The MacNeil/Lehrer NewsHour

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

MR. MAC NEIL: And I'm Robert MacNeil in New York. After tonight's News Summary, Charles Krause covers the latest high-level Bosnian peace talks in New York. As the first phase of the Ruby Ridge hearings ends, we have an assessment by Committee Chairman Arlen Specter and Democrat Dianne Feinstein. Then a controversial new Republican proposal for medical savings accounts; we have a report by Medical Correspondent Fred De Sam Lazaro and a discussion about who would win and who might lose. NEWS SUMMARY

MR. LEHRER: Another step toward peace in Bosnia was taken today. Negotiators meeting at the United Nations in New York produced an outline for a new constitution for Bosnia. Secretary of State Christopher convened the negotiations among the foreign ministers of Bosnia, Croatia, and Serbia. Diplomats from Great Britain, France, Germany, Russia, and the European Union also attended. President Clinton praised the agreement but said much more needed to be done. He spoke at the White House.

PRESIDENT CLINTON: The American people must realize that there are many difficult obstacles still to overcome along the path to peace. There is no guarantee of success. But today's step--today's agreement moves us closer to the ultimate goal of a genuine peace, and it makes clear that Bosnia will remain a single internationally-recognized state. America will strongly oppose the partition of Bosnia. And America will continue working for peace.

MR. LEHRER: The President also said U.S. troops should participate in a post-war peacekeeping force in Bosnia. We'll have a further report by Charles Krause on the New York talks right after this News Summary. Robin.

MR. MAC NEIL: The Libyan government today denied it had ordered the expulsion of all Palestinians living there. Wire services reported earlier today that all 30,000 Palestinians had been given 48 hours to leave the country. A United Nations official told Reuters at least 1500 had already been moved out of their homes into makeshift camps along the Egyptian border. So far, no Arab countries have agreed to take the Palestinians. Libyan leader Moammar Gadhafi has denounced the new Israeli-PLO deal on governing the West Bank. He said it was another a concession to the enemies of Arab nations.

MR. LEHRER: A Senate committee began final work today on Medicare and Medicaid reform legislation. It is part of the Senate Finance Committee's overall effort to achieve a balanced budget plan. Republicans and Democrats expressed different views about changing the health care programs for the poor and the elderly.

SEN. WILLIAM ROTH, [R] Delaware: Without reforming Medicare, the program will be bankrupt, bankrupt in the next seven years. Without reforming Medicaid, it will continue its economy- threatening growth of some 10 percent a year. Well, I think these are common-sense reforms, reforms that must be made.

SEN. CAROL MOSELEY-BRAUN, [D] Illinois: It's difficult to take this mark all that seriously since everybody in this room and everybody that's listening knows that it very patently and obviously is an exercise in Robinhood in reverse, in that it takes from the poor to give to the rich. The major reason this proposal is so extreme--and it's been called radical, it's been called extreme--but the major reason for that is so they can give a tax cut to high-income taxpayers.

MR. LEHRER: We'll discuss one element of the Medicare reform legislation, medical savings accounts, later in the program.

MR. MAC NEIL: The Senate panel investigating Ruby Ridge heard today from the family friend of white separatist Randy Weaver. Kevin Harris told the Senate the federal sharpshooters fired first during the 1992 siege. Harris assumed blame for the fatal shot that killed the U.S. marshal, but said it was fired only in self- defense. Today, Harris described the confusion that led to the shootout.

KEVIN HARRIS, Weaver Family Friend: When I saw the man standing in the road, he looked like--I thought he was a guy in camou, and he had a beard and a hat on or somethin'. I didn't--he looked like a local. He looked like a neighbor. I mean--

SEN. ARLEN SPECTER, [R] Pennsylvania: Well, why would you shoot at him?

KEVIN HARRIS: I didn't shoot at him. I didn't shoot at anybody until after the dog was shot, and the I was headed for cover, and there was shootin' all in front of me. It looked like they were just, you know, bombardin' us with shots. And I just fired into the brush and kept goin.

MR. MAC NEIL: We'll have more on today's Ruby Ridge hearing later in the program.

MR. LEHRER: There was some promising news today on AIDS. Britain's Medical Research Council said the drug AZT taken along with one of two anti-viral drugs produced a 25 percent decline in the death rate among AIDS patients in their study. Since 1992, more than 3,000 HIV-positive people from Europe and Australia participated in the experiment. Doctors estimate the new regime would cost $8,000 a year per patient.

MR. MAC NEIL: In Japan today, thousands marched in an anti- American demonstration near the U.S. Marine base in Okinawa. They were angry about the treatment of three U.S. servicemen suspected of raping a Japanese schoolgirl. U.S. authorities have refused to turn the servicemen over to local police. The protesters demanded that U.S. military bases be removed from Japan. One of Japan's largest commercial banks today revealed a senior bond trader had run up $1.1 billion in losses. Daiwa Bank officials said the trader in their New York branch hid the losses over an 11-year period. He was charged today in federal district court in New York with falsifying bank records. Daiwa officials said the loss posed no threat to the bank's solvency.

MR. LEHRER: And that's it for the News Summary tonight. Now it's on to the Bosnia talks, Ruby Ridge, and medical savings accounts. FOCUS - UNDER FIRE

MR. LEHRER: The Ruby Ridge hearings. For four weeks, a Senate subcommittee has been investigating that shootout in Northern Idaho. Witnesses today included one of the survivors. Kwame Holman reports.

KWAME HOLMAN: Twenty-eight-year-old Kevin Harris described himself as a close friend of Randy Weaver's, almost part of the family, he said. He lived with the Weavers off and on for nine years, and this morning told the Senate subcommittee that the week leading up to the siege at Ruby Ridge, Idaho, was typical.

