The MacNeil/Lehrer NewsHour

MR. LEHRER: Good evening. I'm Jim Lehrer in Washington.

MR. MacNeil: And I'm Robert MacNeil in New York. After the News Summary this Wednesday, we focus on the place of mental illness in health care reform with a report and a debate, then excerpts from President Clinton's speech today proposing a trust fund to reduce the deficit. Finally, Judy Woodruff reports on the President's plan to change the student loan program. NEWS SUMMARY

MR. MacNeil: President Clinton today predicted the U.S. and its allies would take new steps to end the Balkan War in the next few days. He admitted he was having trouble winning allied support for his proposals to use military force, but he said he had not changed his mind about pursuing that course. He repeated that he was considering sending U.S. troops to join a United Nations force in the former Yugoslav republic of Macedonia. He said it could keep the conflict from spilling over to other countries in that region. He also promised to act carefully to avoid any repeat of the U.S. experience in Vietnam. In Bosnia today, there were heavy Croat- Muslim battles for control of the southern city of Mostar. Muslims and Croats have been allied against the Serbs, but they have clashed repeatedly over the past few weeks. We have a report narrated by Vera Frankel of Worldwide Television News.

MS. FRANKEL: Much of the Muslim-held area of the city of Mostar came under attack as the battle raged throughout the day. Bosnian Croats pressed a street by street offensive to break the Muslim hold on the West side of the Nuretga River which the Croats want as their eastern most boundary. There was fighting in the surrounding towns, blocking all routes to peacekeeping troops. Casualties were heavy on both sides. In this hospital in Mostar, Muslims and Croats are being treated side by side. It's not yet known how many have died. Croat authorities allowed U.N. and E.C. monitors to visit Muslims who had been taken from the city and nearby villages to buildings outside Mostar. The Croats say that almost 1500 people are being kept prisoner in two gymnasiums and a military prison under Croatian guard. Another 300 are expected. The detainees said they'd been well treated but that food was limited. The U.N. said up to 300,000 Muslims could be forced from their homes.

JOSE MARIA MENDILUCE, UNHCR: Central Bosnia's completely cut off now from any normal commercial traffic or even, of even Italian assistance that is not provided through UNHCR.

MS. FRANKEL: However, hope came with the signing of a Croat- Muslim cease-fire. It provides for the free movement of all other humanitarian groups and the withdrawal of all forces to their barracks in Mostar.

MR. MacNeil: U.N. helicopters evacuated more than 37 wounded people from the eastern town of Zepa. Thousands of people fled the Muslim enclave after a Serb assault earlier this month. It remains virtually deserted. The enclave is one of six safe areas designated by the Security Council last week. Jim.

MR. LEHRER: President Clinton said today he would make sure money raised from tax increases went to reduce the deficit. He said he wanted to set up a government trust fund that would reinforce his commitment to reduce the deficit by $500 billion over five years. Senate Minority Leader Bob Dole was critical of the idea. He spoke on the Senate floor after Mr. Clinton introduced the proposal in the White House Rose Garden.

PRESIDENT CLINTON: I am going to support strongly the proposition that we guarantee the American people two things: No. 1 is no tax increases without the spending cuts; No. 2 is that tax increases will go to reduce the deficit by creating a legally separate deficit reduction trust fund which will tell you where your money's going.

SEN. ROBERT DOLE, Minority Leader: And I think the proposed tax increase trust fund is just a gimmick to give smoke and mirrors a bad name, to make his unpopular tax increases look good. That's why the President has it backwards. The American people don't care where the new taxes go; they don't want 'em; they don't want new taxes, period, in a trust fund or anywhere else.

MR. LEHRER: The government reported wholesale prices jumped .6 percent last month. It was the largest increase in more than two years. Much of it was due to a big increase in vegetable prices caused by winter storms.

MR. MacNeil: The Clinton health reform package is likely to require employers and workers to pay for health insurance according to a key White House aide. Ira Magaziner told a business group today that such a plan would cover the nation's 37 million uninsured and do so without large tax increases. 85 percent of the uninsured are workers or members of their families. Attorney General Janet Reno called on the Senate to pass a bill making it a federal crime to block an abortion clinic. The bill would also prevent the intimidation of patients and workers at clinics. Reno said the legislation was needed, because local police were unable to deal with the problem effectively. She said such a statute would not inhibit free speech. Last month -- last March, I'm sorry, a doctor was murdered by an anti-abortion activist outside a Florida clinic. That's our summary of the news. Now it's on to mental illness, the President in New York, and changing student loans. SERIES - OPTIONS FOR CHANGE - MENTAL HEALTH COVERAGE

MR. LEHRER: We lead tonight with another in our series of options for health care reform. The subject this time is mental health. Should mental health benefits be part of basic health care? And if so, what should be covered. President Clinton and his task force will soon provide their answers. We'll get four of our own right after this backgrounder by Spencer Michels of public station KQED- San Francisco.

MR. MICHELS: Bay area father and stockbroker Stephen Acciani, a self-described conservative businessman who voted against Bill Clinton, never thought he'd be endorsing increased benefits for mental health care, but a year ago, he joined the one in four American adults who each year experience a mental disorder.

STEPHEN ACCIANI: One day, a particularly anxious day for me, I started feeling like I was having a heart attack. And after several calls to the doctor, I went to the hospital and, you know, they ran a series of tests and found out I wasn't. There wasn't anything physically wrong with me, but these symptoms continued on every day. In fact, I would have several attacks during the day in which I felt like I was dying.

