The MacNeil/Lehrer NewsHour

MR. LEHRER: Good evening. Leading the news this Thursday, President Bush said he was reluctant to stop military aid to the rebels in Afghanistan. Officials said the bomb that destroyed Pan Am Flight 103 was hidden in a radio-cassette player, and Iranian religious leaders said suicide squads have been formed to murder Author Salman Rushdie. We'll have the details in our News Summary in a moment. Robin.

MR. MacNeil: After the News Summary, we go first to the story of the Iran death threats against novelist Salman Rushdie. We have a report from Britain where he's in hiding and we hear from experts on Iran and Islam terrorism Daniel Pipes and Shaul Bakhash. Then Part 4 of our week long look at the Bush budget. Tonight health care with Dr. William Roper of the Health Care Financing Administration, Michael Bromberg of the Federation of American Health Systems, and Dr. James Todd of the American Medical Association. We close with a documentary update on Soviet Armenia.NEWS SUMMARY

MR. LEHRER: President Bush called on the Soviet Union today to help prevent a blood bath in Afghanistan. The last Soviet troops left yesterday after a nine year occupation. The President spoke as Afghan rebels shelled civilian targets in the capital City of Kabul. Thirteen persons were reported killed. Mr. Bush said he was reluctant to stop military aid to the rebels because of the heavy armaments available to the Afghan government. He made his remarks in a White House interview with a small group of reporters.

PRESIDENT BUSH: It would not be fair to have a tremendous amount of lethal supplies left behind and then cut off support for resistance and thus, leaving an unacceptable imbalance, and so before one could do anything other than appeal for a peaceful resolution, which I've done, one needs to know the real facts on this question, this troublesome question of stockpiling.

REPORTER: So does that mean that you will continue to aid the rebels?

PRESIDENT BUSH: That means we will do what we need to do to see that there is a peaceful resolution to this question, that one side does not dominate militarily and we will be encouraging reconciliation.

MR. LEHRER: Mr. Bush also commented on the new peace plan adopted Tuesday by the five Central American Presidents. He said it contains some hopeful elements but said he would not abandon support for the anti-government contras without assurances of real democratic reforms in Nicaragua. He also said we have to be wary about promises from Nicaraguan President Daniel Ortega. Robin.

MR. MacNeil: Scottish police said today that the bomb which destroyed Pan Am Flight 103 was concealed in a radio-cassette player. Two hundred seventy people died when the Boeing 747 was blown out of the sky last December over the town of Lockerbie, killing all 259 aboard and 11 people on the ground. We have more on the investigation from Robert Hall of Independent Television News.

ROBERT HALL: In a huge five acre shed on the Scottish border, investigators are slowly reconstructing Pan Am 103. It's here that the scientists established where the explosion was sited. Their search has concentrated on the 747's luggage containers, the jigsaw of twisted fragments enabling them to reconstruct those in the jumbo's forward hold. Ten miles away in Lockerbie, itself, another forensic team have been examining the contents of those containers. Today, nearly two months after the disaster, a man heading the operation announced their vital breakthrough.

JOHN ORR, Chief Investigator: Painstaking and meticulous examination of debris has now led to the conclusion that the explosive device was within a radio-cassette player. The reconstruction of the baggage container suggests that the explosive device may have been among the baggage from the Frankfurt flight.

ROBERT HALL: Police won't be drawn on the type of explosive used or who planted it, but tonight the forensic teams are trying to establish which bag contained that radio-cassette. They're saying they're confident it can be found.

MR. MacNeil: Britain's Secretary of Transport Paul Shannon said in Montreal today that passengers' radios may have to be banned from airlines to prevent their use for hiding bombs.

MR. LEHRER: There were several developments in the Salman Rushdie mattertoday. Moslem leaders in Iran said suicide squads were being formed to find and murder Rushdie. The Ayatollah Khomeini has pronounced a death sentence on Rushdie for having written the novel The Satanic Verses. Another Iranian religious leader offered a $2.6 million bounty for his death. Rushdie was born in India, but now lives in London. He was out of sight and under police protection today. Telephone threats against British Airlines were also received. The British government lodged strong protest with an Iranian government official in London.

MR. MacNeil: In South Africa, Winnie Mandela, the woman who's been a national heroine to anti-apartheid forces, today found herself shunned and isolated. Mrs. Mandela is the wife of black leader Nelson Mandela who's been jailed for 25 years. She and a group of her body guards have been under investigation in the death of a teenage black activist named "Stumpy". That incident is in part what led to today's first public denunciation of Mrs. Mandela by anti-apartheid leaders. They accused her of violating human rights and said her body guards were waging a reign of terror in the black community. We have a report from Kevin Dunn of Independent Television News.

KEVIN DUNN: The extraordinary setback for Winnie Mandela came in public condemnation by the country's democratic trade unions and political groupings which for decades had looked to her for leadership.

MURPHY MOROBE, United Democratic Front: We are particularly outraged at her obvious complicity in the recent abductions and assault on young people like "Stumpy".

KEVIN DUNN: The black community was, it was said, distancing itself from the lady once known as the mother of the nation.

MURPHY MOROBE: We at the same time wish to take this opportunity to reaffirm our unqualified support for our leader, Comrade Nelson Mandela.

KEVIN DUNN: The condemnation of Mrs. Mandela occurred only 24 hours after she returned from a visit to her husband and 24 hours after it was confirmed this young activist had been found murdered, a killing associated with Mrs. Mandela's household. She has since refused all comments on the affair. Meanwhile, hundreds of political detainees called off a hunger strike to the death after the government indicated many of them would be freed, an answer to the prayers of Archbishop Desmond Tutu and the Rev. Allen Boesak, who, himself, joined the hunger strike.