KEVIN HARRIS, Weaver Family Friend: We had no idea that the deputy marshals would be in the woods on that Friday. In fact, I really didn't believe that the marshals would come up and try to arrest Randy. I figured that they would just wait him out.

SEN. DIANNE FEINSTEIN, [D] California: What's bothering me is everything we have received indicates that there was discussion, that the family had talked, that there was an agreed-upon position by the family with respect to coming off the mountain and/or being arrested. And the decision had been made not to come off the mountain and not to submit to arrest.

KEVIN HARRIS: I knew about all that.

SEN. DIANNE FEINSTEIN: Did you ever ask: "Why don't you go down and get it straightened out?"

KEVIN HARRIS: Yeah. He thought--he thought he'd be railroaded when--if he did by the way things were coming about.

SEN. DIANNE FEINSTEIN: And you agreed with that and didn't advise him perhaps to go down and get it straightened out, to surrender?

KEVIN HARRIS: I didn't--I didn't--no, I didn't say those things, no. I just--they had already made their decision when I got up there.

SEN. DIANNE FEINSTEIN: You knew about the decision then?

KEVIN HARRIS: Not to go to court, yes.

SEN. DIANNE FEINSTEIN: And so what did you think would happen? Because you--you were there then.

KEVIN HARRIS: Right.

SEN. DIANNE FEINSTEIN: Clearly, you were going to be a part of whatever had happened. What did you think it was that happened-- would happen?

KEVIN HARRIS: I was going to be a part of what happened. I never thought--I didn't think they were comin' up. I figured that sooner or later Weaver would get tired of bein' up there, and he'd turn himself in. I thought they were just playin' a waiting game.

MR. HOLMAN: But Harris said on August 21, 1992, he, Randy Weaver's son, Sammy, and the family dog stumbled upon a team of U.S. marshals taking surveillance photos to build a case against Weaver. They exchanged gunfire. Sammy was killed, and so was Federal Marshal William Degan.

KEVIN HARRIS: I was still walking forward and the dog was jumping around the man. The dog then moved away from the man in a circle and ended up facing uphill. Suddenly, the dog was shot. My impression was that the man near him was the one who shot him. But I can't be sure of that. I watched as the camouflaged man ran into the brush. Sam stopped above the dog. As I came up next to him, he started to raise his weapon and said, "You shot my dog, you son- of-a-bitch." As soon as he started to raise his weapon up, I turned to my right and headed for cover. I took two, maybe three steps, crouched down, found some cover besides the woods. There was, there were still shots being fired, and so I fired once into the brush. I believed that whoever was in the woods was shooting at both Sam and me. I heard a dull hissing sound like a "fft," and right away, I heard Sam yelp. It was the kind of sound you make if you were slugged in your chest with a fist. I didn't hear anything from Sam after that. I heard moaning from the woods and someone saying, "I'm hit. I'm hit." There was someone standing up, leaning over something, probably a person. The person was standing up. The person standing up said, "I know, I know." Then this person jumped onto the road and said, "U.S. marshals. U.S. marshals." This was the first time I had heard anyone identify themselves.

SEN. ARLEN SPECTER, [R] Pennsylvania: Well, who do you think they were? Who did you think they were?

KEVIN HARRIS: I--at that point, I didn't--I didn't think anything. I was just trying to get out of the way.

SEN. ARLEN SPECTER: And you thought you were firing in self- defense in that context?

KEVIN HARRIS: Yes.

SEN. ARLEN SPECTER: You've testified that you gave a statement to the FBI. Let me read you a paragraph from the FBI report. "Harris raised his rifle and fired so quickly that he did not get his rifle up to his face or actually have anything in his sights when he fired. Immediately after firing his rifle, Harris heard a man moan and say, 'I'm hit.'" Doesn't that sound to you like you fired the shot that hit Deputy Marshal Degan?

KEVIN HARRIS: Yes.

MR. HOLMAN: Harris then explained to the committee how the next day he was wounded and Weaver's wife, Vicki, was killed.

KEVIN HARRIS: As I started through the door, I heard a loud boom. I was looking at Vicki, at her face. As I heard the shot, it was as if there was something moving under her skin, then her face was deformed, almost seemed to explode. The next thing I knew I was lying on the floor. When I--when I couldn't feel my left hand, I realized I'd been hit.

MR. HOLMAN: Harris already has been tried and acquitted on the charge of murdering William Degan. Now, Harris is suing the federal government for $10 million. The Ruby Ridge hearings continue next month.

MR. LEHRER: Now some perspective on the four weeks of testimony thus far from two members of the subcommittee: The chairman, Sen. Arlen Specter, Republican of Pennsylvania, who's also a candidate for the Republican presidential nomination; and Sen. Dianne Feinstein, Democrat of California. Sen. Specter, do you feel you now know what happened at Ruby Ridge that day and why?

SEN. ARLEN SPECTER, [R] Pennsylvania: [Capitol Hill] Yes, Jim. We pretty well know what happened. We had the federal law enforcement officers come up there to take Randy Weaver into custody. When we questioned Mr. Harris today, I think that it came through that they really knew that federal law enforcement officers were going to come there at some time, although Mr. Harris denied that. We saw the tragedy. You can see it in the--Kevin Harris's face when he talks about it. But we have seen that the FBI had rules of engagement which violated the Constitution. They said that deadly force could and should be used when they saw an adult male with a weapon, which is contrary to what the Supreme Court of the United States has said. The FBI denies that those rules of engagement played a role in the killing of Mrs. Weaver, but the Department of Justice task force said that the shot which killed Mrs. Weaver was unconstitutional. And we also saw--

MR. LEHRER: Excuse me. Let me stop you right there, Senator. For those who haven't been following it that carefully, what does--what did the Supreme Court say, and what did those rules of engage--how did they violate what the Supreme Court said?