BETSY ACCIANI: It was really tough. During Stephen's darkest few months, all my whole job, as far as I was concerned, was to protect the children from his anger and his depression and to just kind of as much as possible make a cocoon for him, even though he was very withdraw and depressed, and just live through each day step by step.

MR. MICHELS: Stephen had to be convinced his panic attacks were mental and that he needed therapy.

STEPHEN ACCIANI: Fortunately, you know, my physician and various other people were familiar with the situation, and said, no, you've got garden variety, high anxiety panic problems, you know, and these are treatable, curable, you know, this is a curable situation if you get the proper care.

MR. MICHELS: You think the therapy made a big difference?

STEPHEN ACCIANI: It's proof. I didn't miss a day of work. I was very productive. I had a very good year and so it was, it was what made it happen.

MR. MICHELS: Stephen's employer, a bank, had provided him with generous health care coverage within his health insurance policy.

STEPHEN ACCIANI: I'm in business, and the cost effectiveness was enough to make me feel it was something that people should do. The total cost to my employer was probably somewhere in the neighborhood of $2500, and I generated about 300,000 in revenue last year for my employer on about $10 million in sales. And so - - and I'm free. I'm free of it now. I'm perfect.

MR. MICHELS: Because his condition was relatively simple, some critics would call Stephen Acciani one of the worried well. The administration's health task force must decide whether to include such patients in their plan, or whether to concentrate only on the severely mentally ill. Their problems are obvious on the streets and in the shelters of most major cities. Only 60 percent of the severely mentally ill get treatment. One study shows that mental illness overall goes untreated 70 percent of the time.

SPOKESMAN: A lot of crazy, crazy people walking down Market Street. A lot of crazy people comes at me for one thing. I'm scared.

MR. MICHELS: Dr. Robert Okin, chief of psychiatry at San Francisco General Hospital, sees severely mentally ill patients and others not so obviously sick.

DR. ROBERT OKIN, Psychiatrist: Some people have railed against the possibility of insurance coverage for what they call "the worried well." And the fear is that it would absolutely break the bank. But even that term, "the worried well," is really a very demeaning characterization of people who often have significant but often treatable kind of mental disorders, and these disorders can be absolutely as debilitating and incapacitating as many physical disorders. To exclude them from the health care system would simply enforce their second class status.

MR. MICHELS: Fifty-nine year old Mary Moore is a client at San Francisco General. For years, she suffered without ever considering getting help.

MARY MOORE: It started with my husband. I guess you would call him very jealous. I don't know what you'd call him. Anyway, he would accuse me of doing things that I wasn't doing, and he didn't physically abuse me; he mentally abused me.

MR. MICHELS: And then in 1986, a really terrible thing happened.

MARY MOORE: My son got killed.

MR. MICHELS: Your son was killed.

MARY MOORE: Yes.

MR. MICHELS: How was he killed?

MARY MOORE: He was shot.

MR. MICHELS: How did you handle that?

MARY MOORE: I was in fear too after my son got killed, because I had other sons, and I was always afraid somethin' like this was going to happen to them.

MR. MICHELS: What about your mood?

MARY MOORE: No good at all. I'd just be down all of the time.

MR. MICHELS: Down?

MARY MOORE: Down, low.

MR. MICHELS: Depressed?

MARY MOORE: Depressed. Stayed up looking out the windows all night, didn't eat.

MR. MICHELS: Mrs. Moore, who received state disability payments, saw a doctor who recommended therapy, and she joined a cost free group at General Hospital.

MARY MOORE: Did me wonders, brought me a long ways. It made me see myself.

MR. MICHELS: You think it was the therapy?

MARY MOORE: I knew it was. My mood is much better.

DR. ROBERT OKIN: Mary was depressed for 26 years. She lived like a caged bird, and through a relatively short period of treatment, she was able to really fly out of the cage. Her whole life turned around.

MR. MICHELS: Increasing treatment for severe mental illness alone would cost an additional $6.5 billion a year nationally on top of $20 billion being spent today. And treatment for less severe disorders would add to that, even though therapists argue that failure to treat even seemingly simple complaints often leads to expensive hospitalization later on. Keeping mental illness costs down while still providing adequate coverage is a major goal of U.S. behavioral health. The pioneering firm which manages mental health care for employees of 400 large companies. Its case managers help set goals for therapists and psychiatrists who are treating clients.

U.S BEHAVIORAL HEALTH EMPLOYEE: [on phone] Does the doctor have her on any medications?

WOMAN: [on other end of phone] No, she's not on medication.

U.S BEHAVIORAL HEALTH EMPLOYEE: Okay. What's the doctor's opinion about the goal, her treatment? What would he like to see happen?

MR. MICHELS: U.S. Behavioral employees, trained mental health workers, must give permission before care begins or is extended.

U.S. BEHAVIORAL HEALTH EMPLOYEE: [still on phone] My understanding is our current contract is approximately between eighty and a hundred dollars per day.

WOMAN: [on other end of phone] Right.

U.S. BEHAVIORAL HEALTH EMPLOYEE: What I'll do is I'll certify another two weeks from today of your program, and let it run its course, and then we'll do a review in two weeks.

WOMAN: Okay.

MR. MICHELS: Psychiatrist Leon Wanerman is deputy director at U.S. Behavioral.