REV. DESMOND TUTU, Archbishop Of Cape Town: A significant move has happened and it has given hope to our people that non-violent action can, in fact, sometimes achieve goals that they set themselves.

KEVIN DUNN: But it's the continuing controversy surrounding Winnie Mandela which will now preoccupy the anti-apartheid movement.

MR. MacNeil: The Solidarity movement may be born again legally. Negotiators for Solidarity and the Polish government agreed today in Warsaw to a formula for Solidarity to emerge as an official labor union. Under the plan, Solidarity would have to agree to support government, economic and political reforms. The exact nature of the reforms is yet to be negotiated. A Solidarity spokesman told reporters today's agreement was "exactly what we wanted to get".

MR. LEHRER: Back in this country Oliver North's lawyers objected today to the new arrangement for handling classified information. Their formal motion to reject the plan said it would impose intolerable burdens on the defense and all others during the trial. Under the procedures agreed to yesterday, the Independent Counsel would consult with the Justice Department before allowing classified information to be made public without objection. Today's defense motion was filed shortly after the Supreme Court lifted an order delaying the start of the trial. The current plan is for the trial to begin next week.

MR. MacNeil: That's our News Summary. Now it's on to the Salman Rushdie death threats, the Bush budget and health care, and an update from Armenia. FOCUS - DEATH THREAT

MR. MacNeil: Our lead story tonight is the growing controversy over the novel "The Satanic Verses" that has now placed in jeopardy the life of its author, Salman Rushdie. Since the Ayatollah Khomeini called for Rushdie's murder, some $6 million has been offered by Iranian clergy and others as bounty money. Today the Iranian representative to the Vatican told Reuters News Agency he would be willing to carry out the death sentence. A Paris publisher cancelled plans to bring out a French translation and publication was delayed in Spain. Rushdie, an Indian-born Moslem who lives in London, has been under police protection for three days. His American book promotion tour has been cancelled. In a moment, we'll talk with an Iranian and American analyst about the anger the book has generated and how it's spreading in the West, but first some background from where the controversy began, Great Britain, where "The Satanic Verses" was first published. The controversy has complicated British moves to restore diplomatic relations with Iran, and today the British Foreign Office called in Iran's top diplomat there, Mohammad Basti, to show its displeasure. Gabby Rado of Channel 4 has a report.

MR. RADO: The arrival of the Iranian Chargez D'Affaires at the foreign office at noon was a tangible sign that the diplomatic temperature was plummeting. Mr. Basti was summoned as soon as the government had heard from the British Chargez D'Affaires in Tehran that his meeting with the Iranian authorities had been unsatisfactory. Mr. Basti spent about half an hour inside the foreign office. At the lunch for foreign journalists, the Foreign Secretary revealed what had been said to Mr. Basti, and it was strong diplomatic language.

SIR GEOFFREY HOWE MP, Foreign Secretary: We recognize that Moslems and others may have strong views about the contents of Mr. Rushdie's book, however, nobody has the right to incite people to violence on British soil or against British citizens. Ayatollah Khomeini's statement is totally unacceptable, but I emphasize that we want a stable and serious relationship with Iran. But such a relationship will not be possible while Iran fails to respect international standards of behavior.

MR. RADO: The government today decided not to increase the number of people at the British embassy in Tehran from three diplomats and one support staff. That's effectively frozen the process of normalizing relations. The that had begun last year when David Evaduay from the Foreign Office visited Tehran. It led to an upgrading of diplomatic links and the reopening of the British embassy. Following yesterday's demonstrations in front of that embassy, the Foreign Office requested adequate protection. Today assurances were received from the Iranian authorities. British Airways and their customers became unwillingly caught up in the furor over "The Satanic Verses" when a caller claiming to represent an Iranian group made a bomb threat to a news agency in India.

UNITED NEWS OF INDIA, BOMBAY: What he said was, "We are informing the British Airways here that till such time as Mr. Rushdie is taken out from his hiding and we know where he is, but we don't want to create trouble for the British government, we will bomb British planes flying to India and outside.".

MR. RADO: As for Salman Rushdie, he was still in hiding today somewhere in Britain under police protection. His book is predictably doing well in the shops and plans to publish it in paperback are going ahead. Today the French authorities put a police guard outside the offices of Rushdie's publishers in Paris and the French Prime Minister, Michel Rochard, said all Western leaders should condemn the Ayatollah's death call. In Strassberg, the European parliament passed a resolution attacking the Iranian leader and demanding severe sanctions if an attempt is made on Mr. Rushdie's life.

MR. MacNeil: Today the U.S. government responded to the controversy. Secretary of State James Baker called the Iranian threats "regrettable". State Department Spokesman Charles Redman used stronger language.

CHARLES REDMAN, State Department: We are appalled by the death threats issued against Salman Rushdie by the Ayatollah Khomeini, as well as a subsequent offer of a reward for his murder. We take these threats very seriously. Such threats are completely irresponsible and are incompatible with basic standards of international conduct.

REPORTER: What does this do to any improvement of American/Iranian relations?

CHARLES REDMAN: Not that anything particularly was happening, but I can't see any way that this could improve the prospects.

MR. MacNeil: Last month, before the death threat, Rushdie talked with the CBC Journal program. He said the protests against his work were symbolic of a larger issue.

SALMAN RUSHDIE: The question is not whether my book is a good book or a bad book. The question is much bigger than that, because if it's me today, there will be somebody else tomorrow. If we get into the position where any zealot group can go along and as long as they're sufficiently violent they can silence any dissent, any opinion which dissents from their own, well, then, you know, in what is still supposed to be a liberal and free society, that's a terrifying precedent.