SEN. SPECTER: The Supreme Court says that there must be an immediate danger of death or bodily harm, grievous bodily harm, for deadly force to be used. And the rules of engagement say--

MR. LEHRER: Not necessarily on the agent but to anyone, is that right?

SEN. SPECTER: That's right.

MR. LEHRER: Okay.

SEN. SPECTER: It could be to anyone.

MR. LEHRER: Anyone. All right.

SEN. SPECTER: And the rules of engagement said, and let me make this plain, that even FBI Director Freeh says the rules of engagement are unconstitutional, but he denies they are causative. The rules of engagement say that if you see an adult male, that deadly force could and should be used. It's really shoot on sight if you see someone carrying a weapon.

MR. LEHRER: Yeah. Sen. Feinstein, do you agree that, that--with Sen. Specter's knowledge level, that you now feel you know what happened and why?

SEN. DIANNE FEINSTEIN, [D] California: [Capitol Hill] I think the Senate expressed it very well. I basically believe, you know, there are some very good things that federal law enforcement has done. You look at the World Trade Center and the investigation, Oklahoma City and the investigation, but this was clearly a mission that went awry, and in going awry, really, there were unnecessary deaths. I think the rules of engagement--

MR. LEHRER: Excuse me. Excuse me.

SEN. DIANNE FEINSTEIN: --are at the center of it.

MR. LEHRER: And you think those deaths were caused by the actions of federal law enforcement officers?

SEN. FEINSTEIN: No.

MR. LEHRER: Not by the Weaver family?

SEN. FEINSTEIN: No, no, No. Not entirely--

MR. LEHRER: No?

SEN. FEINSTEIN: --at all. I think as I understand the chain of events, and the chairman will give his understanding, the dog was probably shot first by one of the marshals. Then I believe Sammy Weaver shot, and that began the fire fight. And then Marshal Degan was shot.

MR. LEHRER: By Mr. Harris?

SEN. FEINSTEIN: Most probably by Mr. Harris, based on what we have. And then it, it escalated from there, with Sammy Weaver running home and being shot again, this time fatally. And that was the 21st. And it's the 22nd then, when the FBI sniper observers came onto the scene, and they were following something that in my experience with law enforcement I have never seen, and that is the supplement to whatever the deadly force policy is, a supplement that by their own testimony the FBI has said was very rarely ever used, that essentially said for any armed male on the scene, they could and should be--the deadly force used. Now, I think it has to be remembered that Mr. Weaver had no prior criminal record. He was not a murderer. He was holding no one hostage. Where one might look at a rule of engagement, that would be different if you were a sniper and you were holding somebody hostage and then there might be a reason, but in this case, I think the rules of engagement really provided an obfuscation and quite possibly an enhancement of the deadly force policy. In my own mind--and this is my conclusion--I don't believe that sniper observer Horiuchi would have fired those shots had it not been for the rules of engagement. He testified that that was not the case.

MR. LEHRER: Yeah.

SEN. FEINSTEIN: That he was following deadly force.

MR. LEHRER: Sen. Specter, do you--do you believe that it was the actions of the federal law enforcement officers that caused the deaths, one thing led to another, led to another, that if they had acted properly, nobody would have died that day?

SEN. SPECTER: Well, I think a substantial amount of fault here lieswith Mr. Randall Weaver in refusing to comply with the order to come to court. Had he come off the mountain, none of this would have happened. But then there's a step behind that, and that is that Randall Weaver originally sold two sawed-off shotguns, which the jury found he was entrapped on. And if you have two sawed-off shotguns, that ordinarily is not a federal case, but Alcohol, Tobacco, & Firearms said that Randall Weaver had prior convictions, which was untrue, and was a suspect in a bank robbery case, and the director of Alcohol, Tobacco, & Firearms characterized those misrepresentations as inexcusable. So you had a whole chain of events for the great tragedy. But Randall Weaver was a major causative factor in what happened, because he could have interrupted the chain. Had he come down, his son and wife would not have been killed, and Deputy Marshal Degan would not have been killed.

MR. LEHRER: Sen. Feinstein, another suggestion--there's been a suggestion that the FBI and the Department of Justice may have been less than forthcoming. Even the word "cover-up" has been used after the event before your hearings, et cetera. What's your judgment on that, or do you have one?

SEN. FEINSTEIN: Well, I'll be very candid with you. My judgment is this: That agents on the scene passed up the chain of command. These enhanced--and that's my word--rules of engagement, and someone should have approved them. Former FBI Director--remember, this all happened on another watch--Former FBI Director Sessions said that the appropriate thing would have been for the number 2 or possibly the number 1 man in the criminal investigation unit of the FBI to have approved those. And I very much believe that to be the case. At least, it would be, I think, in any city police department in this nation, that before something different from the ordinary is going to be done, that this be passed up the chain of command and approval be secured. Now, there is real controversy around, around that, and one of the things that many people had thought is that Mr. Potts did approve it. And--

MR. LEHRER: Mr. Potts was the deputy FBI director at the time.

SEN. FEINSTEIN: That's correct.

MR. LEHRER: Right.

SEN. FEINSTEIN: Did approve those rules and then later said he did not. I believe in my heart of hearts that he did approve those rules, and, and I think that we're looking forward to hearing Director Freeh testify, because I think many things came out in this hearing in terms of the approval process, communication, chain of command, procedures that really need careful review. And I think the Department of Justice and the FBI are going to move as a product of these hearings, or have already, to make some changes.

MR. LEHRER: Sen. Specter, Director Freeh is going to be your next witness, is that right, when you reconvene the hearings, is that correct?