DR. LEON WANERMAN, U.S. Behavioral Health: To just allow someone willy nilly to go into out-patient therapy three times a week for six years without anybody looking at it, reviewing it, deciding this is really worth doing and so forth, is a terrible waste of money, and some people will take advantage of it. On the other hand, you can make services available and have a review organization, manage it very closely, work with the provider there, follow it closely, that's what companies like the one I work for does, and make sure that only the necessary services get approved and get paid for.

MR. MICHELS: This firm claims it is reducing mental health care costs while increasing the effectiveness of treatment. The White House task force must determine whether managing care will save enough money to justify paying for more coverage for mental illness than has ever been available in this country.

MR. LEHRER: Now to our discussion. Lorrie Flynn is executive director of the National Alliance of Mentally Ill, an advocacy group. John Motley is vice president of the National Federation of Independent Business, a lobbying group that represents 600,000 small business. Dr. Paul Fink is chairman of psychiatry at the Albert Einstein Medical Center in Philadelphia, and he is spokesperson for the National Association of Psychiatric Health Systems, representing 300 private psychiatric hospitals. Dr. William Straub is a senior health policy analyst with the Jackson Whole Group, a Wyoming based health think tank that has advised President Clinton on managed competition. First question is a basic question. Ms. Flynn, should mental health benefits be part of a new, national health insurance system?

MS. FLYNN: Yes, Jim, they should. And as a family organization focused on people who have severe disorders like schizophrenia and manic depression, we want to see those illnesses covered on the same basis as all other devastating diseases.

MR. LEHRER: Mr. Motley, should they be?

MR. MOTLEY: Well, we believe, Jim, that mental health benefits are just as important as any health care benefit that can be provided by the employer. But the problem that employers have -- and it's in one word -- and that is cost -- it is really uncontrollable cost in the system today. And we're terribly concerned because --

MR. LEHRER: We are losing our lights. We have a concern as well. Just keep talking like nothing's happening, Mr. Motley.

MR. MOTLEY: We're terribly concerned that the practice of mental health care has tended towards in-patient care which is very expensive. And if you have a standard benefits package which is designed, which is beyond the means either in a voluntary system or in a mandatory system of employers to purchase, then I think the trade-off is going to be jobs. So I think it's a balancing act. I don't think we can say what should be in it, but I think from our standpoint, what has to be put forward is the affordability of the package for those who have to pay for it.

MR. LEHRER: That should be the No. 1 test, in your opinion?

MR. MOTLEY: Either that, or you're not going to increase coverage if it's within a voluntary system. If it's in a mandatory system, then I think the employer is going to have to find ways to cover the cost. And most likely, that's going to be with letting people go.

MR. LEHRER: Dr. Fink, what do you think just generally about the idea that mental health benefits should be in any basic health care program?

DR. FINK: Absolutely. Full coverage for all of the mental illnesses that cause disability and dysfunction should be covered. We shouldn't do the balancing act on the backs of the mentally ill. We wouldn't even have this debate about cancer or heart disease, so I'm not sure why we're having it about mental illness in terms of the cost. The cost to society from not treating is about $75 billion a year. That's an enormous waste of potential lives, and so I believe that we should have a basic package of treatment, treatments that will be the lowest cost treatments in the least restrictive, which means I'm not for any more in-patient service than anybody else, but I think we should not divide up our patients into groups and decide who should get and who shouldn't get. Mentally ill patients range from very, very severely ill like the schizophrenics, to less severe like generalized anxiety disorders, border lines or panic disorders, such as the man you saw in the segment.

MR. LEHRER: And you believe they should all be covered?

DR. FINK: I believe they should all be covered with a lot of quality assurance to make sure that there is not waste in the system and the use of the best, least costly methods of care which are now being developed.

MR. LEHRER: Dr. Straub, is cost a legitimate consideration to, to overlay this question of, of including mental health benefits?

DR. STRAUB: We think it is, and, furthermore, I think that defining effectiveness in treatment is also important. We think that both for general and medical services, as well as mental health. We would agree that you shouldn't really try and separate out mental health benefits in the sense that mental health is a part of all general medical illness, and it's important to cover it. The cost, when you look at the supply and demand considerations, a large number of providers, if you open up the demand side, the cost has got to become a consideration.

MR. MOTLEY: How do you -- well, let's go from there, Dr. Straub. How, what kind of system could be devised that would, that would provide the services that you think are necessary and at the same time meet the cost problems that you have? And then we'll get back to Mr. Motley and see if it's possible even to do anything that would satisfy him as well.

DR. STRAUB: Well, we think it's unfortunate the benefit plan design, itself, is used really as a means of containing costs. And that's done typically through co-payments at the point of service, deductibles, et cetera. Increasingly, I think we have to define what's effective and provide any effective and appropriate services to people that are ill. The problem is getting to that point. And I think the current benefit plan design really is just a stop gap in us getting to that point.

MR. MacNeil: Ms. Flynn, do you think it's possible to create a system that would do what you want, which covers, which you and Dr. Fink want, which is to cover the whole gamut of mental health diseases from the minor to the very severe in a way that won't blow the lid off the costs?

