The MacNeil/Lehrer NewsHour

MS. WARNER: Good evening. I'm Margaret Warner in Washington.

MR. MacNeil: And I'm Robert MacNeil in New York. After the News Summary tonight, we devote the program to the President's health care proposal. We have reaction from citizens who watched the President in Chicago, an interview with the White House official in charge, Ira Magaziner, and analysis by four leading experts on health care costs and finance. NEWS SUMMARY

MR. MacNeil: President Clinton today began a massive campaign to sell the health care reform plan he presented to Congress and the nation last night. Radio talk show hosts from around the country were invited to broadcast from the White House lawn, and Mr. Clinton spoke to some 2,000 supporters of the administration's effort this afternoon. Business leaders, unions, public interest groups, and health care providers were all represented.

PRESIDENT CLINTON: Now you have big business and small business, and health care providers and health care consumers, families who have been broken and workers who are trapped in their jobs, all agreed that the time has come to act. I think my job today is to tell you that as much as I wish this to be a celebration to thank you for everything you've done, and to remind you that our work is beginning, that the real celebration will be when you come back in even larger numbers to this lawn when I sign a bill.

MR. MacNeil: The President drew praise from across the political spectrum for starting the national debate on health care. But there was also criticism from various quarters.

SEN. DON NICKLES, [R] Oklahoma: The President held up a card, and he said this card will promise you all kinds of benefits. He made a lot of promises, a lot of very expensive promises. He didn't pay for them. Some people had a little bug, "Who pays?" I think that's a very good question. Where is the money coming from?

DR. LEIGH THOMPSON, Eli Lilly & Company: You can't make decisions about health care in Washington or in any other single point in this country. Your position will know how to choose the most cost effective medicine for you, but it may well be different from the right medicine for me. Anything you do to restrict choice or the position in choosing nursing home care, hospitalization, and drugs is a mistake, and it'll decrease quality, not improve it.

JACK FERRIS, National Federation of Independent Business: It could be a $50 billion hit on those people that are generating new jobs in America. One of the worst things we can do for health care is to have someone not have a job, and if, in fact, we have job loss, what happens to the people that are guaranteed health care? Their health care still going to be paid by someone. They don't have a job. But where are they going to get the money to subsist and live? From the government.

MR. MacNeil: We'll have much more on the President's health care reform plan later in the program. Margaret.

MS. WARNER: At least three people are still missing from yesterday's Amtrak derailment in Alabama, and authorities still aren't sure how many died. Estimates range from forty-one to forty- four fatalities. This morning, divers resumed the search for bodies in the submerged cars. Transportation Secretary Federico Pena said a drifting barge struck the railroad bridge Wednesday. The train crossed the bridge a short time later, derailed, and plunged into the bayou. Investigators are trying to determine whether bridge damage from the barge accident caused the derailment. In Missouri, two people were killed in overnight flash floods. Five to nine inches of rain fell across much of the state, causing the Mississippi River to rise. Roads, houses, and trailer parks were flooded. The same area was hard hit by record floods this summer. Heavy rains are expected to continue in the region through tomorrow morning.

MR. MacNeil: It was day two of the political tug of war in Russia, with Boris Yeltsin continuing to be the odds-on favorite. He issued a decree scheduling presidential elections for June, two years ahead of schedule and six months after elections for a new parliament. Meanwhile, the old parliament he has ordered dissolved continued to meet, issuing demands that Yeltsin surrender to what they call legitimate authorities. Julian Manyon of Independent Television News reports from Moscow.

JULIAN MANYON: Russia's parliament is at the center of a war of nerves as a group of volunteers, some of them officers, prepared to defend the building while increasingly shrill, even historical, predictions about the crisis come from their leaders inside. The parliamentary speaker, Ruslan Khasbulatov, this morning appeared to accept the possibility of defeat, now says that he may end up in prison or even death, and Alexander Rutskoi, declared acting president by the parliament which Boris Yeltsin has suspended, claimed in an interview with ITN that Yeltsin has placed special commando units near the White House.

ALEXANDER RUTSKOI: [speaking through interpreter] There are special quarters units near this building. Who's done that? Parliament or the President?