SEN. SPECTER: He will be a witness soon, yes.

MR. LEHRER: Yeah. What is it that remains to be done from your perspective?

SEN. SPECTER: Well, the issue of cover-up which you asked about has been conceded by the FBI where the FBI have said a critical document was shredded, destroyed, and five suspensions have been ordered, but what we're really looking here, beyond the placing of blame which responsibility has to be established, but that's not nearly as important as correcting these procedures and making sure that deadly force is not used in violation of the Constitution. And Director Freeh told me that the FBI field offices are under this cloud, and what we want to do is get to the bottom of it, see who was responsible, and see how you correct it for the future, because law enforcement is very, very important in this country. And we do not want to cripple or hamstring law enforcement, but federal law enforcement officers have an obligation to enforce the law against violent criminals, enforce the criminal law, but also to uphold the constitutional law, and we want to see that the procedures are made correct.

MR. LEHRER: In light of that, there was concern going into your hearings that Randy Weaver, an admitted white separatist and alleged violator of weapons laws, would be made into a hero and federal agents would be made into villains by your hearings. Has that happened?

SEN. SPECTER: No. I think that Randy Weaver is not a hero by any means, nor is Harris. And I think that we have seen some areas that have to be corrected. We come out with the conclusion that law enforcement is vital, but it has to follow the Constitution. We have the longest record in this country for stable government because we have a Bill of Rights which are observed, and a theme running through these hearings is that there's a lot of distrust of government in America, and we want to show the people that accountability will be affixed to whatever level is appropriate and that the government will respond to protect individual rights and to protect people against violent criminals.

MR. LEHRER: Sen. Feinstein, do you believe these hearings have been constructive thus far?

SEN. FEINSTEIN: Oh, I think they have. What Ruby Ridge and Waco to a certain extent, I think, is instill in a lot of people a real notion that they can't trust law enforcement, and there is this notion out there, and it does get reinforced from time to time. When that happens, the important thing is that people stand up and take responsibility and do something about it, and that the truth comes out, so that you can make the corrections. The purpose of these hearings, as I look at them, isn't really to cast blame. It really is to see that as we go forward, there is the systems, the procedures, the leadership, the command present, so to speak, that will prevent these things from happening in the future. And I think that's very important, because in our democracy a lot depends on the support of the people.

MR. LEHRER: Well, Sen. Feinstein, has that element been missing thus far on Ruby Ridge, a federal official come forward to you or to anyone else and say, look, I made a mistake, I was responsible, I blew this deal, and has that happened yet?

SEN. FEINSTEIN: Well, in my opinion, there were people that were very candid. I think Agent Glenn, who could have taken the Fifth Amendment and didn't, because he wanted to bring forward very clearly his part, and I thought he did so, quite honestly, and he's taken his censure. Director Sessions came before us, and I felt he was very direct in saying what he thought should have happened and clearly what didn't happen. But what has--I have seen is a big gap between those in charge in Washington and those out in the field. And that's one of the things that bothers me.

MR. LEHRER: Does that bother you too, Sen. Specter?

SEN. SPECTER: It does, Jim, but we haven't finished yet. A very, very big question yet unanswered is why in the face of all of this was Mr. Larry Potts promoted to the No. 2 man in the Department of Justice, and that is a very big question which has yet to be answered.

MR. LEHRER: And thank you both, Senators. When do your hearings start again? When are you going to reconvene them?

SEN. SPECTER: We'll reconvene them. We hope to finishup appropriations this week and take a week of recess and then back about October 10th, and we'll go right back to work and finish them up as soon as we can.

MR. LEHRER: All right. Thank you both very much. FOCUS - SAVING UP

MR. MAC NEIL: Next tonight, a key and controversial element of the current effort to reform Medicare and private health coverage. So-called medical savings accounts are being touted as a new means of controlling medical costs and criticized as an unfair and uncertain approach to health care. Health Correspondent Fred De Sam Lazaro begins our coverage with a look at how the plan works in the private sector.

MR. LAZARO: The Golden Rule Insurance Company has for some years marketed medical savings accounts to employers. It provides the administrative services, as well as the insurance policies that go with these MSA plans, to some 600 companies. Golden Rule began offering its own employees the option of a medical savings account in 1993. The company was trying to grapple with escalating health insurance costs for its 1300 workers and faced some tough choices, according to Spokesman Lee Tooman.

LEE TOOMAN, Golden Rule Insurance: One, we could increase the deductible of our employees' plan. A second would be to increase the contribution to the insurance plan. A third would be to restrict the employees' choice presently. And we didn't really want to do any of those three things, and we, of course, had been advocating the theoretical idea of a medical savings account, and we decided, well, why don't we offer it to our employees.

MR. LAZARO: The medical savings account plan works like this. Instead of a typical medical insurance policy, which has high premiums but low deductibles, Golden Rule buys catastrophic insurance. Catastrophic insurance has much lower premiums and much higher deductibles. Coverage kicks in only after a single worker at Golden Rule has incurred $1500 in medical expenses in a given year, $3,000 a year for workers with family coverage. To help workers foot that deductible, the company channels its savings in insurance premiums into individual medical savings accounts. At the beginning of each year, $1,000 is deposited in the account of every single worker, and $2,000 for each worker with a family, to be spent as they choose for any health care service.

LEE TOOMAN: If you have medical problems or you want to get preventive care, whatever, you use the money first that's in your savings account. If you don't have medical expenses during the course of the year, that $2,000 is yours to keep forever, and you can roll it over into next year's account, if you wish, and next year you start over with a whole new program again, and start over with a new family deductible, and you start over with $2,000 flowing into your account that year.