MS. FLYNN: I think it's increasingly possible. It's clearest in terms of effectiveness with the more severe disorders though, the folks that I'm working with. Young people like my daughter, who was diagnosed with manic depressive illness seven years ago, had access to effective treatment, because we could pay for it even after her insurance benefits ran out, who was able to graduate from Georgetown University and become a taxpaying, full-time worker. So one of the key issues here is early intervention, good diagnosis, and continuous access to treatment that works. And we have data just released this year to Congress that shows our treatment effectiveness for the severe mental disorders is much better, running at 60 to 80 percent effective, than it is for interventions for heart disease, for instance, which are only about 40 percent effective. So I think people don't understand that if we apply appropriate interventions early and in a sustained way that we can reduce disability, we can certainly reduce dramatically the cost of hospitalization, and that's the big cost drive here.

MR. LEHRER: Mr. Motley, do you challenge that premise?

MR. MOTLEY: I don't disagree with much of what Laurie has said. I think what concerns the business community is that the practices in mental health up to this particular point have been somewhat open-ended --

DR. FINK: That's not true.

MR. MOTLEY: -- particularly in the area of therapy.

DR. FINK: That's not true.

MR. LEHRER: Just a minute, Dr. Fink. Okay. I'm coming right back to you, but let's let Mr. Motley make his case.

DR. FINK: All right.

MR. LEHRER: Thank you.

MR. MOTLEY: To give you an example, in the federal employee benefits program where they get to choose, two of the major insurers that were in there, and their high option plans provided unlimited mental health care, and both of them when the costs exploded because of the open-endedness of that type of care had to withdraw those plans from federal employees' choice. And I think that's what employers are so terribly concerned about.

MR. LEHRER: How does that differ from, from the regular health care costs? I mean --

MR. MOTLEY: I think when you have good practice guidelines in most of regular health care, and the profession here can generally agree upon what is the proper procedures that are involved, it is my understanding, and again, I'm not an expert like the doctors that are here, that those guidelines are less sure in the mental health care area, and the types of practices that have been put in place have been very expensive in the past.

MR. LEHRER: All right. Dr. Fink, go ahead.

DR. FINK: Jim, that isn't true. The efficacy for the treatment of major depression is 65 percent. The efficacy for the use of open heart surgery is 41 percent. And I believe that our guidelines are very clear. We're working on them just as fast as the cardiologists and the oncologists are. There is good efficacy. There is excellent treatment. There are excellent drugs, and there is a basic stigma against the mentally ill and their caretakers that insists that we can have a debate about whether our people should get treatment, should get the appropriate treatment that they need, and everyone else can get treated, and the efficacy in medicine and surgery is not as high and is certainly not as proven. In fact, nobody asked those people to prove the efficacy of their treatment.

MR. LEHRER: Do you mean that -- in other words, you say that Mr. Motley is just dead wrong --

DR. FINK: Absolutely dead wrong.

MR. LEHRER: -- when he says that it's open -- it's an open-ended concept of mental health treatment as distinguished from closed and controlled on regular health care treatment.

DR. FINK: That is not true. There is not any evidence that it's closed and controlled in the area of physical health, and the mental health treatments are good, they are effectacious and they return people to the community, but every health insurance policy that's sold in the United States at this time prejudices against the mentally ill and manipulating the benefits, controlling lifetime benefits, making people poor. Anybody who has a schizophrenic child is made poor because they cannot afford to pay for the recurrent disease.

MR. LEHRER: Dr. Straub, what is, what has been your, what have been the results of your study on this particular area? Is there any evidence that would counter what Dr. Fink is saying or support what Mr. Motley is saying?

DR. STRAUB: I think the truth is somewhere in-between. There is - -

MR. LEHRER: One of those?

DR. STRAUB: One of those. I'm sorry, but in looking into it, you know, the mental health people are making a genuine effort to try and define really what is effective therapy. But mental illness, unlike physical illness, is really a soft science compared to treating a hypertensive, where you can monitor his blood pressure. It's much easier to monitor the effects of treatment, if you will, in the physical sciences than it is with many --

MR. LEHRER: Draw the comparison. Take the next step as compared to a mental health situation.

DR. STRAUB: As compared to say depression, which has been studied. You can ask the patient, how depressed are you, and they may say, relative to what? As opposed to a physical ailment, it's much easier to do that. Now, there are tools that are now becoming available, RAN Short Form 36, and other --

MR. LEHRER: What in the world is that?

DR. STRAUB: Well, the depression scale, the Hamilton depression scale is almost as quick to do as the, taking the person's blood pressure, and they are comparable from one week or one month. It isn't necessary to -- I don't think it's true, by the way, that we can monitor blood pressure as well as -- as -- much better than we can monitor depression.

MR. LEHRER: Well, Dr. Straub, you think more progress must be made. In other words, the mental health care professionals are going to have to go even further, in your opinion?

DR. STRAUB: Actually, the mental health and all the physicians must go further than they have. But I think that in the mental health area, their task is greater, because of some of the reasons I've given. But I think they're making genuine, serious efforts to do it. It's going to take time to get the answers we need, and that's why defining a benefit plan today. With all of the uncertainties and indecisions about the open end in cost, our view is probably not the thing to do, the prudent thing to do. So we would recommend putting some constraints on that till this information becomes more available.

MR. LEHRER: What kind of constraints, money constraints, or time constraints? Do you have a certain mental -- you're diagnosed with a certain mental illness under your health care, under this health care package, you're entitled to so many weeks of treatment, boom?

DR. STRAUB: We don't believe that boom you're cut off. We think there's a role for introducing case management and managed care into that equation. And that was alluded to I think in your earlier segment.

MR. LEHRER: What do you think about that idea, Ms. Flynn?

