The MacNeil/Lehrer NewsHour

Intro ROBERT MacNEIL: Good evening. Leading the news today, a PLO official claimed $2 million ransom was paid for U. S. hostage David Jacobsen through Anglican envoy Terry Waite. The White House said the Senate's report on the Iran contra affair supported President Reagan's version. In Beirut, a car bomb exploded, killing 5 and wounding 37. President Reagan vetoed the clean water bill passed overwhelmingly by the Congress. We'll have details in our news summary in a moment. Judy Woodruff is in Washington tonight. Judy? JUDY WOODRUFF: After the news summary, we have three main focuses on the News Hour, starting with a look at a controversial plan for a catastrophic health care program. Health Secretary Otis Bowen joins us, and then we'll debate the pros and cons. Next, an update on the Iran Iraq War and an assessment of what U. S. ship movements in the region mean. Finally, a conversation with departing White House press spokesman Larry Speakes.News Summary MacNEIL: A senior official of the Palestine Liberation Organization alleged today that $2 million ransom was paid to secure the release of American hostage David Jacobsen last November 2. Salah Khalef, a close aide to PLO chief Yassir Arafat, told Reuters News Agency in Tunis that the money was paid in cash by Anglican Church envoy Terry Waite. Waite has repeatedly denied being a go between for the U. S. Khalef claimed the money did not come directly from the U. S. government, but that U. S. firms contributed to a ransom fund. In Washington, State Department officials denied any knowledge of the alleged ransom, saying the policy was not to pay ransoms. In Beirut today, a car bomb exploded in the Christian sector. Five people were killed and thirty seven wounded. Many of them were children in a passing school bus. It was the second car bombing in Christian East Beirut this month. The White House claimed today that the report released by the Senate Intelligence Committee last night supported President Reagan's version of events. Spokesman Larry Speakes said, ''The President is pleased that the first report on the Iran matter is out and that it confirms his position that he neither authorized nor was aware of the alleged transfer of funds to the contras. Judy? WOODRUFF: President Reagan drew a line in the sand with Congress today. He vetoed a $20 billion water clean up bill and called on members of Congress to show some political courage. Speaking to a sympathetic audience of invited guests at the White House, Mr. Reagan pretended to throw the bill out when it was handed to him. He acknowledged his veto would probably be overridden, but called on congressmen and senators anyway to help him hold down the size of the federal budget deficit.

Pres. RONALD REAGAN: I'm now asking them to stand with me in the first great battle of the deficit in the 100th Congress. My friends on Capitol Hill, you can not have it both ways. Let's not belly up to the same old bar, and let's not drive down that dangerous road again. Let's work together both for clean water and responsible government. WOODRUFF: The President of the Sierra Club responded by calling the veto an insult to the health and the environment of the American people. Congress is scheduled to vote on an override of the veto sometime next week. Robin? MacNEIL: The U. S. trade deficit for 1986 was the largest ever recorded, but that news, released today by the Commerce Department, was not all bad. The annual trade imbalance was a record $169. 8 billion, but the December number was $10. 7 billion, and that is the lowest monthly figure in 21 months. Despite the year end improvement, Treasury Secretary James Baker told a congressional committee today that the U. S. trade problem has not been solved.

JAMES BAKER, Treasury Secretary: Clearly, we're pleased to see this result, but we ought not to put too much faith in that. And I don't think that you can necessarily conclude from this that the trade deficit has started declining. You might be able to conclude that we've finally levelled it off where it's no longer increasing substantially. But the number is considerably better than most people were looking for. MacNEIL: The declining value of the U. S. dollar was cited by analysts as a major factor in the improved trade figures. But analysts said the improved trade deficit caused the dollar to increase in value on international currency markets today. WOODRUFF: South Africa's President P. W. Botha went to parliament today to announce new elections for white voters only. It will be the first white election in that country in six years, and in it Botha's National Party will try to win popular support for the state of emergency and limited race reforms he has undertaken. We have a report from Michael Buerk of the BBC.

MICHAEL BUERK [voice over]: Less than 800,000 white votes last time gave Mr. Botha almost unlimited power over a country with 30 million people. Today, Mr. Botha picked the new election date, May 6, and set the tone -- defiance, rather than more P.W. BOTHAchange. , president, South Africa: The campaign against us has very little to do with peace, freedom and reform. No foreign nation nor the United Nations or any other international organization has the slightest right whatsoever to meddle in the domestic affairs of South Africa. BUERK [voice over]: Mr. Botha should win convincingly, but his party has been hemorrhaging support to the extreme right, like the Herr Stuckter or purified nationalists. The right are trying to form a coalition who want South Africa to go back to the days of ferfut and to stop Mr. Botha toadying to the Americans. White liberals like those demonstrating today against the tightening emergency here have a vote but, despite nationalist defections, not much of a say. It's a tribal fight amongst traditional Afrikaners. MacNEIL: In the Philippines, more than 500 people have been arrested on suspicion of being part of the coup thwarted by the Aquino government this week. Another 100 are being sought, including ten opposition leaders and a top general. The Soviet government told the wives of two leading dissidents to apply for exit visas, indicating their husbands will be freed from labor camps and allowed to emigrate. They are Anatoly Koryagin, a 48 year old psychiatrist serving a 12 year term; and Sergei Khodorovich, a 45 year old computer programmer who has sentences totalling six years -- both for political offenses. President Reagan today named Jack Matlock to be the new ambassador to the Soviet Union. Matlock is 57, currently the chief Soviet specialist on the National Security Council. He succeeds Arthur Hartman, who's been ambassador to Moscow for more than five years. Matlock's nomination must now be confirmed by the Senate. WOODRUFF: That wraps up our summary of the news. Just ahead on the News Hour, a major focus on catastrophic health care, a look at the Iran Iraq War and U. S. ship movements in the Persian Gulf, and finally, a talk with outgoing Presidential spokesman Larry Speakes. Catastrophic Costs MacNEIL: Our lead focus segment tonight comes from our medical beat. While the Superbowl may be over for this year, the political football season is just beginning. One issue that's already taken some funny bounces is that of catastrophic health insurance. Throughout Washington, there's a growing political consensus that something should be done to cushion the blow of big medical bills, particularly for the elderly. But there's a battle underway concerning who should provide the help and how to pay for it. At the center of that battle is a plan submitted to President Reagan by the nation's Secretary of Health and Human Services Dr. Otis Bowen.