MR. LAZARO: Tooman says medical savings accounts or MSA's, as they're called around here, have been a huge hit. Most workers have gotten a windfall at the end of the year, having not spent all the money in their accounts.

LEE TOOMAN: In 1993, we had the program for only eight months-- we didn't have it for a full year--and our refunds, the amount of money left in the medical savings accounts of our employees was $468,000. That worked out to over $600 on average per employee. At the end of 1994, it was $734,000 remained in the savings, in addition to the prior year's $468,000. So it's really no wonder, given that scenario, that 92 percent, 93 percent of our employees choose the plan. Everybody's winning.

MR. LAZARO: That glowing report card was borne outin an informal survey of workers. Claims specialist Shelia Merriweather, like many colleagues, uses her MSA for preventative care that was previously subject to deductibles or simply not covered.

SHELIA MERRIWEATHER: I said, I think I'll go ahead and try an MSA because it had--it offered me a chance to use it for immunizations or, you know, things that weren't covered under traditional. That's one of the reasons I really liked it.

MR. LAZARO: Medical savings account clearly favor healthier workers. They reap a cash dividend for not seeing the doctor. But at Golden Rule, workers with health care needs, those who do exhaust their medical savings accounts, or no worse off than under the traditional insurance program. That's because their catastrophic coverage kicks in after a married employee's family has incurred $3,000 in expenses in a calendar year. Their MSA chips in with $2,000, leaving a $1,000 balance out of the worker's pocket, the same figure that worker would shell out in deductibles under the traditional insurance plan. Golden Rule employees say the strong financial incentive under medical savings accounts has made them careful shoppers for health care. Debbie Paris a mother of two young children.

DEBBIE PARIS: I've changed my habits, my own habits. With my daughter, my first child, I had all of the immunizations done at the pediatrician's office. That may have cost anywhere from one hundred to two hundred fifty dollars every time you took them. With my son, Golden Rule has sponsored immunization clinics in the city, and I've taken my son to the clinics. And I've found I've saved an awful lot of money doing that.

MR. LAZARO: Any idea how much?

DEBBIE PARIS: I'd estimate probably eight hundred to a thousand dollars by the time you have them all the way through the age of two.

SHELLI JOHNSON: I was told that I needed to have a couple of tests run, and after talking to my doctor about--inquiring about the costs of the tests, I was given--quoted a price of around $785. I thought that was way too much, and it would have been exhausted almost--the entire amount out of my medical savings account, so I shopped around, called a couple of places, found the same tests at a price of $114.

MR. LAZARO: That kind of careful consumerism benefits not just a worker's pocket book but also the company, according to Tooman.

LEE TOOMAN: We are just spending a whole lot less on insurance and even on the catastrophic claims, because people's behavior doesn't change. Once you ingrain in people that it's okay to ask a doctor how much is this going to cost, do I really need this procedure, they don't all automatically just turn off that behavior as soon as they break the deductible.

MR. LAZARO: Tooman says his company's health care costs have remained virtually unchanged since switching to medical savings accounts after years of double-digit increases. It should be noted that Golden Rule, whose top executives are active in conservative Republican politics, and whose CEO is running for governor of Indiana, has never offered a managed care or HMO option to its workers.

MR. MAC NEIL: Currently, two proposals promoting medical savings accounts are before Congress. Businesses that use MSA's would receive tax benefits under a bill passed by the House Ways & Means Committee last week. And seniors could choose MSA's instead of traditional Medicare under Republican Medicare reform plans being written this week in both the House and Senate. We have two views of this new medical approach. John Goodman, a leading advocate of medical savings accounts, is the president of the National Center for Policy Analysis, a conservative think tank based in Dallas where Mr. Goodman joins us. Alain Entoven, a leading proponent of managed health care and market competition is a professor at Stanford University and a founding member of the Jackson Hole Group, a health policy think tank. Professor Entoven joins us in Palo Alto, California. Mr. Goodman, why do you think these MSA's, which in the example we've just given where most of the people we saw were relatively young, why would they be the answer to the country's Medicare problem?

JOHN GOODMAN, National Center for Policy Analysis: [Dallas] Because they give the elderly real catastrophic health insurance. Right now, about 400,000 seniors will spend more than $5,000 out of pocket this year on medical bills. So they don't really have catastrophic coverage under Medicare. Under what we're talking about, the most they would pay out of pocket is $1,000 or $1500, and so they would have real protection, plus they would have control over a good bit of their own health care dollars.

MR. MAC NEIL: Now, in, in the case of senior citizens eligible for Medicare, the amount put into their savings account would be provided by the federal government, is that correct?

MR. GOODMAN: That's correct. We think that the private sector could create a plan with about a $3,000 deductible and be able to put from $1500 to $2000 into a medical savings account. And that's a good deal for seniors who are healthy, but it's also a really good deal for seniors who are sick.

MR. MAC NEIL: Mr. Entoven, Professor Entoven, you believe this is not the answer for Medicare, as I understand it. Explain why.

ALAIN ENTHOVEN, Stanford University: [Palo Alto] Well, for several reasons. First of all, I agree with Dr. Goodman and the Republicans that we badly need to bring individual choice and economic responsibility into the reformed Medicare system. But I think this puts the incentive in the wrong place, i.e., it puts the incentive not to do the inexpensive things like take your child to the pediatrician, and it doesn't provide an incentive to hold down the very expensive things. For example, in Pennsylvania a couple of years ago, in one hospital they did coronary artery bypass graft operations for $21,000 and had better than average mortality rates, while another hospital did it for $84,000 and had worse than average mortality rates. Somebody with a $3,000 deductible and everything paid after that is not going to have any incentive to choose the less costly hospital. But what I'm saying is that's where the big money is. So the incentive ought to be on the consumer to choose a cost-effective, organized system of care by being involved in the premium.