MS. FLYNN: I think that can be excellent if it's done on an individualized basis, and it's because of the lack of hard knowledge that we have all across the medical spectrum of that effectiveness and as has been pointed out particularly with some of the less disabling disorders that we feel strongly we should serve the sickest people first, but we cannot apply these limitations to people who clearly have brain disorders, schizophrenia, manic depressive illness, clearly brain disorders, very responsive to treatment, and literally life saving treatment that ought to be available to people for as long as they need it. As we move into some of the other end of the spectrum, indeed, we do need to learn more.

MR. LEHRER: One step at a time.

MS. FLYNN: One step at a time.

MR. LEHRER: Go to the severe ones that everybody agrees on and then --

MS. FLYNN: Now we're penalizing the severely ill, because we don't know as much as we'd like to about those that are less disabled, and for my daughter, that's a tremendous, tremendous problem.

DR. FINK: We can apply managed care and quality assurance to all levels of mental illness, and, for instance, a study completed last year demonstrated that if a schizophrenic person is seen weekly, it reduces the amount of hospitalization by two-thirds. That's a phenomenal fact. The reality is that if the managed care companies and the insurance companies only allow for 20 outpatient visits a year because of manipulation of the benefit package, it destroys the ability to save money. And there are lots of ways in which we can cover the entire spectrum, not just the very severe mental ill of which I feel should be covered, the entire spectrum. But we're asking for good quality assurance, good case management, and good managed care in the mental health equation.

MR. LEHRER: Mr. Motley, is Dr. Fink right in something he said earlier, which is there is a basic prejudice in the medical profession, but also more so probably outside the medical profession against mental health as a, just as a basic disease compared with physical things like heart and cancer, et cetera? He says we wouldn't even be talking about this if it was heart or cancer.

MR. MOTLEY: Jim, the only thing I can do is answer from an employer's viewpoint.

MR. LEHRER: Sure.

MR. MOTLEY: And that is I think most employers sit down with their, their insurance carriers, with their agents, and they take a look at how they're going to build their policy. And when you take a look at it, mental health is the third most expensive element, and it is capped in some way today. You usually don't have open-endedness on it.

MR. LEHRER: A lot of them don't even have it at all.

MR. MOTLEY: A lot of them don't have it all. And that is true. Again, I would point to the fact that two of the largest carriers in the federal program, two of the most rock solid insurance companies that you want to see, withdrew their plans because of their open-endedness, because they couldn't control the cost. What happens is if you're an insurer and you're a business owner, you get selected against. People seek out the plan, and they buy it, so you end up with all the people who feel that they need mental health care treatment for some way. I --

MR. LEHRER: Wait a minute. I'm not sure I follow you there.

MR. MOTLEY: Well, in the case of the federal system, anybody who was either, either depressed or who felt they needed to go into analysis or therapy of some kind would pick these high option plans, because they knew that they would use the benefit. The actuaries say that now they're being selected against; they're getting all the bad risks, and, therefore, the costs skyrocket, and they had to withdraw the plans. I think the points that have been made here about managed care today are very, very valid. But managed care is relatively new in this arena, I mean, in at least in the terms of the way we look at the employer and the doctor and the patient relationship.

MR. LEHRER: Everybody getting together in a room and figuring out a way to --

MR. MOTLEY: That's right.

MR. LEHRER: -- to make it work.

MR. MOTLEY: And if you've got to pay the bill, and in this case, you know, the bill is paid for in this country primarily by employers, and one of the options before the task force is to make employers pay for almost all of it, then you're concerned about how that arrangement is going to work in the future.

DR. FINK: Jim.

MR. LEHRER: Yes, Dr. Fink.

DR. FINK: The, the reality of the federal program and the adverse selection which Mr. Motley suggested is true. There were 40 programs that federal employees could choose from, and they chose the high option ones if they knew in advance that they wanted to get some treatment. In countries like Germany and Canada, there has been a stable expenditure for all mental illness, including psychoanalysis, psychotherapy at 8 percent for twenty-five or thirty years. There is no evidence that it will skyrocket. There is a belief and a prejudice that it will skyrocket, but there is no true evidence that it will skyrocket. And I believe that the managed care system could keep controls on and get rid of fraud and abuse and spread the money around so that people would get out of the treatment and get back into the work force.

MR. LEHRER: As a general premise, thesis, Dr. Straub, do you agree with that?

DR. STRAUB: I agree with that.

MR. LEHRER: It's just getting it done?

DR. STRAUB: Right. The hard part.

MR. LEHRER: Right. That's the hard part.

MS. FLYNN: Let me mention.

MR. LEHRER: Quickly. We have to go.

MS. FLYNN: Let me mention, Jim, what happens when we do discriminate in this way. We now have today over 30,000 seriously mentally ill people in jail. And you know how many we have on our city streets and in shelters. So not providing for these people with severe illnesses has a real cost.

MR. LEHRER: All right.

MS. FLYNN: Personal and society.

MR. MacNeil: Ms. Flynn, gentlemen, thank you.

MR. MacNeil: Still ahead on the NewsHour, President Clinton on a deficit trust fund and changing the student loan program. FOCUS - TRUST ME

MR. MacNeil: This was the third day in President Clinton's latest effort to sell his economic program to people outside the Washington, D.C., beltway. Today's speech, delivered at the Cooper Union in New York City, contained a new idea, new that is to the President's program. Mr. Clinton proposed using new tax dollars to create a trust fund. It would be used solely to bring down the federal deficit. Here's how he explained it.