MR. MacNeil: Now we have two perspectives. Daniel Pipes is Director of the Foreign Policy Research Institute in Philadelphia and a former Middle East Specialist on the State Department's Policy Planning Staff during President Reagan's first term. He's the Author of The Long Shadow, Culture and Politics in the Middle East. Shaul Bakhash is a Professor of Middle East history at George Mason University in Virginia. An Iranian by birth, he worked for 18 years as a journalist in Tehran before moving to the United States in the late 1970's. Dr. Pipes, Charles Redman of the State Department said we take the threat seriously, how much danger is Rushdie in in your view?

DANIEL PIPES, Middle East Analyst: I think it's a very considerable danger. I think so both because the Iranian government has shown itself capable and interested in extinguishing its enemies abroad, particularly in Europe, and because there is a history of persecution, of free thinkers, atheists and others who don't go along with standard views. So I think Rushdie is in very very considerable danger.

MR. MacNeil: Do you agree with that, Mr. Bakhash?

SHAUL BAKHASH, Middle East Historian: No. I think Daniel Pipes exaggerates the danger. Obviously, one cannot predict what will happen and how, you know, millions of Moslems around the world will react to Ayatollah Khomeini's call for Rushdie's death, but I think one should see the declaration that Ayatollah Khomeini issued a few days ago within the context of the book, itself,Ayatollah Khomeini's own position in the Islamic world, and also the context of Iran's internal politics.

MR. MacNeil: But, Mr. Bakhash, isn't it true that we've seen thousands of Iranians in the recent war willing to become martyrs on the Ayatollah's orders? What would be different for people who hold very extreme loyalty to his views from carrying out his wishes in this case?

MR. BAKHASH: Well, of course, it is a possibility, and who can predict what might happen in that context. But I think, you know, looking for example at the presentation of the news segment before this interview, simply focusing on the drama of this event, and there is a lot of drama in it, I think somewhat distorts the sequence of events that led to Ayatollah Khomeini's declaration and, therefore, its significance.

MR. MacNeil: Tell us how you think, what context should we put it in, in your view?

MR. BAKHASH: It seems to me that one should see this in perhaps three ways. First of all, of course, there's the book, itself, and it has material which has been thought offensive to Moslem sentiments. Ayatollah Khomeini at the same time I think as an Islamic leader, as one who aspires to speak for the interest of the Moslem community could not have remained silence once the book achieved its notoriety. Once he issued a declaration I think internal faction of Iranian politics came into play as well. There are groups in Iran eager to derail the recent improvement of relations between Iran and Europe and the rest of the world. They oppose the attempts by Iran to secure international credits and technical assistance in its reconstruction program after the war, and it is in their interest, of course, to sabotage those in the Iranian government who have been working very hard to produce a more moderate, a more middle of the road image of the Iranian government.

MR. MacNeil: What is your view, Dr. Pipes, of that?

MR. PIPES: I'm a great admirer of Dr. Bakhash's understanding of Iranian politics, but I think what he has just said is pure poppycock. This is a simple threat on a man's life. The Iranians have repeatedly attacked those who they don't like abroad. They have tried to kill, for example, the former Prime Minister of Iran while he was living in Paris. They have attacked many Americans. They have attacked many French, British, Germans. There's no reason not to take them seriously this time.

MR. MacNeil: Do they have people who can carry this out? I mean, the Tehran Radio recorded the clergy today as saying that there were suicide squads, we said it in the news, literally trying to hunt him down. Is that literally true, or is that part of the sort of figurative and rather flowery Iranian way of talking?

MR. PIPES: I think that may well be an exaggeration they're trying to hunt him down now, but this is a young man. He's 40 years old. He has many years to live we presume. Unless he's under permanent body guard, unless he publicly recants, unless he takes a false identity, they will be after him. Look, there's a lot of precedent to this. Just three years ago in January of 1986, a very eminent leader of a Moslem group in the Sudan was executed by order of the President of the Sudan, because his views were at variance with those that the President then had on Islam. Now this is a literary man whose views were well within the bounds of acceptable. They were not fantasies such as Salman Rushdie's. They were serious worked out views on Islam. Because they were not in accordance with those of the President, he had this man hanged. There are many other examples of it.

MR. MacNeil: Let me just go back to Mr. Bakhash. I know you'll want to respond to the charge that what you said is poppycock, but on the specific point of Mr. Rushdie being in danger perhaps for many years because there will be somebody trying to hunt him down, you just don't think that's true?

MR. BAKHASH: No, no, I wasn't saying that. It may well be the case and after all, there may be many followers of Ayatollah Khomeini who may feel a duty now to carry out the death warrant or death threat he has issued. I'm only saying that the declaration by Ayatollah Khomeini came within a specific context. Just two weeks earlier, a radio broadcast on Iranian Radio angered him sufficiently so that he not only wanted those officials responsible to be jailed and flogged, but suggested that they might also be put to death if the offensive remarks appeared on radio by intention. In other words, recently we've had a pattern of impulsive behavior by the Ayatollah. So of course the threat once issued is there and Mr. Rushdie certainly is in some danger, but I don't think we can say how much, nor do I believe for a moment that there are death squads on their way to London to have him killed.

MR. MacNeil: How do you look at the context that Mr. Bakhash sketched in, that the effort by some in Iran to frustrate the apparent amelioration of relations with the West and the sort of growing influence of more pragmatic groups of Iranians?