MR. MAC NEIL: And you're saying that Health Maintenance Organizations and such like do stringently control the costs of where a person could go for a coronary bypass or something?

PROF. ENTHOVEN: That's right, because they contract with high volume, high quality centers that bring the costs down.

MR. MAC NEIL: Mr. Goodman--I'm sorry, go ahead.

PROF. ENTHOVEN: On the question of cost reduction, we are actually rolling back HMO premiums in California. At Stanford this year our premiums are down 6.3 percent from last year. Next year, they'll be down another 5.2 percent. And that's because we're using competition.

MR. MAC NEIL: How do you answer that, Mr. Goodman, that on the really expensive items, while there might be some savings in the sort of things the witnesses in that tape explained, like child immunizations, on the big ticket items, there's no incentive to save under MSA's?

MR. GOODMAN: The medical savings accounts are not designed to save on the big ticket items. There you need an insurance company employer or some other organization to help patients choose wisely in the medical marketplace. There's no question about that. But these bureaucracies do not deal well with the diagnostic tests and the small medical bills. That's where you really need the patient involved. And the patient needs to find it in his or her self interest to get good quality for a good price in the medical marketplace.

MR. MAC NEIL: How do you answer that, Mr. Enthoven?

PROF. ENTHOVEN: Well, what we're agreeing is where the big dollars are is in the big ticket items. And so Dr. Goodman's proposal deals with, with the pennies, while I'm trying to deal with the billions of dollars.

MR. MAC NEIL: Mr.--

PROF. ENTHOVEN: I think there are other--there are other problems with this idea too, though.

MR. MAC NEIL: Right.

PROF. ENTHOVEN: Health insurance means the pooling of risks, i.e., the healthy and the sick all put their money into the insurance pool, and then that's paid out to help the sick. Now, the trouble with this scheme is a high deductible is a powerful device for sorting out the healthy from the sick. If they're given this choice, the people who don't expect to have any medical costs in the coming year, they'll choose the high deductible and accept the Medi-save bonuses, while the people who expect to be sick, they'll choose the low deductible or first dollar coverage. And so what'll happen is that'll drive up the costs of coverage for the people who are sick. And that could get to be--

MR. MAC NEIL: How will you explain--just spell out how that would have the effect of driving up the costs for those who are sick, because fewer of them would be left in the pool, is that- -

PROF. ENTHOVEN: The healthies would not be in the pool. But here's the--

MR. MAC NEIL: So this is--this would be a form of self-cherry- picking, in other words?

PROF. ENTHOVEN: Exactly, exactly. I mean, look at the House Republican proposal as it's now written. On an annual basis, you can pick the high deductible or the low deductible coverage. So somebody who expects to be healthy this year takes the high deductible, gets the low premium, collects the money into his Medi- save account. Then, let's say, late in the year he's been having an arthritic hip and it gets painful, and he goes to the doctor, who says he really ought to have a hip replacement. And he says, fine, let's do it next year after I've switched to the, to the low- deductible plan. And so on an annual basis, the good risks will switch into the high deductible, and they'll pocket the money, which really belongs in the insurance pool, and the bad risks will be in the low-deductible coverage, and their premiums will soar.

MR. MAC NEIL: Let's get Mr. Goodman's answer to that.

MR. GOODMAN: It just simply isn't true, and in any medical savings account plan that I know of in the private sector it's always a better deal for sick people than it is for healthy people. And what's going to happen under the Medicare reform proposal is you can't offer a good deal to the healthy without offering a better deal to the sick. Now what we did for our own employees is we went to a medical savings account plan. We put--they have a $2,000 deductible. We put $1500 in an account for them. So the most they have to pay is $500. Under the old plan, a sick person, several people got sick in the family, they could have been out several thousand dollars. Now, they're only out $500, a great deal for sick people, and that's not something you need for our plan. That's very common.

MR. MAC NEIL: Where is the disincentive for sick people in joining the MSA's, Mr. Enthoven? Why wouldn't they go? You say that only healthy people would opt for that.

PROF. ENTHOVEN: Yes.

MR. MAC NEIL: Why wouldn't sick people opt for it too?

PROF. ENTHOVEN: No. Because the sick people figure they're going to have a lot of medical expenses, so they're going to have to pay the deductible out of their own pocket, and so that's not a good deal for them. They would prefer to go with first dollar coverage or low-deductible coverage, so that they would have lower out-of- pocket payments.

MR. MAC NEIL: Mr. Goodman.

MR. GOODMAN: Right now, the elderly people who get really sick can be stuck with thousands and thousands of dollars of medical bills. Under the medical savings account plan that they're going to have, they will be limited to $1,000 or $1500. So this will be very, very attractive to people who expect to have a lot of medical bills.

MR. MAC NEIL: Explain something--explain something to me, Mr. Goodman. I'll come back in a moment, Prof. Enthoven. At present, many Medicare recipients pay premiums for Part B coverage of Medicare. What would happen--or they pay for an additional premium for additional coverage that Medicare does not cover. What would happen to those premiums under your scheme of medical savings accounts?

MR. GOODMAN: Well, that's one of the reasons why the current--

MR. MAC NEIL: Medi-plus and so on.

MR. GOODMAN: That's one of the reasons why the current system is so wasteful. You have two different insurance plans sold by two different entities, and they go together in a very wasteful way. What the Republican plan allows is for one insurer to put both packages together. And what we're going to find is that the typical beneficiary will save money and not have to spend as much as he's now spending on supplemental insurance and in order to get the same coverage and the same protection against catastrophic expenses.

MR. MAC NEIL: What's your observation on that, Prof. Enthoven?