PRESIDENT CLINTON: This is a strange and in a way wondrous moment in our history when citizens everywhere desperately want things to change but still are wary of it and reluctant to place their faith in anyone's prescription. We must begin with the economy. We must change the way the government works if we expect the economy to improve. So I have asked in Washington that we begin with significant spending cuts below the budget that was adopted last year to reduce the deficit and to free up resources for targeted investment in the future of our economy and of the young people present here in this hall. We should look at every program for possible savings, including ones that Democrats have favored for a long time. And there should be no, no tax increase, not a dollar, without the spending cuts. The cuts, however, must be credible, and credibility is difficult to come by in Washington today. They must be legally enforceable; they must be plain to the American people. After 12 years of rising deficits and Americans feeling deceived about the issue, I don't blame the people of this country for being distrustful about what they hear from Washington when it comes to bringing down this deficit. That is why I have decided today to propose that we establish a deficit reduction trust fund and put every penny of new taxes and the budget cuts proposed in my budget into the trust fund so the American people know that it has to go to deficit reduction. [applause] Let me repeat what this means. We will create a trust fund in which every dollar that is raised will go to deficit reduction and in which all the net budget cuts which have been approved will do so also. This is very important. This seriousness, however, should not relieve us of our obligation to recognize that over the long run we must also bring down the investment deficit in this country. I am as dedicated to that as I ever have been. I know that long-term economic growth depends on high quality and comprehensive education and training, converting the workers and the investment from defense that is being cut to new technologies which must be increased; establishing new and innovative partnerships with the private sector, and, as I said earlier, opening the doors of college education to all Americans. But bringing the deficit down will give us the freedom to do that. If I may say, if you don't remember anything else I say, I hope you'll remember this, the human condition in the end changes by faith. And faith cannot be held in your hand. The scripture that I carry to my place of worship every Sunday says, "Faith is the assurance of things hoped for, the conviction of things unseen." But -- [applause] -- but make no mistake about it, it is by far the most powerful force that can ever be mustered in the cause of change. Today we are seeing too much cynicism and too little faith, an obsession with the moment, an obsession with the politicians and their wins and losses, an obsession with blame and division, an obsession with paralysis, an obsession with always pointing out the pain of change and never embracing its promise. Without faith, in the end, we always wind up resorting to the easy and the immediate. Tax the other guy. Cut that other program, not mine. Wait for somebody to deliver the goods to me, or wait for it not to happen, so I can blame somebody else for what didn't. But faith changes all that. My fellow Americans, our clear duty is to revive the American dream and restore the American economy. And for as long as it takes, with energy and joy and humility, let us dare to do that duty. Thank you very much. [applause] FOCUS - HELPING HAND

MR. LEHRER: Finally tonight, reform of the student loan program. President Clinton put it on the front burner yesterday when he talked to students in Illinois. Judy Woodruff has more.

MS. WOODRUFF: The President has attracted a great deal of attention with his proposal to let young people pay back college loans by giving their country two years of national service. But many believe that most students would opt instead to pay back their loans as a proportion of future income. Whichever plan students choose, the administration wants to overhaul the way the loans are made. What President Clinton had to say to an audience of high school students in Chicago yesterday was calculated to win applause.

PRESIDENT CLINTON: [yesterday] If we adopt the plan that I have, basically developed in cooperation with Sen. Simon and others, we can save the American taxpayers $4 billion over the next five years and make loans available to you at cheaper rates. I'd say that's a pretty good idea. [applause]

MS. WOODRUFF: By targeting the federal government's guaranteed studentloan program, the President spotlighted a problem that has plagued national policy makers for the past few years. At the University of Michigan, enrollment 51,000, some students tell stories of frustration about trying to get a federal loan to help put them through school. Jason Hackner had to wait months after his father was laid off from IBM before he could apply for aid. Then, when he did, the paper work got lost.

JASON HACKNER, Student: I spoke with my professors, and my school allowed me to still continue to take classes even though I wasn't registered, with the expectation that any day, you know, the paper work would get sorted out.

MS. WOODRUFF: Charlotte Becker, who comes from a family with 12 children and a modest income, says her education has hinged on a highly complex financial aid package.

CHARLOTTE BECKER, Student: I definitely spent a good deal of time in the financial aid office, you know, even with counselors or data processing people or whatever, and it's, it's, on top of that, it's scary, because you know that there's this big debt out there that you're going to have to pay off.

MS. WOODRUFF: These sort of stories coupled with $3 billion lost each year by the federal government to cover loans that don't get paid back on top of billions in federal guarantees to keep private lenders thriving have all contributed to calls for dramatic change in the student loan program.

PRESIDENT CLINTON: [yesterday] I don't know how many seniors here have already looked into college loans, but if you want a college loan that's guaranteed by the federal government, there's a lot of paper work involved and a lot of hassle. That's because there are a lot of extra costs in there, from middle men, from banks, and from corporations, who profit from the current loan program.

MS. WOODRUFF: The change that the Clinton administration and others want to make is to convert the current system into a program of direct loans run by the federal government. But the opposition, led by the Consumer Bankers Association, is making itself heard loud and clear.

JOHN DEAN, Consumer Bankers Association: We all know the government's pretty good at giving away money. What kind of a job they are at getting it back, not very good. I think that this is going to be a highly unreliable delivery system. And who is going to pick up the tab for this? The taxpayers are.