MR. PIPES: I'm afraid I would again have to disagree and say that I think it's really a matter of profound revulsion to the contents of this book. Now we who look at it in this country and those who are born and bred in the West find it strange. We find it strange that the power of the word can be so strong it can arouse such intense passion.

MR. MacNeil: Are you saying that this is all spontaneous revulsion by highly motivated Moslems in Iran and in other countries and is not being used by some political factions for a different political purpose?

MR. PIPES: I'm not saying it's purely a spontaneous reaction, but it's basically that. This whole movement started in India with an article in September pointing to the offensiveness, the alleged offensiveness of the book. It picked up on the popular level. This was not a politician's issue. This was a popular issue, and it's a strange one for a Westerner, but it's a real one. The politicians then may exploit it, but fundamentally it is a matter of profound revulsion to the text and while there may be some advantage to be gained in Pakistan, in India, or in Iran, from siding on one point or the other, the key point is the profound revulsion.

MR. MacNeil: Mr. Bakhash.

MR. BAKHASH: Well, let me give an entirely different interpretation or position on this. Consider that in Iran, the issue of Mr. Rushdie's book was not even under discussion or a focus of any attention until the troubles began in Pakistan or in India, and Ayatollah Khomeini issued his declaration. Two of Mr. Rushdie's previous novels have been translated in Iran and published. The Ayatollah or the cleric, I should say, who issued the offer of a reward for Mr. Rushdie's head, is a very minor figure in Iran. So there is -- I mean, there is a danger of perhaps exaggerating what has happened. I fully recognize the dangers which this puts Mr. Rushdie in, but there is an internal Iranian politics as well, and some of what we're seeing is a result of that. Obviously, we are now in a situation, as we were with the American hostage crisis in 1979, where the developments in Iran and the reaction abroad to this are going to feed into one another and enlarge in this crisis, but perhaps, you know, there is room for saner counsels on both sides.

MR. MacNeil: Do you not see this as endangering the slow but apparent rapprochement with Iran between Iran and the West?

MR. BAKHASH: Absolutely.

MR. MacNeil: You do, I gather, Mr. Bakhash. You do. You do not?

MR. PIPES: Well, as the State Department spokesman pointed out very correctly that can't help, but I wouldn't see it primarily in the context of foreign relations.

MR. MacNeil: You mean, it's not going to make any big difference between Britain and Iran or the United States and Iran?

MR. PIPES: Just 10 years ago, there was the death of the princess flap of Saudi Arabia, it came, it went.

MR. MacNeil: There was a program that was shown here in public television and the Saudi Arabians tried to get it stopped.

MR. PIPES: And there were formal protests and the British government apologized, the American government virtually apologized. It's forgotten now. It comes and it goes. Granted, that was not as inflamed an argument as this one, but the long- term consequence I think is not in the area of diplomacy. The long-term consequence I think is rather in the area of perception and cultural exchange. We in the West are likely to see our deepest stereotypes of the Moslems being confirmed.

MR. MacNeil: In other words, it was the issue Mr. Rushdie, himself, pointed to in that little excerpt we showed, that if they get away, if extremists get away with this kind of pressure, then it will be somebody else --

MR. PIPES: Actually, I was going to make a different point.

MR. MacNeil: I'm sorry.

MR. PIPES: That we have a -- there's a stereotype of the Moslem of being backward and fanatical and if there's any single confirmation of that, it's this one. It's unfortunate, it's not accurate, but it does play to some very profound sensitivities in the West and in the United States.

MR. MacNeil: Do you have a final comment on that, Mr. Bakhash?

MR. BAKHASH: Well, I would agree with Richard Pipes on this point, with Daniel, sorry, on this point that we are in a period that there is going to be friction between the Moslem world and the West, and there are very different perceptions on these issues, of course.

MR. MacNeil: I see. Well, Mr. Bakhash, thank you very much for joining us. And Daniel Pipes, thank you. Jim.

MR. LEHRER: Still to come on the Newshour tonight, the Bush budget ideas on medicine and health and an update on the Armenia earthquake. SERIES - BUSH BUDGET - 1989

MR. LEHRER: Next, Part 4 of our week's look at the specifics of the Bush budget. The subject tonight is health care. The head of the Health Care Financing Administration and spokesman for hospitals and doctors are here. We will hear from them right after this background report by Correspondent Tom Bearden.

TOM BEARDEN: The kinder, gentler portion of President George Bush's budget, the part which focused on health care, seemed to start out on a very kind note indeed.

PRESIDENT BUSH: [Feb. 9, 1989] Our first obligation is to the most vulnerable, infants, poor mothers, children living in poverty. And my proposed budget recognizes this. I ask for full funding of Medicaid, an increase of over $3 billion, and an expansion of the program to include coverage of pregnant women who are near the poverty line.

MR. BEARDEN: The President also wants Medicaid to cover immunizations for children who are eligible for food stamps. $20 million of his Medicaid package would go to states with high infant mortality rates to help them develop pilot projects. However, in financial terms, Bush recommendations add no money to the Medicaid budget. He merely has restored the Reagan administration's proposed budget cuts. On the AIDS issue, Bush spoke of compassion, while sticking closely to the Reagan bottom line.

PRESIDENT BUSH: One problem related to drug use demands our urgent attention and our continuing compassion, and that is the terrible tragedy of AIDS. I'm asking for $1.6 billion for education to prevent the disease and for research to find a cure.

