Substantial differences between the Democratic and Republican plans to reform Medicare are discussed by Elizabeth Farnsworth with Susan Dentzer, chief economics correspondent for "U.S. News & World Report," and Julie Rovner, a special correspondent on health and welfare policy for "Congress Daily."

ELIZABETH FARNSWORTH: Thank you for being with us. Let's start, Julie, with how big a deal is this, how much of the, the nation's health care system are we talking about here?

JULIE ROVNER, Congress Daily: Well, this is a very big deal. Medicare and Medicaid together account for about 30 percent of all health spending. I think because of last year's health debate, people are underestimating how big this is. The example I like to use is that last year we were talking about the universe, and this year we're only talking about the solar system, but it's still a very, very large undertaking.

ELIZABETH FARNSWORTH: And Susan Dentzer, what's similar about the two bills? Everybody emphasizes what's different. What do they have in common? I'm talking here about the Democratic bills. I understand that the President and the Democrat--the congressional Democrats' bill is--or their ideas--we don't have a bill yet, are similar and the Republican House and Senate ideas are similar.

SUSAN DENTZER, U.S. News & World Report: Right. Well, for one thing, they both all wanted to cut Medicare but by very different degrees, as we've seen a moment ago. And they also both rely on the notion of expanded choices for Medicare beneficiaries to roll in Health Maintenance Organizations, Preferred Provider Organizations, and other more modern forms of delivering health care than the fee-for-service system on which Medicare relies. But really the fundamental point to make I think is the differences, and to underscore that these are largely political differences at this point, we don't have a Senate Democratic bill yet, a saga that is familiar to those who have followed the story. We seem to get lots of press releases and press conferences in the bills following sometime afterwards. The fundamental point, though, is the differences.

ELIZABETH FARNSWORTH: Summarize the differences. Let's, first of all, from the beneficiary's point of view, from somebody who receives Medicare, what are the fundamental differences?

MS. DENTZER: Well, for one thing, under the Democratic proposals, beneficiaries don't pay anything more. They are not subject to higher premiums as they are under the Republican proposals. They are not subject in some instances to a higher deductible under the Senate Republican proposal, and so forth. That is really the fundamental differences. Beneficiaries are going to pay what they would be scheduled to pay in current law under the Democratic plans. The other fundamental differences that--I refer to the Democratic plans as the truth serum on the trust fund and taxes issue. In effect, they are absolutely designed to take the Republicans at their word. Recall that the Republicans initially said that they got into this game because they wanted to shore up the finances of the hospital insurance trust fund. The Democrats rightly pointed out that $46 billion in beneficiary cuts under the Republican plans weren't going to do anything for the sake of the hospital insurance trust fund. They would go to another part of Medicare, known as Part B. The Democrats come back and say, if what you really want to do is shore up the trust fund, we can get you there with $89 billion of savings over seven years, instead of $270 billion in savings. We don't have to take a dime out of the hides of beneficiaries, we can buy sustainability of the trust fund until they say the year 2006, and it looks like the Republican plans probably only get the trust fund to 2008, 2009, anyway.

ELIZABETH FARNSWORTH: And do you think that that's true, that they could do it for much less money, save the trust fund?

MS. ROVNER: I think it's clear that they could, but I think that there's also some serious underlying philosophical differences here. It's not just a matter of the Democrats are at 89 and the Republicans are at 270, and maybe they can split the difference. I think the Democrats really fundamentally feel that Medicare needs to be part of a broader look at the health care system as a whole. And they don't see any need or any reason to really overhaul the entire program. The Republicans feel like this is something that the entire health care system is in fundamentally pretty good shape. They simply need to get a handle on entitlements, Medicare and Medicaid being by far the two largest, and that they would like to overhaul Medicare, in particular, here, and, therefore, it's not even so much the $270 billion, as the idea of some of the really major changes that they would make that the Democrats simply don't think are necessary at this time.

ELIZABETH FARNSWORTH: And you said it's mostly that we're talking about mostly political differences here. What did you mean by that?

MS. DENTZER: Well, I mean political in the sense that for one thing the reason the Democrats are introducing plans now is simply to get into the game. You can't fight something with nothing. And they really needed to be at the table, particularly in the Senate, where we've seen, for example, welfare reform and other major overhauls come about with substantial bipartisan input. I think they know that if they can get into the game by coming out with their own proposal there is a chance that they could actually amend it, and of course, the number one option here or the number one goal, the number one objective is really to get the size of the tax cut reduced, and to take it away from wealthy individuals, and then probably get some other things onto the table in the broader context of this overhaul budget debate, come up with a budget balancing plan which balances the budget in seven to ten years but doesn't necessarily do that on the backs of the nation's poor and so forth.

ELIZABETH FARNSWORTH: Do you agree that this is basically strategic maneuvering, that this is not really about Medicare?

MS. ROVNER: It's both. I think it's really about Medicare, but it's certainly strategic maneuvering, and I think the Democrats are really forced to do this by the Republicans' really masterful handling of the interest groups. This was something I think the Clinton administration would have loved to have been able to do on health reform. They basically took all of the people that would potentially be impacted in a negative way, the hospitals, the doctors, and the beneficiaries, and they gave everybody something, and nobody is very happy right now, but basically what we're hearing is whimpering instead of these multi-million dollar ad campaigns.

ELIZABETH FARNSWORTH: Well, let's talk about that for a minute. How would the providers be affected by the two plans? I mean, how do they differ in how they affect providers, doctors, hospitals?