MR. MANYON: By contrast, President Yeltsin is doing his best to appear relaxed and in control, spending this afternoon with millionaire George Saros and then declaring that he had suspended parliament not for himself but for Russia. In a gesture of almost arrogant confidence, Yeltsin's team has now announced that all parliament's assets, including the White House, are central government property until new elections are held, and they've also announced the creation of special employment service to find new jobs for the deputies inside.

MR. MacNeil: In the former Soviet republic of Georgia, shell fire hit another airliner, reportedly wounding many people. The plane was preparing to evacuation refugees from the besieged city of Sukhumi. Separatist rebels last week launched an offensive against that city, the capital of a breakaway region. The rebels have repeatedly fired on the airport, calling it a legitimate target in their war. They were blamed this week in two other attacks on airliners which killed dozens of people.

MS. WARNER: Israel's parliament today approved the peace agreement with the Palestine Liberation Organization. The vote was 61 to 51. The approval was a victory for Prime Minister Rabin and is expected to undercut opposition calls for a public referendum on the deal. Rabin said it gave him freedom of action to implement Palestinian autonomy in the Gaza Strip and the West Bank town of Jericho. In South Africa, the parliament today ratified an agreement giving blacks their first ever role in governing the country. The vote sets up a mixed race transitional council. It will have veto power over some government decisions and will oversee preparations for next year's multiracial elections. Some right wing lawmakers walkedout in protest. They said the vote could lead to civil war.

MR. MacNeil: The International Olympic Committee today chose the host city for the summer Olympics of the year 2000. The result was announced in Monte Carlo after final presentations from the five bidding cities: Beijing; Berlin; Manchester, England; Istanbul; and Sidney, Australia. The announcement came from IOC Chairman Juan- Antonio Samaranch in a live worldwide television broadcast.

S.E. JUAN-ANTONIO SAMARANCH, President, International Olympics Committee: We really regret that there is only one winner, and the winner is, the winner is Sidney, Australia.

MR. MacNeil: Australians in the hall and in Sidney celebrated wildly, but the reaction was different among the Chinese in Monte Carlo and Beijing, who had hoped to win, despite foreign criticism of China's human rights record.

MS. WARNER: A Cuban MiG fighter pilot flew to the U.S. Air Base at Guantanamo Bay this afternoon and asked for political asylum. Another Cuban pilot defected to Florida last week. His plane was returned just hours before this latest defection. That ends our summary of the day's top stories. Now it's on to the Clinton health plan with citizens of Chicago, key White House adviser Ira Magaziner, and top health care economists. FOCUS - CLINTON'S CURE

MR. MacNeil: We devote the rest of the NewsHour to the Clinton health plan. The President said fixing the health care system was America's most urgent priority. Tonight we'll examine the basics of the plan and debate its main elements. Tomorrow we'll look at the political landscape, and each night next week, we'll examine what the Clinton's proposals would mean to different groups, starting from the patient's point of view. Tonight we begin with a reaction from citizens who watched the President last night in Chicago. Elizabeth Brackett reports.

PRESIDENT CLINTON: [speech excerpt] This health care system of ours is badly broken, and it is time to fix it.

MS. BRACKETT: Most of the eight people we gathered in this Chicago living room last night agreed with President Clinton that the health care system needed to be fixed. Retail business owner Karen Kline.

KAREN KLINE: I think it's very important that we have security, that we have universal coverage, but that we, that we let people live without the fear that they're going to lose their health insurance, we let employers live without the fear that their health insurance premiums are going to skyrocket if one or more of their employees faces a serious illness.

MS. BRACKETT: Small business owner and homemaker Karen Zeema.

KAREN ZEEMA: Well, I felt the whole speech was so hokey. I mean, it just, it was so emotional. It was, it was good. It, you know, it hit home, but who's going to pay for this?

MS. BRACKETT: Raymon Vargos is self-employed.

RAYMON VARGOS: We believe that we are a great nation, we should have great coverage for our people. It's, I think, too early to pass some judgment as to how it's going to be done because we don't know the details. We are going to know in the few coming months, but the whole health care system for the American people has been something that should have been done many years ago. We have the opportunity now to have for everybody, and we should, I will embrace it.