MR. BEARDEN: That 1.6 billion for education and for research is the same amount proposed by Reagan, more than last year's budget but $300 million less than requested by Health & Human Services. It was in the area of Medicare, a topic not covered in the speech to Congress, that Bush has proposed substantial budget cuts. The President wants 5 billion cut out of the federal insurance plan for the elderly. Hospitals would bear the brunt of most of the cuts, cuts also proposed by Reagan. The high cost of hospitals, which are responsible for 2/3 of the Medicare budget, were attacked by Bush during his campaign.

PRESIDENT BUSH: There is a cost problem, there's no question about that. Anyone who has ever been hospitalized knows that. And we must address it, and when I say "we", the federal government has a role, local governments have a role, private institutions have a role.

MR. BEARDEN: Bush wants to reduce the amount reimbursed to hospitals to help them cover the cost of expansion and acquiring new equipment. The President would also decrease Medicare's contributions to teaching hospitals, despite complaints that this subsidy is a life support system for the high cost of training future doctors. These proposed cuts are not the first endured by the hospitals. Five years ago, reimbursements for patients' care were effectively cut when a fixed fee for services system was instituted. Hospital administrators complain that because of the lowered reimbursements, rising nurse's salaries and costly new equipment, 40 percent of hospitals already lose money from Medicare. They say the less they get from Medicare, the less they are able to absorb the costs of those not covered by any insurance. Bush's budget has no provision for covering these uninsured. Hospitals aren't the only ones to feel Bush's knife. Beneficiaries who use the optional doctor's coverage will have to pay higher premiums. The raised premiums and the hospital cuts will save the system $3.2 billion a year. The rest of the cuts, $1.8 billion worth, have not yet been revealed. Speculation is that some of that money will be carved out of doctor's bills, which the medical community sees as the unkindest cut of all.

MR. LEHRER: Now, to Dr. William Roper, Administrator of the Department of Health & Human Services Health Care Financing Administration, Michael Bromberg, Executive Director of the Federation of American Health Systems, representing 1400 for profit hospitals and health care companies, and Dr. James Todd, Sr. Executive Deputy Vice President of the American Medical Association. Dr. Roper, in general terms, what do you think of Mr. Bush's budget for health care?

DR. WILLIAM ROPER, Health Care Financing Administration: It's a prudent budget that buys access to needed quality services. As you heard the President say, he wants full funding for Medicaid and Medicare will continue to grow at a rapid rate. Medicare next year, far from being cut, will be 10 percent higher than it is this year.

MR. LEHRER: The cut, what that means when people talk about cut, it's very confusing of course, it's a cut in what was originally proposed by President Reagan, is that right?

DR. ROPER: No.

MR. LEHRER: No?

DR. ROPER: Actually, the program this program this year is about $80 billion.

MR. LEHRER: Okay.

DR. ROPER: Next year, it would ordinarily be 13 billion higher than that. The President is prudently asking that we restrain that rate of growth, so that it grows only 8 billion. It's still going to grow 10 percent.

MR. LEHRER: It's a cut in the growth?

DR. ROPER: Yes.

MR. LEHRER: Rather than a cut in -- right -- did I get that right, Dr. Todd?

DR. JAMES TODD, American Medical Association: I think you did.

MR. LEHRER: Thank you. What do you think about the plan overall?

DR. TODD: Well, we haven't seen enough of the real details to be able to comment specifically, but the problem is even the growth that Dr. Roper is talking about is still going to leave 11 million Americans uncovered by Medicaid, and the cuts that have been sustained both by the hospital industry and by the doctors over the past eight years have gotten down to the point now where patients are really having difficulty finding doctors and hospitals who are able to bear the cost of providing the care at decreasing amounts of reimbursement. And we think that the proposed budget by Mr. Bush, and he started off by talking about a kinder, gentler, and we hope healthier America, by restoring some of these things that the Reagan administration wants to take out.

MR. LEHRER: But he didn't do it?

DR. TODD: Hasn't done it yet, but we really have not seen his full proposal. Took the right first step talking about Medicaid. We hope he'll extend that on to Medicare, so that there won't be the access problem. You can only go just so far with an aging population, new technology, greater utilization of services by the aged, and we're afraid that we've gotten to the point now where patients are going to be injured by further cuts.

MR. LEHRER: Mr. Bromberg, what do you think generally?

MICHAEL BROMBERG, Federation Of American Health Systems: Well, generally I think a very small step, tiny step in the right direction on Medicaid, very small, but on Medicare, as was pointed out was never mentioned in the speech, a $5 billion cut represents 23 percent of the total cuts that the President wants to make in the whole government and Medicare is only 8 percent of the budget, so we think on its face it's unfair. Secondly, as you pointed out, this word "cut" may have a Washington meaning but when the Secretary of Defense talks about freezes, he's talking about a 5 percent inflation increase. So this cut in the rate of growth is serious. $5 billion on hospitals is going to put out the lights on some of these thousand points of lights. We had 82 hospitals close this year, one every fifth day. Four hundred have closed in the last seven years and more will close. And those that don't close are going to have to do one of two things, raise prices to working people to subsidize this cut, or cut back services at a time when we have a nursing shortage, or hold back technology, which the public takes for granted will be there when they need it.

MR. LEHRER: Take me through the process where these cuts, these cut cuts, or non-cut cuts will result in the closing of a hospital.

MR. BROMBERG: Well, Medicare represents about 42 percent of the income of the average typical hospital. That's one point. Eighty- two hospitals closed last year because the operating margins from the Medicare business have gone from 10 to 15 percent profit margins four years ago to what we estimate to be minus 5 percent this year, well below 0 profit margin on Medicare, so we're losing money.

MR. LEHRER: You're losing money on Medicare as it is now?

MR. BROMBERG: That's correct. The average hospital is losing money on Medicare. That hasn't happened in the history of the program until this year. A $5 billion cut --

MR. LEHRER: Where are you losing? How are you losing?

