pay more in Medicare premiums than they're currently projected to pay if we kept the law in place because the formula changes next year and, in fact, the payments would be less than they would be otherwise.

So, as I say, she's a little bit right, she's a little bit wrong. And to put this in a broader context, the American Association of Retired Persons has now worked up some numbers about what beneficiaries will have to pay, and they've concluded that under the House plan over this seven-year period until the year 2002, beneficiaries would pay about $1700 more under the House plan, under the Senate plan about $1950 more.

That is to say, under the House plan, on average, over the seven years, about 240/250 dollars a year more than they would be under current law if we just left the program alone, and under the Senate plan that we'd be paying closer to $280 a year more, again, as over and against if we just left the program alone.

ELIZABETH FARNSWORTH: Nancy Johnson also says that as a beneficiary, if I were a beneficiary, I could move into the managed care, the HMO program, with greater benefits, and then if I didn't like it, I could come right back. Ben Cardin says that I'll be forced into an HMO plan where I can't choose my own doctor. Who's right?

MS. DENTZER: Well, Congressman Cardin is wrong about being forced in. In fact, the Republicans created--have created a system where people really would have a broad choice in theory among a range of plans. There's nothing in this inherently that would drive people out of the traditional Medicare program known as fee-for-service and force them necessarily into HMO's.

Actually, it might be that many people would find HMO's a very attractive option as Congresswoman Johnson said. If you choose to enroll in an HMO now as a Medicare beneficiary, you might find that, for example, you could drop your supplemental so-called Medigap coverage that covers, that you have to buy separately from Medicare that can cost $1,000 a more or year that is there to pay for things that Medicare doesn't cover, like prescription drugs.

You might enroll in an HMO that would chart where you would only have to pay say 5 dollars or 7 dollars per every prescription drug that you had filled. That's something that beneficiaries might, indeed, find very attractive, and to the degree that the Republican plan expands options for people, that could be a positive. What we don't know and where our crystal ball gets quite cloudy is exactly what benefits will HMO's and other similar plans choose to offer the elderly over time.

One of the reasons we don't know that is we don't know what the government really is going to pay HMO's in the future, so we can't stand here with certainty and say that everything is going to be coming up roses for beneficiaries in the future, but, in theory, they will have more choices that for many could be more attractive.

ELIZABETH FARNSWORTH: Okay. Well, let's look at this question of quality for a minute. As we heard, the House Ways & Means Committee completed work on its Medicare reform bill today. The last three days of debate were filled with statements from Democrats. The Republican plans for Medicare reform would seriously comprise quality of care. Pete Stark, Democrat of California, is the speaker in this clip.

REP. PETE STARK, (D) California: The vast majority, almost 85 percent, of the savings are going to come out of the fee-for-service sector. That's rationing. You're rationing seniors. I mean, you know that as sure as you sit there. You let the Medicare plus plans charge premiums, whatever they want, that only the rich will be able to afford. You ration seniors by holding down the growth in Medicare.

ELIZABETH FARNSWORTH: Okay. Ration. Republicans say that you'll get the same quality whether you stay in traditional Medicare or you're in the HMO. You just heard Congressman Stark saying that the cuts will lead to rationing, which I take to mean less care, less quality. What about that?

MS. DENTZER: Well, rationing is a very charged word. As you suggest, a lot of people think it means less care and less care that I really need. A more neutral definition of the word would say you're just going to get less care, and if you take a program that has been growing at 10 percent a year, as Medicare has been and is projected to grow at 10 percent a year, and you ratchet that rate of growth down to closer to 6 percent a year, as the Republicans would do, there's no question but that less is going to happen under that program than it would if it were growing at 10 percent a year.

What we honestly don't know is what the effect of that will be. And if you take, for example, a new study that has come out about the state of California where 80 percent of privately-held insured people now are in managed care plans, this new study by the Rand Corporation suggests that over the decade of the 80's health spending in California grew at only 2/3 the rate that it grew nationally. So there was clearly a lot of savings achieved from having a lot of HMO's and managed care presence in the health insurance population.

ELIZABETH FARNSWORTH: Well, did that study say anything about quality, though?

MS. DENTZER: That's the catch. What the state clearly underscored is that we have no idea what the effect was. We can see what happened. We can see how a lot of these savings occurred. We know that people had radically shorter hospital stays in California than they did in many other parts of the country.