[voice over] The man in charge of America's health care says that the golden years of millions of the nation's elderly are tarnished by fear -- the fear of huge medical expenses for major illnesses, such as strokes and chronic diseases. Illnesses of this nature require long term hospital stays, sometimes for more than 60 days. Only a small part of this is paid for by Medicare. Medigap is purchased from private insurers for premiums ranging up to $1,000 a year and takes care of some of the expenses not covered by Medicare. Health and Human Services Secretary Bowen proposes to solve this problem by adding a cost of $4. 92 to the present $15. 50 monthly Medicare payments that would cover extended hospital care. NURSE: Are you dizzy today? Does the room spin? MacNEIL [voice over]: Another drain on the elderly and their dependents is home care following an illness. PHYLLIS ERICKSON, nurse: She told me that if I stopped the aid that she would kill herself and kill her husband, that I just could not neglect them and that Medicare certainly should just not ignore them. MacNEIL [voice over]: And then there are also the nearly 1. 5 million Americans over the age of 65 who require nursing home care at an average cost of $22,000 a year. Most of this expense is not paid by Medicare or private insurance, though many Americans believe it is. Secretary Bowen proposes legislation that would allow workers to put aside money for potential nursing home care in tax free, independent, medical accounts -- something similar to IRAs. And then there are the ten million Americans under the age of 65 who exist on the potential brink of economic disaster, because their current medical coverage is inadequate to deal with extended illnesses and hospital care. Bowen's solution for this problem would be to compel employers to offer health insurance which includes an option for catastrophic coverage that workers could choose to buy at their own expense. Another 30 million workers under the age of 65 risk financial disaster from long term illness, because they have no medical coverage at all. LINDA FRIEDRICK, waitress: They want over $200 a month for just myself and the two kids. We have to sit down sometimes and make a decision if we're going to pay the money for bills or if we're going to eat for the month. MacNEIL: To elaborate on his controversial plan is the Secretary of Health and Human Services Dr. Bowen. Dr. Bowen, good evening. Let's take first the elderly people on Medicare whose benefit expires after 60 days in the hospital. I'm not quite clear what you're suggesting. Are you proposing to extend Medicare indefinitely -- coverage indefinitely -- for an additional premium of $4. 92 a month? Is that it? Dr. OTIS BOWEN, Secretary of Health: We expect, or we would like, to restructure the Medicare so that we could establish an upper limit of $2,000 out of pocket expenses, and pay for that through a $4. 92 addition on the part of the premium. Now, that would allow for an unlimited number of hospital days and unlimited amount of medical care by the physician for the things that Medicare now pays for. MacNEIL: So, but the patient to get that additional care would have to pay an additional $2,000, or pay $2,000 of that cost. Is that it? Dr. BOWEN: If he were one that established that amount of expenses, yes. And there are about 1. 4 million people each year, out of 30 million, that have medical expenses beyond $2,000 a year. MacNEIL: I'm not quite clear. If a person has a catastrophic illness and goes to -- needs to have hospital care, acute care, Medicare now covers him for 60 days. Are you proposing that the rest of that care after 60 days would be covered or that he'd still -- I don't know where the $2,000 would fit in. Dr. BOWEN: It would mean that the individual would be at risk for upper limit of $2,000 of out of pocket expenses, and he could get this coverage for the $4. 92 per month. MacNEIL: Why charge them the $2,000? Dr. BOWEN: They aren't going to be charged the $2,000 only if -- unless they become ill and have to use it. They can still have the Medigap insurance, which would cover the $2,000 upper limit and for the things that Medicare has never paid for now, such as drugs, dental care and vision care. MacNEIL: I see. So this wouldn't -- this additional premium of $4. 92, it wouldn't be the replace this private Medigap insurance. Dr. BOWEN: It would be a choice of the patient. The patient could use a Medigap policy to cover these other things if he so chose. And the $1. 4 million of these people would benefit by having an additional Medigap policy, but you never know which one of these 30 million people fall into the 1. 4 which are going to have the $2,000 or more medical expenses each year. MacNEIL: What does this Medigap insurance typically cost an elderly person? Dr. BOWEN: The average Medigap policy is between $500 and $600 per year. There are some that run considerably more than that, and there are a few that run less than that. But there are none -- MacNEIL: Pretty steep for somebody on Social Security or retirement income, isn't it? Dr. BOWEN: Yes. And that would compare to the $59 a year, which is what the $4. 92 amounts to. But if you did not have your Medigap, you would have to recognize you would still be at risk for up to $2,000. And the 2,000 would not bankrupt too many people, and it's an assurance that they would not lose their total lifetime's savings. MacNEIL: I see. Now, I read your testimony before Congress, and it seemed to me that was one proposal -- the $4. 92. And you have two other options. One was to increase the cost sharing related to income or increase the cost sharing unrelated to income. Could you explain -- clarify that for me? Dr. BOWEN: Yes. It would simply mean that, for the first X number of days that one was in the hospital, one would pay a certain percentage of that hospital a day. And one could still have the $2,000 upper limit. And also, it could be fixed so that it could be income related. That is, those that have higher income would pay less, and those that -- or would pay more. And those that have lower income would pay less. MacNEIL: Well, what I wasn't clear about, is that instead of the additional premium of $4. 