PROF. ENTHOVEN: Well, there are two important points here on which we do agree. One is the present Medicare system which has a relatively poor benefit package from the government and has to be supplemented by additional private insurance is very expensive, cumbersome, wasteful, generates paperwork, and is a bad idea. People ought to be able to get their comprehensive insurance from one carrier. Dr. Goodman and I agree on that. The other thing we agree on is everybody ought to have catastrophic expense protection in the sense that there needs to be a limit on the amount of money that the patient has to pay if they are very seriously ill. And that's something that today's Medicare does not do and needs to be reformed to do. That would be a positive feature in--that would be a positive feature of catastrophic expense protection. I'm just worried about relying on the high deductible as an expense control mechanism.

MR. MAC NEIL: Mr. Goodman, the question is: Since one of the motives of all this Medicare so-called reform is to save the government, i.e., the taxpayers, money, because the costs have been rising in such an uncontrolled way, how will the MSA's save the government money? There was--just let me quote you something. There was testimony today in the Congress. A Republican aide to the Senate Finance Committee said that saving--medical savings accounts in Medicare will addto the federal government's budget deficit. Julie James, who's health analyst for the Finance Committee, shared the initial findings of the Congressional Budget Office, which found the use of Medicare MSA's will offset some of the savings achieved by the Republican Budget Reconciliation Bill. That's a bit complicated, but the bottom line in that is this won't--your plan won't save the government any money.

MR. GOODMAN: That is a misinterpretation of what Julie James was really saying. Medical savings account plans will save money; HMO's will save money. There are a lot of different ways that you can save money. Now, the idea is for government to limit what it pays for beneficiaries and then give them choice among private plans. We're going to save money by limiting what we pay to the private plans, and then they're going to compete on the basis of benefits, and they will be able to offer the elderly a better benefit package than they now have. I think even Alain Enthoven would agree with that.

MR. MAC NEIL: Do you, Mr. Enthoven?

PROF. ENTHOVEN: Well, I think Julie James is right in that this is going to cost the government money, because it involves paying Medi-save bonuses out to people who are healthy and have no medical expenses who otherwise would not have gotten any money.

MR. MAC NEIL: Is this another large--Prof. Enthoven--is this another large source of profit for the insurance industry, if there are going to be suddenly many companies offering these new medical savings accounts?

PROF. ENTHOVEN: I don't know.

MR. MAC NEIL: I mean, is that going to--is that going to be a factor in all this?

PROF. ENTHOVEN: Well, I think what it will do is to preserve the business of companies like Golden Rule, which rely on traditional fee-for-service indemnity insurance, which is a dying product in the marketplace. It's being rapidly replaced by managed care. So where a lot of the drive for this is coming from is not profits of insurance companies in general but saving the business of those traditional indemnity insurance companies that work with the fee- for-service sector and that have failed to innovate to control costs.

MR. MAC NEIL: Mr. Goodman.

MR. GOODMAN: Well, I'm shocked to hear Alain Enthoven say these things. This plan is much closer to what he's been advocating for years than the Clinton plan was last year. I would think he'd be happy with this. We're going to create a level playing field. We're going to have a lot of different private options. People can choose among them, and people who choose wisely and purchase prudently will save as a result of their prudent choices.

PROF. ENTHOVEN: But wait a minute. Let me make clear--we're in the same church here, you know, but we're arguing about which--the left or the right aisle. I agree that what the Republicans are talking about is a lot closer to my thinking than the Clinton plan, which I characterized as a single payer in Jackson Hole Clothing. So I have no--you know--soon after it came out, I started attacking the Clinton plan for what it was.

MR. MAC NEIL: There's one--

PROF. ENTHOVEN: We're haggling over some relatively smaller parts of the whole thing.

MR. MAC NEIL: Since you have some criticisms of this, Mr. Enthoven, what's the risk in trying the MSA's as an experiment and giving them the kind of tax break that the proponents are seeking?

PROF. ENTHOVEN: Well, the thing that troubles me is the problem of risk selection, i.e., that the healthies opt into this--opt into the Medi-save accounts until they get sick, and then they switch back, and so that's a heavy hit on the ability of comprehensive managed care plans to compete. I would feel much less concerned about it if they said that in Medicare you make a once-in-a- lifetime election, that you cannot engage in self cherry-picking and switch back and forth, or alternatively to say in Medicare, if you want to switch back to traditional, you know, to comprehensive first dollar coverage, you have to give us five years notice and pay back the money that you got in your Medi-save account, something like that. What's really troublesome is the opportunities here for risk selection games.

MR. MAC NEIL: Just a very quick comment, Mr. Goodman. Then we have to go.

MR. GOODMAN: Even President Clinton came out today and said we should experiment with medical savings accounts for Medicare beneficiaries, and he's right. This adverse selection problem is not going to be that much of a problem. It'll save money and be good for elderly at the same time.

MR. MAC NEIL: President Clinton also said, "I'm convinced that these medical savings accounts would be a sort of add-on, a marginal support, for what needs to be a fundamental program."

PROF. ENTHOVEN: I'm shocked that Dr. Goodman is now agreeing with President Clinton on health insurance.

MR. GOODMAN: Well, no. He's agreeing with me.

MR. MAC NEIL: Okay. Gentlemen, thank you both. FOCUS - PATH TO PEACE

MR. LEHRER: Now, the Bosnia negotiations and the agreement on a new constitution for that war-battered nation. We have two reports, beginning with Charles Krause in New York.

MR. KRAUSE: The talks officially began this morning at the U.S. Mission to the United Nations, where Sec. of State Warren Christopher opened the session by urging the parties to go beyond the constitutional issues by agreeing to a cease-fire.

WARREN CHRISTOPHER, Secretary of State: I personally think the time has come for that. Maybe this is that moment in history when we can reach a--reach a cease-fire, a cessation of hostilities.