MS. ROVNER: Certainly, the Republican--both the--well, the Republican and the Democratic plan would take the lion's share of money out of providers. They do it in various--

ELIZABETH FARNSWORTH: Get their savings by not giving doctors, hospitals as much money?

MS. ROVNER: That's right. They would reduce payments, or as they like to say they would reduce the increase in payments to providers. It's not just doctors and hospitals; it's also nursing homes and home health care agencies and makers of durable medical equipment. There are particularly the hospitals are unhappy. This is a lot of money, and Medicare has been ratcheting down on what they pay doctors and hospitals for the last, oh, most of the last decade, a little bit more in the case of hospitals, and some of them are already running at a loss in caring for Medicare patients, and there is a serious concern among even some Republicans who will quietly say that they're worried that taking too much money out of some hospitals could force some hospitals to close. And that would impact not just Medicare and Medicaid beneficiaries but everyone else who uses those hospitals.

ELIZABETH FARNSWORTH: But, Susan, the Republican plan has some incentives and benefits, right, for doctors and hospitals? Is that different from the Democrats? And explain what those incentives and benefits are.

MS. DENTZER: Yes, very much so. As Julie mentioned, there was a real attempt, particularly on the part of House Speaker Gingrich, to get people into the table to go through with this large--what is going to be very painful for them in many respects, and there are a number of quid pro quo inserted, for example, hospitals and doctors would be given the ability to form new provider service networks they're called--actually they would be able to go into business, in effect, and compete head to head with insurance companies that now offer HMO's. They'd be given special dispensations that would enable them to do it. Those kinds of things were strewn throughout the Republican plans to get these providers on board, and really, as Julie mentioned, blunt their opposition to many of the things in the plans that they don't like, particularly the size of the provider cuts. The Democrats don't really have anything like that, because, of course, No. 1, they don't have a bill. No. 2, that really isn't the game here for them. They're not trying to stuff a lot of things down people's throats in terms of large, extremely large, provider cuts, as Julie mentioned. They have some provider cuts in, but the important point is, for example, the Senate Democratic plan doesn't even have as much in the way of cuts in it as the President's plan does. It's even--goes even more lightly on providers than the President, himself, would.

MS. ROVNER: Something else the Republicans could do, though, that the Democrats couldn't is repeal some of the Democratic initiatives that have been passed in the last few years in the name of consumer protection. For instance, they would--in calling it regulatory relief--repeal some of the requirements on laboratories and physicians' offices, repeal some of the rules that were put in over the last couple of reconciliation bills that would bar doctors from referring patients to physical therapy facilities and X-ray facilities in which the doctors have an ownership interest. Those are things that they say are too bureaucratic; those are things that the Democrats passed and said were necessary to protect consumers and save the country money. And obviously, I don't think the Democrats with a straight face can suggest repealing them now.

ELIZABETH FARNSWORTH: Susan, a key critique of the Republican plan by the Democrats has been that it's really aimed at paying for the tax cut. And now the Republicans have managed to diffuse that criticism. Tell us what they've done to do that.

MS. DENTZER: Well, in the Senate, on the Finance Committee, they set up something known as a lock box provision. Essentially what they would do is take the Part B premiums, that is to say for the other part of Medicare that does not deal with hospitals--

ELIZABETH FARNSWORTH: Medical insurance.

MS. DENTZER: --physician and laboratory services--to the degree that people were compelled under the Republicans' plan to pay more in those premiums, those would instead be siphoned back over to shore up the hospital insurance trust fund. But that's more than is actually going to be the case. This is a kind of a budgetary gimmick, because the actual effect of Medicare on the budget deficit would not be changed by this. It's really a way of in a way--it's the rhetorical chickens coming home to roost here. They've had--the Democrats in a way have won this argument that the tax--that part of the Medicare savings are going to be used to finance a tax cut and Republicans have had to take defensive measures to head off that rhetoric from really sinking in.

ELIZABETH FARNSWORTH: How do you think this will end, what kind of a compromise do you expect?

MS. ROVNER: Well, I certainly don't expect it to come soon. I think the Republicans are really--they're determined to put a bill on the President's desk that includes $270 billion in reductions in growth in Medicare and $182 billion in reductions in growth in Medicaid, and if the President vetoes it, then so be it, and I suspect they'll go through the exercise of trying to override it, which they won't be able to, and all of this is going to take a considerable amount of time. And then, and I think only then, will they sit down and start to negotiate and come out with something that could well be into next year.

ELIZABETH FARNSWORTH: Last year, the President pushed a very broad plan of health care changes, and the Republicans fought it, and now we have the reverse happening. Are we having a kind of role reversal here?

MS. DENTZER: Role reversal and a lot of hypocrisy. We've heard a lot of the complaints that the Democrats have made about the Republicans' plans this year that exactly mirror what the Republicans were saying about the Democrats last year, not the least of them being that we're rushing to judgment here, we're putting through these enormous changes in the health care system without a substantial amount of reflection. Those of us who have been in this town a long time know that if you had a dollar for every time somebody in Congress was a hypocrite, you would balance the budget in seven hours instead of seven years, so that's really not the key issue here. I think the key issue is that everybody does agree that Medicare has got to be changed. The rate of growth of the program has to be brought under control, and as Julie says, it's only when we get some vetoes and everybody has to sit down at the table to really negotiate it that we'll see the dimensions of the final plan.

ELIZABETH FARNSWORTH: Well, thank you both for being with us.