MS. WOODRUFF: In fact, the taxpayers have already picked up the tab for more than $56 billion in defaulted loans and interest payments to banks, as well as other costs and fees that have accumulated since the guaranteed student loan program got underway in the late 1960s. It's a program that has grown more and more popular as the cost of going to college as far outstripped any increase in family income. In the past decade, the cost of a private college education shot up 50 percent. At a public school, it jumped 33 percent. Median family income, meanwhile, adjusted for inflation, rose only 6 percent during the same period.

SPOKESPERSON: [on phone] Have you filed for need-based financial aid yet?

MS. WOODRUFF: For students who do need financial aid, the process can be daunting. First, they must fill out a lengthy application form spelling out their family's income and resources.

SPOKESMAN: [on phone] So you initially sent a copy of what you thought was going to be your tax return, but now it's been amended? Okay.

MS. WOODRUFF: Then if the school they've chosen to attend decides they are eligible for federal assistance, they turn to one of 7,800 banks that are in the business of making federally guaranteed loans.

SPOKESMAN: You may shop around these loans. Most of them have 800 numbers that you can call.

ELAINE NOWAK, Financial Aid Officer: And students, upon admission to the university, their names become very well known to lenders, and they're almost bombarded with applications for student loans.

MS. WOODRUFF: Why is that?

ELAINE NOWAK: Lenders buy these lists of student names, and they know that can solicit students to select a lender.

MS. WOODRUFF: Elaine Nowak helps run the financial aid office at the University of Michigan, which receives 16,000 applications for aid each year. Once a student chooses a bank, there is another form to fill out.

ELAINE NOWAK: So once the lender is selected the student is to complete a fairly complex application, not quite as bad as a mortgage application but pushing that point. Delivery to the institution to the college. We complete our section of the form, return it back to the lender, or perhaps the guarantee agency, depending on what that agency's scenario is.

MS. WOODRUFF: There are 46 state and privately owned guarantee agencies in the country that act as local representatives of the federal government, promising the government will pay back the loan if the student does not. Once the guarantee agency and the bank approve the loan, the student signs a note promising to pay it back. When the bank receives that, it issues a check which has to be endorsed by both the school and the student. Students don't have to begin repaying the principal on the loans until they are out of school. In most cases, for needy students, the federal government pays the bank the interest on the loan while the student is in school. In addition, the federal government pays banks a so-called "special allowance" to make up the difference between the favorable interest being charged to students and what the bank could earn under current market rates. The government also pays special fees to the guarantee agencies over and above the cost of defaulted loans to cover collection costs and other expenses. And, oh, by the way, there are also so-called "secondary markets," like the federally chartered Student Loan Marketing Association, or Sallie Mae.

SPOKESMAN: Customer service. This is Peter. Can I get your account number, please?

MS. WOODRUFF: They buy up student loan portfolios from banks and administer them usually during the repayment period.

SPOKESMAN: And that again was the fifteenth for a double payment, right? I'll put that on your account. Anything else today then?

MS. WOODRUFF: Overseeing all of this is the U.S. Department of Education. Critics say it is a needlessly complex and bewildering setup.

PETER McGRATH, President, National Association of State Universities: It's a balkanized system in terms of the number of participants, the banks, the lending agencies, the guaranteed agencies, the secondary market agencies, the students, themselves, the colleges and universities. I mean, there are an enormous amount, number of players out on that field. It is a very confusing and ultimately relatively expensive, very expensive system that could be vastly, vastly improved.

MS. WOODRUFF: Peter McGrath heads the National Association of State Universities and Land Grant Colleges, a group representing many schools that want to see the system changed. His concerns are shared by Linda Morra at the General Accounting Office, the investigative arm of Congress. She and others have spent years auditing the guaranteed student loan program and are dismayed at the lack of accountability in a program where the federal government bears all the risk.

LINDA MORRA, General Accounting Office: What hasn't been done is really the oversight and the financial control to make sure that this whole system works, that students are getting loans when they should and students aren't getting loans when they should not, because they're in default, that the federal government isn't overpaying, and that when the federal government gets billed, that those bills are accurate and that the federal government is paying what it, what it is paying is proper. And right now, the federal government can't, can't attest to that.

MS. FLYNN: The Clinton administration's solution to the problem is a direct loan from the government to the students, eliminating all the middle men.

PETER McGRATH: We're saying that the federal government and our colleges and universities can operate the system. We have financial aid people in place. We have the technical people to do this.

MS. WOODRUFF: But ever since the idea of direct loans was first floated a few years ago, the banks that currently make student loans and their lobbyists have led a chorus of critics charging, among other things, that the federal government is unfit to run the program.

JOHN DEAN: That is a dangerous experiment. It's a leap into the dark. We respond to people who say that the current program has problems by saying, saying, convince me the new program is going to work better. And there's no evidence. You just need to take a look at the Department of Education's history in running this program, and you will be convinced in short order that they have no business whatsoever running a new $20 billion a year program.

MS. WOODRUFF: Peter McGrath says no matter who's running the program, it is bedeviled by its own complexity.

PETER McGRATH: Right now, it's one of these things where if you want to know who did it, you'd kind of being pointing in five or six directions, because you don't know who does it and who should you really charge with having been negligent or not has prudent with this money.

MS. WOODRUFF: Congressman Bob Andrews says in any event, the banks and Sallie Mae are wrong to assume a direct student loan program would be run like any other government undertaking.