MR. KRAUSE: But later, U.S. officials said a cease-fire remains at least several weeks away. Instead, today's agreement outlines a set of democratic principles for Bosnia's future government once a cease-fire is agreed to. President Clinton announced the agreement this afternoon at the White House.

PRESIDENT CLINTON: I have just spoken with Sec. Christopher and the rest of our negotiating team in New York, and I am pleased to announce another positive step on the path to peace in Bosnia. The foreign ministers of Bosnia, Serbia, Croatia have endorsed a set of further-agreed basic principles for an overall settlement to the war, building on the agreement they reached in Geneva on September 8th. These principles spell out in greater detail the constitutional structures of the state of Bosnia, including the establishment of a national presidency, a parliament, and a constitutional court. They commit the parties to hold free and democratic elections under international supervision. And they further provide that a central government will be responsible for conducting Bosnia's foreign policy, as well as other key functions that are still being discussed. If and when the parties reach a settlement, America should help to secure it. The United States should participate in implementing a peace agreement. We should not have ground troops on the ground under the present UN mandate. We should not have ground troops on the ground in combat. But the United States is the leader of NATO. No peace agreement could be fairly implemented without the involvement of NATO, and we cannot walk away from our responsibility to try to end this terrible conflict not only for the people of Bosnia but for what it means for ultimate peace through the Balkans and the ultimate security of the United States and the ultimate avoiding of war and involvement by the United States. And that has been my position for two and a half years. We have had several congressional consultations about it, and, of course, as developments proceed here, if there is a peace and we have a good implementation agreement that I believe the United States should be a part of, I will, of course, extensively and further consult with Congress.

MR. KRAUSE: Shortly afterwards in New York, Assistant Secretary of State Richard Holbrooke, the chief U.S. negotiator, provided further details of today's agreement. He was joined at the U.S. Mission by representatives of Britain, France, the European Union, and Russia, the so-called "contact group" of countries also involved in the peace process.

RICHARD HOLBROOKE, Assistant Secretary of State: There are many other important issues not resolved or even addressed in today's document. Above all, the territorial issues are still unresolved and will be the subject of very tough negotiations. In this connection, the contact group reiterates its strong support for the sovereignty and territorial integrity of the states of the region.

MR. KRAUSE: Holbrooke was then asked whether the Bosnian Serbs who were not a direct party to today's agreement had agreed to the language about democratic elections.

RICHARD HOLBROOKE: On the question of elections, this was the-- probably the most difficult single issue today. The two sides will have to speak for themselves. I can assure you that this document is not definitive in elections. It simply establishes the principle, and every word and every comma was fought out.

MR. KRAUSE: Holbrooke was also asked about Christopher's expressed hopes for a cease-fire.

RICHARD HOLBROOKE: On behalf of all of us at the table, don't misquote our secretary. He did not say we're going to arrange a cease-fire. He said a cease-fire was a high priority and he and the President want us to address that. I know that my colleagues at this table all share that view. We had discussions on this yesterday with Sec. Christopher and again today in the contact group. I would say, and I would defer to my colleagues if they want to add anything, but I would say that there was--that each side wanted a cease-fire defined quite differently, and I would not hold out any anticipation that the next trip will produce a cease-fire based on what we heard today.

MR. KRAUSE: Holbrooke also said that nothing in today's agreement prohibits prosecution of war criminals, nor does anything dilute the U.S. position that Bosnia should remain one country now and in the future.

MR. LEHRER: In Belgrade, Bosnian Serb leader Radovan Karadzic called today's agreement a further step in the direction of peace. He said, "All those who are for a continuation of war will find it hard to annul the results of the conference." But the fighting did continue. Nik Gowing of Independent Television News reports.

NIK GOWING, ITN: In Bosnia, there was still time for all sides to go for tactical advantage and revenge. These Serb MiG's have been in action. NATO apparently ignored these violations of the no- fly zone. On the ground, Bosnian Serb forces have not just been holding defensive lines; they've also been moving forward into territory seized by the Bosnian Croat advance over the past 10 days. These Serb troops have been trying to make gains bystealth, without artillery, a gain in this location of five kilometers. A couple of hundred meters away through the trees, Bosnian Muslim forces vulnerable to the counterattack. In a more ominous development, five towns some 50 miles inside Croatia were this morning shelled by Serb guns. It is then military tit for tat. First came the Bosnian Croat advance of last week and their big gains; then a new Serb defense line followed by Croat and Muslim shelling of the Serbs' vital access corridor into Northern Bosnia. Serb shelling, retaliation into Croatia was, therefore, inevitable. Then today, from Sanski Most and Bosanski Novi came modest Serb pushes which won back some territory. In an almost unique event for him, a summoned press conference, the Bosnian Serb commander, Gen. Mladic, was typically ambiguous. Mladic refused to say whether the Serbs or the Bosnian Croat forces were in a worse predicament. Mladic said a diplomatic end to the war was now logical, but a wider escalation was also possible. If intent can be measured by small actions, then this exchange of prisoners at Sarajevo Airport today, 17 Bosnian soldiers for 17 Serbs, might signal a loosening of hard-line positions on all sides. RECAP

MR. LEHRER: Again, the major stories of this Tuesday included the Bosnia story we just heard about. Bosnian negotiators meeting in New York reached an agreement on an outline for a new constitution. Also, Libya reacted to the new Israeli-PLO agreement by ordering the expulsion of Palestinians living there, and the Senate Finance Committee began final work on Republican plans to reform Medicare and Medicaid. Good night, Robin.

MR. MAC NEIL: Good night, Jim. That's the NewsHour for tonight. We'll see you again tomorrow night. I'm Robert MacNeil. Good night.