92? If the Congress or the President doesn't buy the additional $4. 92, is this an alternative? Dr. BOWEN: That's an alternative. That's what we listed it in our report. We have three options in our report for the acute catastrophic care for the elderly. MacNEIL: Let's move on to the problem that so many people consider the most serious one, and that is the lack of coverage for nursing care. What is your proposal there? Dr. BOWEN: Well, this is the foremost cause of catastrophic expense. There's no question about that. And about two out of three of our elderly people do not realize that Medicare and Medigap do not cover nursing home costs. In fact, only about 1. 4% of all of the nursing home bills are paid for by private insurance, and 50% is paid by Medicaid, and the rest is paid right out of the pocket of the individual. So our first plan would be to educate the public as to what Medicare and Medigap covers and what it does not cover. Then we had suggested the utilization of an individual medical account, coupled with an insurance program. And the combination of those two would be able to take care of those in a nursing home for many, many months. The average stay, I believe, in a nursing home is approximately two years or just a little bit under. MacNEIL: So this is entirely a private sector solution you're proposing. It's not more government or public aid. Somebody has to go out and buy more insurance or create one of these funds for himself. Dr. BOWEN: It is totally a private enterprise method. And it would be very effective, but not for the immediate time. I don't think there is an immediate solution to the long term care problem. We have to look ahead. And now, I think, is the time to start doing that. MacNEIL: And as you point out, that's going to get a lot more acute a problem for the nation, because the number of people in that age group is going to increase a lot. Dr. BOWEN: That is right. One other thing that we think could be done to help the situation would be to provide a refundable tax credit for the people above the age of 55 who would purchase a long term care policy. And then one could provide some favorable tax treatment for the long term care insurance reserves, similar to what the life insurance companies have at the present time. These would help to stimulate the insurance companies to offer these types of long term care policies, and I think it would be an incentive for the people to purchase them. MacNEIL: Some people in the administration -- Beryl Sprinkel, the Office of Management and Budget; Attorney General Meese -- are reported to say they don't support this. They think that the private sector should solve all of this problem. What do you say to them when they say that to you? Dr. BOWEN: Well, I say that I don't quite agree with their reasoning. I don't think you can solve this totally on ideological grounds. I think it has to be a combination of public and private sector solution. And the plan for the acute care really is a pay as you go plan. It does not add any cost to the federal government. Now, the addition of an IMA, or an Individual Medical Account, would have some reduction in income to the federal government over a period of time. But at the same time, it would have a great benefit, I think, even on the economy, but perhaps a greater benefit on the reduction of the number of people who go into Medicaid as a result of being impoverished. And those are about 500,000 per year from nursing home expenses in a matter of three to six months are impoverished to the point that they are on Medicaid. MacNEIL: Isn't this a very piecemeal approach to a big problem to continue coming up with a little new program here and part of a new program here -- a very patchwork approach? Wouldn't it be more realistic, given the problem, and as it's going to increase, to do a thorough sort of coordinated, comprehensive revision of the whole Medicare, Medicaid situation, as was just recently done with the tax structure? Dr. BOWEN: I think you'd find it very, very difficult to do. It's a very complex subject. You have really three different groups of people with very different problems, and the same solution will not work for the same -- for these different people. For example, there's nothing more catastrophic than having a young 23 or 24 year old couple with a baby that weighs a pound and a half and is in a neonatal care center for three months to four months at $1,000 a day. That solution for him would not work the same as it would for somebody 85 years old and needing long term care. MacNEIL: Dr. Bowen, thank you. We'll move on. Judy? WOODRUFF: Joining us now to debate the merits of Secretary Bowen's proposal are two men who feel very strongly about it. First, Robert Ball, the U. S. Commissioner of Social Security from 1962 to 1973. He played a central role in the creation of Medicare. And Stuart Butler, director of domestic policy studies at the Heritage Foundation in Washington. Mr. Butler, let me begin with you. What do you think of the secretary's plan? Let's just begin with the aspect that deals with hospital stays longer than 60 days. STUART BUTLER, Heritage Foundation: Let me say first of all, I think the secretary gets two out of three. I think the provisions that he suggested dealing with the non elderly and I think the start that he's making on long term care are steps in the right direction. I think the problem really surrounds the expansion of Medicare, dealing with in hospital care. And I think there are a couple of problems with this. One is that it really doesn't make a big impact on most of the elderly. About 70% of the elderly do have Medigap insurance, which covers up to a year in hospital. And there really, quite frankly, are very few people who exceed that. I mean, we all know specific examples of people that exceed that, but it's actually very small and not costly. And what the secretary has done in his proposal