MR. BROMBERG: Basically, the revenues that we get paid from Medicare are not keeping pace with the costs. I'll give you the two biggest reasons.

MR. LEHRER: All right.

MR. BROMBERG: Nursing costs in this country to attract qualified nurses to work in a hospital where the patients are much sicker than they used to be because a lot of the routine patients are now treated on an out patient basis are going up about 10 percent a year to attract nurses, and we still have the highest vacancy rates in a long time. On the other hand, while our costs are going up 10 percent, the Medicare program for the last three years raised our prices 1 percent, 1.15 percent, and 3 1/2 percent, rather than the inflation increase promised us. So like in any other business if you tell the workers at this station or anywhere else that even though the CPI is going up 4 to 5 percent --

MR. LEHRER: That's the Consumer Price Index.

MR. BROMBERG: Right -- you're going to give them a 1 percent wage increase for three years in a row, a lot of them are going to quit, or else their quality of their service may not be what you expect.

MR. LEHRER: Dr. Roper, is that the real world that Mr. Bromberg is talking about?

DR. ROPER: Surely, hospital managers face challenges and I want them to do the best job they can managing those hospitals. But I think we need to step back and look at the bigger picture. America has the world's finest health care system, but it takes 12 percent of our economy to run that system. The answer, it seems to me, is not just writing blank checks to America's doctors and hospitals. Remember, Medicare is growing under the Bush budget 10 percent, another $8 billion next year. What we've got to do is find a way to spend that money better, get better value for the dollar spent, and not simply say we need some more money from the federal government.

MR. LEHRER: All right. What about his specific complaint though that these things go into effect, there are going to be hospitals that are going to have to close down because of that? Is that a bad thing for America?

DR. ROPER: America has 6,000 hospitals that are part of the Medicare program. The average hospital has about 40 percent of their beds empty. Much of the hospitals in America have many many beds that are empty these days.

MR. LEHRER: So there are too many hospitals already?

DR. ROPER: There are too many hospital beds.

MR. LEHRER: It's a natural weeding out process.

DR. ROPER: The responsibility of the Medicare Program is to see that the 32 million people that depend on us have access to quality services. It's not our responsibility to see that every hospital in America survives in the form that they are right now.

MR. LEHRER: Is it your position, Dr. Roper, that the way the Medicare system is working now the system is subsidizing those 40 percent empty beds?

DR. ROPER: Yes, it is, and we've got other important needs; lowering the all too high infant mortality rate in the country, insuring some people who currently are without health insurance, and even beyond health care we've got some pressing social needs. We've just got to get serious about the budget and serious about the Medicare budget in particular. And I make the point again we're talking about restraining growth down to a 10 percent growth.

MR. LEHRER: Mr. Bromberg, some of your hospitals deserve to be closed according to Dr. Roper.

MR. BROMBERG: Some hospitals should close, but let me tell you what's happening, because it's a little different than that. First of all, 40 percent empty beds is a high figure, but it may not be that way Monday to Friday. You're averaging in weekends and non- peak hours and non-season, and the question is, what do those beds really cost. The 400 hospitals that have closed in the last seven years and the ones that are really losing money are either your rural hospitals or your inner city hospitals which treat the poor, and you can't, you're closing your hospitals in the case of the rurals that are probably the least expensive hospitals around. Where are those patients going to go, to the more expensive hospitals? In and terms of the inner city, you're putting a burden on those treating the poor. So it's not that easy to say we have a lot of empty beds closing. If you close them, you may not save a penny. It may cost you money. The mortgage payment's still there. Beds aren't being staffed and Dr. Roper can't tell us which hospitals he wants to close.

MR. LEHRER: I mean, the government is not going to get into that business, are we, are you?

DR. ROPER: No, we are not going to get into that business. We want to be prudent managers though and keep a tight rein on these costs. I know you're going to get to Dr. Todd in a minute, and that's where we need to pay particular attention this year, payments to my colleagues, the doctors of America.

MR. LEHRER: They're too high too, right?

DR. ROPER: And last year how much we paid doctors went up 15 percent, much higher than the amount we paid to hospitals.

MR. LEHRER: And under the new arrangement, they would go down a little bit, the doctors?

DR. ROPER: Some doctors; radiologists, anesthesiologists, and surgeons, we're proposing that their fees be cut 8 percent. Others who are not primary care doctors would freeze how much we pay them. Primary care, internists and family practitioners, we'd give them the full, ordinary increase.

MR. LEHRER: Is this going to close down some doctors, Dr. Todd?

DR. TODD: I don't think it's going to close down some doctors, and I totally agree with Bill when he talks about the government needing to be a prudent buyer. We wish they also would be a prudent observer and instead of using meat ax approaches and across-the-board freezes and reductions in payments that they would look at the need and the volume of services.

MR. LEHRER: Now give me an example of where they've used the meat ax approach and give me the evil that this has caused.

DR. TODD: For three years, the physicians' fees were essentially frozen.

MR. LEHRER: All physicians' fees?

DR. TODD: All physicians' fees under the Medicare Program. Now we're involved in a participating, non-participating program, which is so complicated I don't even want to try and explain it because the patients won't understand it, but the physicians also have maximum allowable charges and they're told how much they can charge. The doctors of this country have been under essentially wage and price controls for the last four years. Now they're not going to go out of business.

MR. LEHRER: But Dr. Roper said they've gone up 15 percent?

DR. TODD: In terms of the volume of services that they have provided, the cost, not physicians' income, but the cost of providing that service to the government has gone up and it's a combination of it.