But we have such a poor benchmark of quality now we really honestly don't know what our health care system achieves in terms of quality now, so we had absolutely no way to forecast what--how quality would be affected in the future, and that's what I think is so frustrating about this debate for many people. The politicians are making statements with great certainty on ground where the experts just fear to tread. We honestly don't know what the effect of this would be.

ELIZABETH FARNSWORTH: And will some doctors--are some doctors likely to pull out of treating Medicare patients if this bill passes?

MS. DENTZER: There have been anecdotal reports that suggest that already some physicians are turning away Medicare patients. The, the Physician Payment Review Commission, which is a congressionally-appointed entity that has looked into this question, has said that they have seen these anecdotal reports.

As of yet, they do not see a systematic problem with, with people not having access to medical care because of the fee cuts. But there's no question that as you continue to squeeze what Medicare pays, Medicare pays only about 60 percent of what the private health insurance system pays physicians now, as you squeeze on that more and more, you really do build pressure on physicians, and you just simply cannot rule out that many of them will simply decide to stop taking Medicare patients.

ELIZABETH FARNSWORTH: Okay. Now let's turn to the debate over whether the $270 billion savings planned by the Republicans are necessary to preserve Medicare. Here are two views from Republican--here are two views from Republican Congresswoman Nancy Johnson again, speaking to her constituents last week, and from Democrat John Lewis yesterday at the Ways and Means Committee.

REP. NANCY JOHNSON: This year, Medicare cost $178 billion. If we do nothing in the year 2002, which isn't very far away, Medicare will cost $348 billion. So we do have to get serious about Medicare, and there are ways that we can make Medicare a better program for the current seniors and yet guarantee it will be there in the future for future retirees, i.e., your kids and grandkids.

REP. JOHN LEWIS, (D) Georgia: Keep your greedy hands off of Medicare. Don't use Medicare. Don't cut Medicare by $270 billion in order to give some of your rich friends a $245 billion tax cut.

ELIZABETH FARNSWORTH: Okay. Who's right? Are the savings meant to save Medicare? Are the cuts meant to save Medicare, or is it fund the tax cut?

MS. DENTZER: Again, a little bit of truth on both sides. Let me try to elaborate. The whole of the Republican program in terms of everything the Republicans want to cut goes to pay for the whole of what the Republicans want to achieve. In other words, all the spending cuts that they want to achieve in Medicare, education, farm programs, et cetera, go to the goals that they wish to accomplish, which is to say, balancing the budget over a seven-year period and if all goes well having a $245 billion tax cut.

It's not correct to suggest that there are red Medicare dollars which are going to be saved that will trickle over and be spent on a tax cut. Money is fungible. But also in a much more technical sense, what the Republicans propose to do is only have the tax cut if they balance the budget first, if interest rates then fall, if the government, therefore, spends less borrowing money to fund a deficit, and, therefore, you have in theory a pool of savings out of which you can have a tax cut. It's not a direct linkage between Medicare and a tax cut.

It is, however, I think appropriate to raise the question--even if all of these wonderful things did come true, interest rates fell and you had this pool of savings--it is at least appropriate to ask the question about whether you would want to have a tax cut, a large portion of which would be lavished upon high-income people. And I think that that's where the Democrats are--to give them their due--asking a serious question.

Do you want to go through all this effort to balance the budget, in many ways hurting people who are low income. Keep in mind, 3/4 of Medicare beneficiaries have incomes below $25,000 a year. Do you want to go to all of that effort, putting a lot of pain on a lot of people, and then at the end of the rainbow turn around and have a tax cut, a lot of which is going to be showered upon the rich? That's a serious public policy issue. And even if there isn't a dollar-for-dollar linkage, it's one that's probably worth asking.

ELIZABETH FARNSWORTH: Will the tax cuts actually add up to $270 billion? What's the evidence on that?

MS. DENTZER: The tax cuts--$245 billion?

ELIZABETH FARNSWORTH: I mean the welfare cuts. Sorry.

MS. DENTZER: The Medicare cuts, as far as we can tell now, look as if they will add up to $270 billion. But, again, we're going to have to see how these bills evolve as they go through the floors of both Houses.

It does appear also that a lot of the savings are going to be achieved after the fact if we don't get a lot of savings out of a movement of many Medicare beneficiaries into HMO's. If those savings don't materialize, we're going to have to come back and take some pretty dramatic steps to restrain fees to doctors and hospitals. And that's a real question. Will we then go back and take those dramatic cuts? And if all of that adds up, yes, indeed, $270 billion could be saved out of the program.

ELIZABETH FARNSWORTH: Susan, thank you very much for being with us.

MS. DENTZER: My pleasure.