is essentially to pull out the easy part, the least expensive part of the Medigap insurance, and bring that into the public sector under Medicare, and leaving this $2,000, which would actually be quite expensive to cover on the Medigap insurance. The second problem is that by venturing into Medicare as a way of dealing with this problem, you open up a continuous political problem. As technology advances, there will be increases in the ability of the health care industry to deal with the problems of the elderly. Costs will go up. The cost of the outlays, in other words, of this program will continue to increase, in my opinion. And Congress will, in my opinion, also tend to try to keep the premium low. Nobody will want to keep increasing the premiums to keep up with the high cost of medical care in the future. And that inevitably means that the system will go into the red. And somebody's going to be paying, and it's going to be the next generation. WOODRUFF: What do you think ought to be done, then? Mr. BUTLER: Well, I think relatively small changes in the law governing Medigap insurance would actually deal with most of the problem. Right now, under the law, Medigap policies have to cover the first dollar when you go into hospital. And when an elderly person goes into hospital under Medicare, they have to pay $500 now -- up front deductible. That has to be covered. Anybody that has car insurance knows that if you cover all the deductible and if it's a first dollar coverage, it's very expensive. At the same time, they have to cover a year. I think by changing the law such that Medigap policies would have to cover catastrophic care -- in other words, exactly as Dr. Bowen suggests; unlimited in hospital -- but allow them to have the same kind of deductible that he's talking about -- $2,000 -- would bring the cost down -- WOODRUFF: So you're saying they would have to pay -- Mr. BUTLER: Well, under the law, the Medigap policies have to provide a certain type of service. They would certainly have the option of taking out extra insurance to cover that first $2,000. But right now, it's all or nothing. Either you have to get private insurance that covers that first dollar, which is very expensive, or you can't get it under the normal Medigap rules. So it's very easy to change. In fact, Mutual of Omaha, one of the insurance companies, testified recently that they could do the same job as the Bowen proposal for the same price in the private sector. WOODRUFF: But again, what you're calling for would require that they pay, what, a couple thousand dollars deductible first. Is that right? Mr. BUTLER: Yes. Or take out extra insurance for that. But the basic package would cover the catastrophic. WOODRUFF: Mr. Ball, let me go to you now and ask you to respond to this last point that Mr. Butler made -- that this creates a continuing political problem. What we ought to do, simply, is just change the laws governing Medigap. ROBERT BALL, former Social Security Commissioner: Well, I couldn't disagree more. Could I say this first -- that I think Secretary Bowen has done really a great public service in calling attention to the two big gaps that are in the Medicare program. That is, the catastrophic part of acute care, where people -- a relatively small number; a couple hundred thousand a year -- who are in hospitals more than 60 days. But for them, it can be very expensive. And then calling attention to the problem in long term care, where really there isn't any insurance to amount to anything, private or public. But I think the Congress can and will take his proposal and greatly improve it. It could be improved in many ways. You can improve it both on the benefit side and on the way it's financed. Medicare has just been deteriorating for many, many years. It's just gotten worse. The coverage is now nearly as good as it used to be. The deductible in the hospital used to be $40, is not $520. What people used to pay for the supplementary part that's physician coverage used to be $3. It's now $17. 90. And the Secretary proposes an additional $5. Now, it's very important, I think, that the audience keep in mind that there really are two quite separate parts of Medicare. There's hospital insurance, and that's paid for by the contributions that people make while they're at work. It's paid up insurance. Then there's Part B, voluntary supplementary insurance under Medicare, that people pay a premium for. That's the $17. 90 a month that they're already paying. Now, on top of that, you have this third voluntary Medigap policy, which is now taken out by almost 70% of the elderly. WOODRUFF: But to get back to Mr. Butler's point, he's saying we could solve a great deal of this if we simply change -- did I understand you correctly? -- if we simply change the law surrounding Medigap, so that people were asked to pay a larger deductible. Mr. BALL: Well, solve it for whom? That solves it, maybe, for relatively well off people. But the $520 deductible that Medigap, for 70%, is now moving in to take care of is a great burden on a large portion of the elderly. WOODRUFF: Mr. Butler? Mr. BUTLER: Well, so's $2,000, of course. And what I'm saying is that the expansion of Medicare -- the $5 -- really just covers something which already Medigap covers, and it leaves the most expensive part of insurance, which is insurance that is always being paid out -- the deductible -- really to be picked up either by the individual person -- and $2,000 is a lot of money for people -- or they're going to have to pay by private insurance for that, which is expensive. Mr. BALL: Well, we found a point that we can agree on, and that is that $2,000 is not my idea at all. The $2,000 tab is way too high. Let me just throw out a proposal, so that people could react to that. WOODRUFF: All right, and then I want to get back to another point. Mr. BALL: All right. Instead of -- let's take the hospital part separately. And there Secretary Bowen has made a very good partial proposal. And that is to get rid of the co payments, get rid of the maximum -- WOODRUFF: Co payments