MR. LEHRER: That's not, you're saying that's not going to the doctors?

DR. TODD: It's going to the doctors in terms of more services, and you have to separate the differences between doctors' prices and the amount that is spent on doctors' care. There's distinct differences.

MR. LEHRER: I got you. In other words, the rate for getting a toenail extracted is the same but there are just more toenails being extracted.

DR. ROPER: You just made the key point that I hope the listeners, watchers take home with them, and that is the thing that's driving the increase in payments to doctors is more services, more intensive services, and that's why we need to get serious about the business of looking carefully at whether all that's done in medicine is really necessary, really appropriate. I don't think it is and I am pleased that the AMA is taking leadership to help us with that task.

DR. TODD: But look at what's driving the increased volume. It's an aging population. You know what happened after President Reagan had his colonostomy and a cancer was found. Patients walked into doctors' office all over this country and said I want my colon checked. Mrs. Reagan had her breast operation Patients walked in. It is very difficult to say we are not going to allow these things to happen, particularly when you're still faced with a professional liability situation that says the patient wants a procedure, the doctor says you really don't need it, and then something bad happens and the doctor ends up in court. The government's got to look at those issues as well.

DR. ROPER: Clearly we do and it would be wrong for me to say or imply that doctors were ginning up all of these extra services just to make themselves wealthy. Much of these services are good for patients, much of them are demanded by patients. But let's be serious about the bottom line. Payments to doctors is $30 billion. It grew last year 15 percent. Now if we can tolerate year in and year out growing a $30 billion program 15 percent per year then fine. I don't think we can. If we can accept that, let's go worry about nuclear disarmament, but I think we need to get serious about the costs in this program, Medicare, because it is such a large part of the health care system, and if we can't control Medicare's costs, we are going to keep the private payers from being able to control their costs. And one of these days the car companies and steel companies are going to throw up their hands and say we just want the government to come in and regulate the whole health care system because it's eating us alive.

MR. LEHRER: As a practical matter, isn't it true already that the Medicare system and the rates are driving the private system almost?

DR. ROPER: Well, we are being prudent managers of our part of the pocket book and that is helping them be more prudent in what they are doing, but we have still got a health care system that is out of control.

MR. LEHRER: Do you agree the health care system is out of control, No. 1, Mr. Bromberg, and No. 2, that the federal government is being helpful in trying to control it and putting some pressure on you in the hospital business to hold down your costs that you might not otherwise do?

MR. BROMBERG: The federal government is doing some good things in terms of quality assessment as is the AMA, and I agree with everything Dr. Roper has done in that area. We've got to get rid of unnecessary care. The problem is somebody has got to have the honesty in the government to levelwith the public that if you want, expect and demand the best quality care in the country it costs money. Every public opinion poll taken shows the public wants more and more care, they want the 37 million uninsured to be covered, but when you ask them how much they're willing to pay for it, they say something like between 10 and 20 dollars. That's what the polls show. Somebody's got to tell them it's like the Defense Department's helicopters. It won't fire right without the right money.

MR. LEHRER: There was a poll just a couple of weeks ago that came out. 89 percent of the American people, at least in this poll, said they thought that the health care system needed to be reformed, needed to be revolutionized, needed to be shaken up.

MR. BROMBERG: And we're going to hear more of that if the government keeps shifting the costs for them, because what Dr. Roper is doing and what this Medicare budget is doing is saying here's 5 billion less for us, shift that 5 billion to General Motors, and they're getting frustrated.

MR. LEHRER: Is that what's happening?

DR. ROPER: That is what's happening unless General Motors rises up and says we've had enough and we are going to control part of our system as well. Let me be --

MR. LEHRER: You mean through their private health insurance program.

DR. ROPER: Right. America's health care system has a lot of problems, too high infant mortality rate, too many people without health insurance, aides and so on, but of all the problems one is surely not too little money. We've got plenty of money, 12 percent of our whole economy, that challenges how to spend that money better, and that's what we need to be spending our time on, not trying to jack up the federal budget.

MR. LEHRER: In a word, Dr. Todd, is the federal government at this point from a doctor's point of view the problem or the solution?

DR. TODD: I think it's probably both. I think it's a problem in the sense that they have this fixation on cost to the exclusion of the concern of what it does to the access of patients of patients to get the technology that they want and the continued reluctance to face some of the tough issues and do as Mike suggested. Tell the public you've got to reach a conclusion about how much health care you want. Also --

MR. LEHRER: Speaking of conclusions, we have just reached it. Gentlemen, thank you all three very much. UPDATE - AFTERSHOCK

MR. MacNeil: Finally tonight we have an update on the December earthquake that claimed more than 25,000 lives and devastated much of Soviet Armenia. It comes from a group of Armenian Americans in Boston invited to observe earthquake relief operations recently. They were accompanied by Independent Television Producer Theodore Bogosian. He documents the great difficulties survivors still face nearly two months after the earthquake.