REP. ROBERT ANDREWS, [D] New Jersey: This is not a system run by the government. It is a system where the government acquires the capital, then goes to the private sector on a competitive bidding basis and says, whoever can originate and service the loans best will get the contract. This marries the best of the public sector and the best of the private sector, and it's best for students and taxpayers.

MS. WOODRUFF: Congressman Andrews introduced a direct loan bill in the last session of Congress. He explains that the government could borrow the money at a cheaper rate than private banks can and cut out expenses, saving the government billions of dollars over the next five years. Yesterday, President Clinton singled out the banks and other middle men who are doing very well by the system.

PRESIDENT CLINTON: Last year, lenders made a total profit of a billion dollars on student loans. Sallie Mae made $394 million. And between 1986 and 1991, listen to this, this is a group that helps us get student loans, right, which should not be a big profit making operation, the costs of this corporation went down by 21 percent, and its profits went up by 172 percent.

MS. WOODRUFF: Sallie Mae's president, Larry Hough, acknowledges his association has done well. He, himself, earned more than $2 million in salary last year. But he says all this is due to the way the law is currently written and to a favorable interest rate climate.

LARRY HOUGH, President, Sallie Mae: Three or four years ago when we were borrowing the money to invest in student loans, our rates of borrowing were substantially higher. It cost us more money. We made less money in the bottom line. Today, under the economic situation we're in today, we're borrowing at more attractive rates. The amount of money we make is higher.

MS. WOODRUFF: Whatever the reason, such large profit margins from a federal program have fueled the drive for reform. And that drive, in turn, has caused a wall of opposition to spring up from the outfits that profit from the current system, the banks, the guarantee agencies, as well as Sallie Mae.

PRESIDENT CLINTON: No sooner had I even mentioned changing this system than Congress was deluged with lobbyists. The biggest organization, Sallie Mae, alone is supposed to be in the business of helping you get money to go to college, has already hired seven of the most powerful lobbyists in Washington to try to stop this process from changing.

MS. WOODRUFF: Today, the House Education & Labor Committee began to write the legislation to implement the President's plan. Lobbyists presenting all the affected interests were in the meeting room looking for chances to buttonhole committee members. The threat of direct government lending has caused Sallie Mae and the bankers who make student loans to come around in recent months with a new offer to cut the fees they accept from the federal government and make other cost trims which they say will offset the savings promised by direct loan advocates.

LARRY HOUGH: The threat of direct lending has galvanized industry and has persuaded us that we'd better put everything on the table that was ever thought of in the past.

MS. WOODRUFF: But proponents of direct government loans say they are suspicious of the loan industry's claim.

REP. ROBERT ANDREWS: For the last 15 years, the bankers and the allies have come up to Capitol Hill and said if you cut our subsidies to the student loan program, it will collapse; all the banks will leave the program; the world, as we know it, will end. Now, all of a sudden, they are saying that they can cut their expenses, the subsidy can be cut, and that all the things they've been saying for the last 15 years aren't true. I'm asking, were they wrong then, or are they wrong now?

MS. WOODRUFF: The arguments go on endlessly, with both sides producing studies to back up their points about saving. But one of the most powerful arguments opponents of direct lending have come up with is to ask why such a massive overhaul of the program is necessary. Some Democrats and Republicans on Capitol Hill like Kansas Sen. Nancy Kassebaum say the sheer magnitude of the change gives her pause.

SEN. NANCY KASSEBAUM, [R] Kansas: It's a big, big change from the way we have done it in the past. Now it's not to argue that there aren't some improvements in the way we've done it in the past. But I personally feel strongly that just somehow to embrace this as a solution when it's a significantly different way of doing business will cause some real harm.

MS. WOODRUFF: The problem the President faces is that he is asking for a fundamental change in how things are done, and this at the same time he asked for support in overhauling federal spending priorities, the health care system, and so on. The difference with direct student loans is that this is an issue with budget cutting on its side. As long as they don't lose that argument, proponents believe they have a good chance to succeed. Robin. Jim.

MR. LEHRER: Judy. To both of us actually, because we want to say thank you for that piece and for 10 years of great work here on the NewsHour. We wish you well as you go from here to CNN. And I want to say this is your absolute last chance to change your mind. Robin.

MR. MacNeil: Judy, I said to you earlier in private and I'll say it in public, that I've never worked with anybody who's more professional or more gracious or less temperamental than you. We'll really miss you. So thanks, and good luck.

MS. WOODRUFF: Well, all I can say is thank you to you both, Robin and Jim, for being the terrific journalists and friends that you have been, and thanks to the dozens and dozens of other talented people here at MacNeil-Lehrer who the public really only knows by seeing their names at the end of the program. You've all been fabulous. This is a very special place. It always will be. And I'll be watching you.

MR. LEHRER: Thank you. RECAP

MR. MacNeil: And again the main stories of this Wednesday, President Clinton predicted the U.S. and its allies would soon take new steps to end the fighting in Bosnia. But he said the U.S. would proceed carefully to avoid another Vietnam. The President also proposed putting remedies from spending cuts and new taxes in a special trust fund to cut the deficit. Senate Minority Leader Bob Dole called the plan a gimmick that would give smoke and mirrors a bad name. Good night, Jim.

MR. LEHRER: Good night, Robin. We'll see you tomorrow night. I'm Jim Lehrer. Thank you, and good night.