being what, quickly? Mr. BALL: After 60 days, you have to pay a lot of money for each day you're in the hospital. He'd get rid of that, he'd get rid of the maximum on the number of days. But he leaves the $520 deductible. I would reduce that in some way or another. Reduce that $520. That's enough for the hospital part. WOODRUFF: So there's another suggestion. What about that? Mr. BUTLER: If you start doing that, the more you erode that co payment and that deductible, the cost of the premium's going to go up. And then you either face an increasing premium, or you run into the red -- one or the other. Mr. BALL: I'm not talking about a premium. I wouldn't even have a premium in this part. This needs to -- Mr. BUTLER: Somebody has to pay. Mr. BALL: Of course they do. This has to -- Medicare Part A -- the hospital part -- is now financed on a pre hospital payment basis by workers during their lifetime. This is the way to continue to do it. There are 3 million state and local employees who are getting more or less of a free ride under Medicare now. They should be brought in. That gives $2. 31 billion to Medicare to take care of this Part A part. WOODRUFF: What about the argument about how much of this ought to -- I mean, you know, getting into the theory of this, how much of this ought to be government's responsibility, and how much should be left to the private sector? Mr. BUTLER: Well, I think we choose government to undertake these kinds of functions if we feel that government is likely to run the program better or somehow is likely to be able to operate generally and cover the people more effectively. And I think in both those cases that there's no particular reason to suppose that the government can do this job more effectively than changes in the law governing Medigap. And I think we have every reason to believe that the finances of this new Medicare program would quickly run the same way as the rest of the other Medicare. WOODRUFF: Meaning what? Mr. BUTLER: Well, already the Part B that this would be attached to, it is supposed to be covered 50% by premiums and 50% out of general revenue. It happens that it is only 25% covered by premiums. And there's a very simple reason. WOODRUFF: It's cost much more than -- what about that point, Mr. Ball? Mr. BALL: Well, it's true that the supplementary part of Medicare now is paid for 75% from general revenue. And one way I'd get money is to tax that subsidy for the relatively well off elderly. There's no reason that people who are relatively well off ought to be getting 75% of their Part B protection from general revenues. And if you take that money -- if you tax that -- you can use it to improve the Medicare program. WOODRUFF: What about that? Mr. BUTLER: I think this misses the point that premiums will not be kept in line. One of the main arguments that Secretary Bowen said is that this is neutral -- that the premiums will cover the outlays. The experience already with Part B is that congressmen will not raise premiums to the elderly. And so it may well be that the revenues and the expenditures of this new idea might balance in the first year or so. In 10, 20 years' time, I don't think so. WOODRUFF: But you're saying the political reality is that -- Mr. BUTLER: And when you talk about government coming in to take over a program, you have to talk about political reality. And that's why I think the private sector is the right way to go. Mr. BALL: Well, actually, these supplemental policies that private insurance is selling are the expensive part. They are very costly for what they provide. The benefits that you get from a Medigap policy through private insurance varies between about 60% and 80% of what you pay. Under the Medicare program run by the government, people get 95% in the Part B part, and they get about 98% in benefits of the other part. WOODRUFF: Let me just quickly ask you both about this idea of -- this notion of an individual medical account. What -- how do you -- Mr. BUTLER: I strongly support that, because it is basically establishing the principle that you pay into a system during your working life. You build up your own system which is controlled by you with your decision, which is then used when you retire. The political problem with this right now is that, of course, last year we had a tax reform bill where IRAs were a very thorny issue which eventually was dealt with. It seems to me very unlikely that Congress for a few years to come is going to start opening up IRAs again. Mr. BALL: And the reason they're not is a very good reason. And that is a very close correlation between the people who will take out IRAs and the amount of their money. The latest figures from Internal Revenue are that at the lowest level -- below $5,000 income -- 1% take out an IRA. WOODRUFF: Would take advantage of this thing. Mr. BALL: Right. Now, when you get to $10,000 to $15,000, 6%. When you get to $50,000 to $100,000, it's 58%. WOODRUFF: You're saying that it would work the same way with -- Mr. BALL: Of course. This is just a matter of giving wealthy people -- well off people -- a tax break. Everybody else pays more, and you don't protect the ordinary person. Now, long term care is the big issue. WOODRUFF: Well, I know that this is an issue we will be coming back to. We thank you, Robert Ball, Stuart Butler, for being with us. Robin? MacNEIL: Still to come on the News Hour, the Iran Iraq War and U. S. naval forces in the region, and a farewell interview with Presidential spokesman Larry Speakes. Iraq-Iran: The War Without End MacNEIL: Now we return to the Iran Iraq War, notable both for its duration and absence of on the scene coverage by the Western press. Yesterday, the Iranians said the Western reporters recently allowed in would have to leave again -- an indication that a new offensive may soon begin. The reporters were let in to cover the Iranian advance to the key Iraq city of Basra. Don Murray of the Canadian Broadcasting Corporation joined the Iranians in an area they call Karbollah Five, where a battle raged around an Iraqi town called Duayji.