THEODORE BOGOSIAN: The international media attention that accompanied the rescue effort has vanished from Soviet Armenia, but the worst problems facing this earthquake stricken Soviet republic remain. By all appearances, very little disaster relief actually reached those survivors still living in the earthquake zone and reconstruction plans are almost non-existent. Yerevan, the Soviet Armenian capital, is a city under stress. To prevent ongoing nationalist demonstrations from interfering with earthquake relief, Soviet militia are posted at every major intersection in Yerevan, and a strict midnight to 5 AM curfew exists. It's estimated that 150,000 people left homeless by the earthquake have temporarily moved to Yerevan. Compounding this gloomy political environment is the heavy air pollution from nearby factories which blots out the sunlight by mid morning and makes breathing difficult. At the Fourth Children's Hospital in Yerevan, Surgeon Armand Tunion said he needed outside help to help with his young earthquake survivors. All of his pediatric amputees needed more surgery to prepare their limbs for prosthetic devices, but Dr. Tunion said he had neither the proper sanitary conditions here to prevent infection, nor the surgical tools to prepare these wounds properly. This fourth grader's right leg required amputation after it was crushed beneath the rubble. She was in school in Leninakan when the quake struck. Her father was killed but her mother survived and brought the girl to Yerevan for treatment. The Soviet government and Project Hope finally started sending many of these children and their families to the United States for surgical treatment. But estimates of the total number of children needing help is as difficult to come back as any earthquake related information. Three different government health officials gave widely varying estimates of the number of amputees in Armenia, ranging from 275 to 5,000. From Yerevan, the group of Armenian Americans from Boston made the two hour trip by bus to Spitak, led by the prominent Armenian scholar, Gerald Libaridian. Twenty thousand people lived here before the earthquake which killed 12,000 people in Spitak alone. Most of the women and children here who survived have been moved temporarily to other locations throughout the Soviet Union. The survivors who stayed behind exist among the ruins of their previous lives. Many in Spitak are determined to stay. This old man told the Boston group that he lived on the street near a fire for almost four weeks after the earthquake, until he was finally able to get a tent. He said food distribution to survivors had stopped recently, but he didn't know why. He also complained that he needed clothing and medication but most relief supplies required pushing and shoving to get and he just didn't have the energy. His sentiments were echoed by this old woman who told Libaridian that she and her family still feared that they might not survive, were half human now, were frozen people. "When summer comes, we'll that and either live or die.". Asked about earthquake relief, she said, "Day before yesterday we were told 200 cranes would arrive, but obviously they haven't. My little house is under rubble, but they didn't give us one crane. For 15 days we have been kissing their feet.". The group then went to Leninakan, the largest city in the earthquake zone. This was the day known in Armenian religion as Karasunk, the day when the traditional period of mourning following death is supposed to end. At the hastily dug cemetery on a hillside beyond the city, tens of thousands went to visit the family and friends who were killed in the quake. [People mourning lost loved ones] Most of the survivors commemorated the event with ancient graveside rituals, sharing food and drink with the dead. Here in Leninakan, people were even more skeptical than they were in the small Town of Spitak that their rebuilding efforts would be successful. The scale of destruction here is greater. This corner of Leninakan, for example, once had apartment buildings that housed about 20,000 people. Because many of the buildings still standing must be demolished for safety reasons, what the earthquake didn't bring down by itself is being dynamited and carried away. Little temporary housing has arrived, except for a few tents and some porta cabins from England. Most people share garages and single family homes that were small enough to withstand the quake.

DR. GERALD LIBARIDIAN, Armenian Scholar: This is where they're living now, 10 of them.

MR. BOGOSIAN: At the hotel that is now Leninakan's makeshift city hall, a wall sized map is color coded for residents to survey. Red denotes the buildings that the quake leveled. Green denotes those that will be dynamited. Yellow are those that have been condemned pending reconstruction, and blue are those which are habitable but need reconstruction. People complain that they are existing on bread, gelatin, and whatever else they had been storing before the quake. Diets appeared to be low protein and unbalanced. Most survivors received some nutrition every day but many had no idea how they would survive the winter in the earthquake zone without a better, more dependable food supply. Much of the food that was shipped in was either inappropriate or had expiration dates that had already passed, leading many survivors to accuse people of using the earthquake as an excuse to dump what they couldn't use back home.

DR. GERALD LIBARIDIAN, Armenian Scholar: What they're talking about is that none of the relief that they have heard about has never reached them, that anything that is coming must be going somewhere else and they know that it is being sold in the streets of Yerevan, and Susanna here is saying that whatever clothes are coming are mainly male clothing and the women are getting absolutely nothing. She has been in the same piece for 40 days.

MR. BOGOSIAN: They also complained that the government cut off the electricity each night for no apparent reason, making life so much more difficult psychologically. One example of the confusion and lack of centralized planning that plagued the region was the makeshift pharmacy in Leninakan. Pharmacists said all the drugs which arrived were labeled in languages other than Armenian and Russian, so careful, time consuming vocal instructions must accompany each dispensing. There seemed to be barely enough primary care doctors and too few pharmacies in the earthquake soon. Most of the sick have been shipped to Yerevan, but due to the stress and strain of daily life among the rubble, many people need some kind of medical attention. Psychiatrists in Armenia stress the drastic needs of virtually the entire population for some sort of therapy following December's earthquake disaster. They claim that long-term work will be necessary to rebuild the human spirits that the earthquake destroyed. Otherwise, the children especially will be unable to cope with the emotional traumas posed by a long and difficult reconstruction period. The psychiatrists emphasize the need for Soviet Armenians to know the outside world cares, else their outlook will turn from bleak to hopeless. RECAP

MR. LEHRER: Again, the major stories of this Thursday, President Bush called on the Soviet Union to help prevent a blood bath in the Afghanistan it left behind. He said he was reluctant to stop military aid to the Afghan rebels because of the arms advantage of the other side. Investigators said the bomb that blew up Pan Am Flight 103 was in a radio-cassette player, and religious leaders in Iran said suicide squads were being formed to murder Salman Rushdie, author of the novel "The Satanic Verses". Good night, Robin.

MR. MacNeil: Good night, Jim. That's the Newshour tonight and we'll be back tomorrow night. I'm Robert MacNeil. Good night.