DON MURRAY [voice over]: This is a war that has turned back time. The killing conflict of attrition in the Persian Gulf has its only parallel in the mud and murder of World War I. But this month near Basra, the Iranians have dented the Iraqi line. They call it an important victory. The bodies of Iraqi soldiers still lie in the trenches where they were overrun, beside them their boots and a koran. The Iranians say 3,000 enemy soldiers remain unburied -- 3,000 of 15,000 they say they killed. This is the area the Iranians call Karbollah Five, an area of flat marsh land next to the Shatt al Arab River. On the other side of the river is Basra, Iraq's second city. The Iranians began their offensive on January 9. Within a week, they had penetrated several kilometers into Iraq. And within a week, they had overrun five Iraqi defense lines, killing men and collecting armor -- 550 tanks, 400 big guns, 5 helicopters; all destroyed. The fighting was brutal. This is the village of Duayji, now bombed and shelled into desolation. They call these Iranian fighters the Basib, the volunteers. They come armed with faith and little else. Their training, the Iranians themselves admit, is minimal. But it was they who attacked at Karbollah Five, not units of the regular army. And it was they who pushed the advance forward at enormous cost -- 20,000 dead, foreign diplomats suggest. The key, the Iranians say, was surprise. Karbollah Five was the second major attack on the Iraqi line in 12 days. Surprise, coupled with massive artillery bombardment and Iraqi discipline. The Iranians claim 45% of the Iraqi brigades at Karbollah are now nonexistent, many of them noting when their soldiers deserted. These men too are prizes of victory -- 2,500 Iraqi prisoners from the battle of Karbollah Five chanting obediently for the foreign media under the direction of their Iranian captors. ''God is greatest. Saddam Hussein, Iraqi leader, is the enemy of God. The man Khomeini is our leader. '' They're a prisoners, but they are alive. An hour later, captured senior Iraqi officers file in to meet the press: a brigadier general, two major generals, five lieutenant colonels, a downed pilot. Their number and their rank hint at the extent of the Iraqi defeat. Some stay silent and look unhappy. Others, however, talk, and their words are severe for their own side. PRISONER [through subtitle]: Their morale is not very good. MURRAY [voice over]: One speaks of the weak defenses at Basra, in some places, he says, guarded now only by militiamen. Only further Iranian attacks can test the truth of those statements, but Baghdad in recent months has produced no Iranian prisoners to match these in rank or bleak criticism of their own forces. The Iranian volunteers are digging in themselves now, but this is still the front line. Everywhere we went in Karbollah, we were accompanied by the sound of shells -- Iraqi shells. Because across the river the giant petrochemical plant in the suburbs of Basra is still in Iraqi hands, and it remains a forbidding military citadel bristling with armor. [on camera] This was a ferocious, bloody battle, but Basra, the key Iraqi city, is still 12 kilometers down the road. The stalemate may be broken, but the end is still not yet in sight. [voice over] Death in Iran -- death in war -- occasions a particular type of mourning -- mourning with militancy. In a mosque in Tehran, mourners shout their belief in God, in Islam and their belief in Khomeini. One week ago, several men from this district died at the front. This is the father of one of those men. He has now lost all three sons, he says, and his son in law. He himself has been injured, but as soon as he is healed, he declares, he will return to the war. Others will live, but not return to fight. In hospitals throughout Tehran, throughout the country, the wounded fill the wards. In this small private hospital, they occupy 15% of the beds. In public hospitals, the figure may be 20%, 30%, even 40% -- tens of thousands of men. Just how many is a military secret. And with the latest offensive, the number is growing. DOCTOR: At least would be 50 for this hospital. And when there is an attack, right now, we get more. I now have 28. They most likely are going to send more. MURRAY [voice over]: In a cemetery of martyrs outside Tehran, the men who died at the front are buried and commemorated as heroes. Their families are told to be happy, for they have gone to paradise -- a whole generation, hundreds of thousands of young men, slaughtered, and another generation which is left and can only remember. That, in this country of believers, is a brutal test of faith. Fleet MovesMacNEIL: The tension in the Persian Gulf and Iranian threats against some of its Arab neighbors are, in part, behind a recent flurry of U. S. Navy ship movements in the Middle East. In the gulf, at least two ships have moved north towards Kuwait, and an aircraft carrier is moving towards the Arabian Sea from the Philippines. In the Mediterranean, one carrier is moving east, and another was told the remain on station, rather than returning to the United States. The movements have been described by administration officials as precautionary, but they come amid the gulf tensions and the capture of more U. S. hostages in Lebanon. For more on where the ships are and what their mission may be, we turn to William Beecher, chief diplomatic correspondent of the Boston Globe. Bill, can I ask you another question first? Is it remotely conceivable, as claimed by that PLO official today, which we reported at the beginning, that cash ransom -- like $2 million -- was paid for the release of an American hostage? WILLIAM BEECHER, Boston Globe: Remotely conceivable, I suppose -- remotely. But I'm very, very skeptical. First of all, the captives are believed to be held not by the PLO -- and Abu Iyad is a PLO officer -- but by the Hezbollah, which is a totally different group. So it's possible, but I think very unlikely. MacNEIL: Just in view of all the surprising disclosures we've had over the last two months, whether this was a plausible one or beyond plausibility to your well informed mind. Mr. BEECHER: After what we've heard over the last several weeks, nothing is beyond the pale entirely. MacNEIL: Yeah, okay. Let's come back to the ships. First of all, the Persian Gulf. What ships are there, exactly, and what do you think their purpose is? Mr. BEECHER: There normally are up to six American warships in and around the Persian Gulf. Five of them are combat vessels, one of them is the command ship. Normally, they operate south of the -- south of a line around Bahrain. But given some of the concerns expressed by moderate Arab countries in the region, particularly Saudi Arabia and Kuwait, during an Islamic conference in Kuwait which has just finished, two of those ships went off the coast of Kuwait. They don't normally operate there at all. MacNEIL: I see. And what were they doing there? Mr. BEECHER: They were there, one, to bolster the nervous Nellies at the conference; secondly, implicitly as a warning to Iran, which opposed the conference being held in the capital of a country that supports the enemy that you've just been discussing in your previous segment -- Iraq. And just before the conference got underway, Iran fired a couple of missiles from its territory -- probably from Faw Island -- into Kuwait. There were some sabotage bombs set off there. Pro Iranian groups in Lebanon threatened and warned any of the Islamic leaders not to go there. Their lives might be in jeopardy if they went. So this was, in part, also an effort try to dissuade Iran from doing anything aggressive. MacNEIL: Is there any circumstance you can imagine under which the American fleet there would actually go into action? What might the Iranians do that could provoke such a thing? Mr. BEECHER: Iran is thought to be installing about 50 missiles that they acquired recently from China north of the Straits of Hormuz at the mouth of the Persian Gulf. The United States -- these are rather large missiles of the sticks type -- Russian developed. One of those missiles sunk an Israeli warship in the '67 Arab Israeli War. So they're very effective, even though old technology. And if the Iranians -- and this is not expected to happen -- but if the Iranians started to shoot at ships going into and out of the Persian Gulf, I think not only the United States, but other Western navies might have something to say and do about that. MacNEIL: Let's move to the Mediterranean. What ships are there, and what is their purpose? Mr. BEECHER: There are roughly 30 odd combat vessels in the Seventh Fleet in the Mediterranean right now. One half of them are associated with the Nimitz Carrier task force steaming toward the coast of Lebanon. The others are associated with the John F. Kennedy Carrier, which is right now around Spain -- actually, at port call in Malaga. The purpose of keeping two carriers there -- two carrier task forces there now -- and the Kennedy was to have gone home and has been told to stay on station indefinitely -- is, again, in part as a warning to try to deter kidnappers in Lebanon not to execute hostages; and second, to present an option to the President, should the council not be met, in case he wants to do something military. MacNEIL: Every time that's come up in the last couple of years, people who oppose such actions say, ''You can't take any military action against the captors of hostages in Lebanon. They're too hard to identify. They're too mixed up with other groups. How would you find a target?'' Has intelligence been so refined recently that realistically -- politically realistically attackable targets could be found? Mr. BEECHER: First of all, I guess that the short answer is no, and the longer answer is, of course, there is enough information on which to base action if a political decision and the political will is there. Those who hold the hostages -- all of the hostages -- regardless of the various names that are used in calls to newspaper offices from time to time, the hostage holders are believed to be various factions of the Hezbollah, which is a pro Iranian, militant group in Lebanon. The Hezbollah is -- it's known generally where they operate in West Beirut and in the Bekka Valley near Syria. Certain buildings, certain training camps, certain facilities are known. If a political decision was made -- and I don't think it would be, unless American hostages were executed -- but if a decision was made to go bash the Hezbollah, there are finite targets. They could be hit, and I think they might be. MacNEIL: That's might be, if one of the American hostages is -- Mr. BEECHER: In my view, only if. MacNEIL: Only if. Bill Beecher, thank you very much for joining us. Final Briefing WOODRUFF: A man whose name has been synonymous with statements out of the Reagan White House for the past six years made his exit today. Larry Speakes, who has been the President's spokesman to the press since early 1981, observed his last day on the job before starting a new one in New York with Merrill Lynch. We used the opportunity to sit down with Larry Speakes and ask him for his reflections on his White House years, beginning with how the recent Iran affair has affected the mood of the White House staff.

LARRY SPEAKES, White House spokesman: The atmosphere in the press briefing room ebbs and flows with the news. And right now, the pot's boiling a little bit in the press room. The press is interested in Iran. The President is going to talk when he has all the facts in hand. And so there's a little confrontational atmosphere. As far as what's going on in the White House, we're not nearly as preoccupied by Iran as 15 minutes on the evening news night after night would seem to indicate. We've got a lot on the President's platter, and we're off and running for the final two years here. WOODRUFF: But people can't help but be a little demoralized by what's happened, or at least what's been stressed in the news media over the last two and a half months. Has that not taken its toll? Mr. SPEAKES: I don't think it has taken its toll on the morale of our staff here, but it certainly takes its toll on trying to present the President's message to the public when night after night, you know, 50% of the news is Iran, the lead stories in the newspaper every morning. So you've really got to continue to push forward. And I think that Iran will wear itself down. We want to get all the facts out. The Senate intelligence report was helpful on that. And there will be others that will be helpful. So I think it's just going to take time on Iran. It's a difficult PR problem. It's difficult for a press secretary to advise the President and the White House staff how to move forward. And this is one you've just got to tough it out. WOODRUFF: Is that all it is, you think -- just a PR problem? Mr. SPEAKES: No, I don't think it's just that. It creates a PR problem. And that is our inability to get press attention focused on anything else. I think public interest has quickly waned in Iran, and they're really tired of it. But as far as the White House briefing room, you've got a lot of work to do there to get them off that subject. WOODRUFF: I hear what you're saying about the polls indicate people are somewhat losing interest in the story or it ebbs and flows and so forth, but the polls also show that this President's credibility has suffered because of this incident. Do you think he's going to be able to restore that? Mr. SPEAKES: I would think so. There's a reservoir of goodwill for President Reagan and what he's done for this country. I don't have any accurate measurements, but it would be my judgement, just as one who's observed this a long time, that when this story broke in November, that there was public attention devoted to it for a couple of weeks. All of that public attention, all of that information the public received at that period, was negative. Then when positive information began to come out, by that time, the public had tuned out. So it's going to take a while. Another point is that this Iranian matter -- the people in the United States have been conditioned to hate Iran. For ten years -- for one solid decade since they took our hostages and caused those problems -- we've preached against Iran. And so for one morning for the public to wake up and see splattered across the front page, ''President Reagan Sold Arms to Iran,'' it was a shock. And the public opinion can't reverse itself that quickly. And it's going to take time to explain our position. WOODRUFF: Are you at all personally bothered by this whole episode and what's happened? Mr. SPEAKES: I'm, you know, concerned by it and, as I said, concerned for the Reagans. But at the same time, the lack of information that we had initially -- the story breaks, and my advice was to tell as much as you can as quickly as you can and put this matter behind you. And we attempted to do that. But in the President's initial television speech and in his initial press conference, he didn't have all the facts. His people had not served him well by providing him facts. Certain people withheld the contra connection idea at that time. And so that's why we had to go back in and get more facts. WOODRUFF: Let me ask you about your role as press secretary. You wake up here -- this isyour last morning on the job, and there's a headline in the Washington Post, ''White House Role in Contra Aid Greater than Previously Disclosed. '' How do you feel when you get up in the morning and drive to the White House, and you face another -- Mr. SPEAKES: I generally wake up with classical music on the radio, because that's the last soothing sound I'm going to hear 'til I come back home at night. And also, I get four headlines and the weather from the classical station, and that gives me everything I need to know as to whether I need to tuck my head under the covers and call in sick or jump out of bed and come to work. But -- WOODRUFF: But you never do call in sick. Mr. SPEAKES: No, I know. I wish I had that privilege sometimes. But you come in determined to get to the bottom of it, get the facts and get them out. You're a bit irritated sometimes when you think a headline's overblown or a story's gone askew in some fashion. And a lot of times, I fault myself for not doing a better job the previous day in explaining it, if there's a bad headline in the papers. You go and try again. One thing about this job, you can always do it better the next day. One day you do something, the next day you come back, and you say, ''I can do it a little bit better. '' And that keeps your interest and keeps your enthusiasm for the job. Keep trying to do it a little bit better. WOODRUFF: Actually, your relations with some members of the White House press corps have not been the smoothest possible. Why is that? Mr. SPEAKES: Well, this is, fortunately, not an elected position or a popularity contest, or else one would probably be voted out of office every other day. It's a -- you're a man in the middle in this job. You serve the President, you serve the press, but most of all you've got to keep in mind you serve the people. And that's where the truth comes in. And you've got to tell the truth in every instance. If you lie or mislead, you have lost everything. WOODRUFF: What sort of job do you think the press does? Mr. SPEAKES: The press corps covering the White House, by and large, most of them have been here since 1981, if not before. They do a good job. They have reported us fairly, they reported us in depth, they have held our feet to the fire when we needed it. They've exposed some things that we didn't know, and we've hopefully moved to correct them. So they're by and large, a good press corps. I take a bit of an issue that the press this day and age more and more is concentrating on conflict and personality conflict. When I first started in the business, you said, ''Okay, what are we going to play as the lead story,'' and that would be how many people it affects, what impact does it have. But now, more and more, you find if you can get Weinberger and Stockman in a big fight, or Shultz and Weinberger going at it, then that's news. I've often said if 100 congressmen came in to see the President, everyone walked out and said, ''The President has got a great idea,'' no news. But if 99 of them walk out and say it's great, and one guy walks out and says, ''This thing stinks,'' then you've got news, because you have conflict. WOODRUFF: But has that changed that much since you've been here really? Mr. SPEAKES: I think it has. You know, going back to Nixon and observing, you know, through the Johnson and all the way back to the Eisenhower years, I think there was a time when there was a little more of an approach to it where you explained the policies, you explained why a President had done that, but it wasn't the staff conflicts and the cabinet conflicts that made so much news back then. WOODRUFF: As you sit here now, even though this is your last day, and you're a few hours from walking out of the White House and going to another job, you're still on guard. I mean, there's a guard that's up. Does that guard ever come down? Mr. SPEAKES: No, it really doesn't. You know, when you learn you've arrived as a press spokesman is when one of your jokes gets quoted in the newspaper. And I've learned that press secretaries over the years, as I've observed them, got in more trouble over asides from the press platform -- some little quip they made -- than they did from stating broad issues of public policy. So you're constantly on guard, and you find out -- you know, before I had this job and worked in the White House as an assistant, there were a lot of things you could say, and 90% of what you said never got quoted. But boy, in this job everything is on the record. WOODRUFF: How do you ever let your hair down, then? Mr. SPEAKES: Well, I tune out on the weekends and, you know, play the guitar and run and listen to music and a lot of good eating and things like that. And when I come in on Monday morning and say, you know, ''Gosh, what was it we were saying on Friday about such and such?'' I know I've succeeded in tuning out. And you have to do it if you're going to handle this job this long. WOODRUFF: Some people are wondering why you're leaving this President when he's down and out. Some people -- Mr. SPEAKES: That was the toughest decision I had to make in all these six years is to leave and leave now. I would have liked to have stayed 'til the end. I would have liked to have waved good bye to Air Force One leaving for California for the last time and see the President and Mrs. Reagan off. But opportunity comes. You know this is going to come to an end at some time. And if the opportunity comes a little earlier than you thought, then you've got to make a decision. And I talked it over with the President and made the decision. WOODRUFF: What are you going to miss? Anything? Mr. SPEAKES: Well, I'll miss everything. You know, having been a part of the White House really since 1974, I feel, you know, that I'm sort of part of the woodwork here. And I don't think it's hit me yet that I'll be gone and won't be coming back and certainly won't be coming back with the opportunity that I've got now. So I'll miss it. I guess the thing I'll miss is this fireplace and this office and the man who comes in every day and builds a fire for you. WOODRUFF: Thank you, Larry Speakes, for being with us. Mr. SPEAKES: Thank you very much. It's been a pleasure. MacNEIL: Just to recap the main stories of the day, a PLO official claimed $2 million ransom was paid for U. S. hostage David Jacobsen through Anglican envoy Terry Waite. The White House said the Senate's report on the Iran contra affair supported President Reagan's version. And President Reagan vetoed the clean water bill passed overwhelmingly by Congress. Good night, Judy. WOODRUFF: Good night, Robin. That's our News Hour for tonight. We'll be back Monday night. I'm Judy Woodruff. Thank you, and have a good weekend.