MS. BRACKETT: Freelancer Mary Beth Berkoff.

MARY BETH BERKOFF: I'm very optimistic. I think we need to see some details. I personally feel very encouraged, particularly as I embark on a, a career of being self-employed, that this gives me the security of having benefits and not having to seek employment in a situation that I would rather not have.

MS. BRACKETT: Orthopedic surgeon Mitchell Sheinkop.

DR. MITCHELL SHEINKOP: You can't argue with the spirit of anything the President said tonight. This was a masterful speech, and he outlined principles of a universal nature with which no one can argue. I too had some principles which I was looking for and established, and I wanted to hear in the speech, and unfortunately, he failed in principle No. 1, am I better informed now than I was before the speech.

PRESIDENT CLINTON: [speech excerpt] We're blessed with the best health care professionals on earth, the finest health care institutions, the best medical research, the most sophisticated technology. They are what is right with this health care system.

MS. BRACKETT: He said the quality was very important and that that was what we had to preserve in the health care system that we have today. Did he convince you of that, or not?

PERRY EICHOR: The quality issue is, I think, what a lot of people are concerned about.

MS. BRACKETT: Small business employee Perry Eichor.

PERRY EICHOR: I don't know that he answered any questions for anyone tonight regarding how they're going to either maintain quality, the quality of service that we have now, or make improvements on it.

MS. BRACKETT: Small business owner Bob Zeema.

BOB ZEEMA: They talked about report card; they talked about the developing information for people through the alliances. I think he has a very strong program for maintaining quality. I think the quality is excellent for those who have access to it.

PRESIDENT CLINTON: [speech excerpt] If we're going to produce a better health care system for every one of us, every one of us is going to have to do our part. There cannot be any such thing as a free ride. We have to pay for it. We have to pay for it.

BOB ZEEMA: I'll say as a business person I'm tired of paying for the people that are getting a free ride, and I'm tired of seeing our employees with their share of the premiums paying for the people who are getting a free ride.

DR. MITCHELL SHEINKOP: But may I interject? Please be aware that the 37 million, however, are not the indigent of this country. The indigent of this country are covered by Medicaid and governmental programs. These are people -- a large number -- who elect to go without insurance. Now, I'm not talking about the young and the new college graduate. There's a population, and a significant percentage of 37 million, who purposely elects to go without insurance coverage, and then the health cost is transferred to you, the insurance payer.

MS. BRACKETT: Do you think this is going to change that?

DR. MITCHELL SHEINKOP: I don't know.

BOB ZEEMA: But why do they elect it? Why would somebody elect - - why would somebody elect to be without insurance? Or why would an employer, why would an employer elect not to provide insurance to their employees?

DR. MITCHELL SHEINKOP: Well, that's a complex question too.

BOB ZEEMA: It's greed.

MS. BRACKETT: President Clinton said we've had all the government agencies look at these numbers, and we've had accountants look at these numbers, and we believe we can do it and wanted you to take that on faith. Did he sell you?

PERRY EICHOR: I think we can afford it but it'll be through taxes. I think they've underestimated what it's going to cost, and what they'll be able to -- overestimated what they'll be able to save. We have but to look at any of the big programs that they've predicted they'll be able to cut over the last 20 years even up and to the current budget. For the government to say that they're going to be a better administrator of cost savings and cost cutting I think is kind of funny.

KAREN KLINE: I think we can, we can take care of the health of our people.

MS. BRACKETT: And you're a small business woman, and you're not worried that this might put you out of business?

KAREN KLINE: I think we're already paying for it. I think, I really -- I'm not an economist but I see, I see all these enormous numbers of the amount of money we're spending on health care. I see the amount of money we're spending on insurance premiums and health costs of all sorts, and I think it's, it's just a matter of shifting it around. And I think that we are already paying for it, and we just have to do it more sensibly.

KAREN ZEEMA: I think it was a very -- I said this before -- a very emotional speech. I would love it to be for everybody. I have problems with how we're gonna put this into effect. If we do, great! I'm not an economist. I, I hope it works out.

MS. BRACKETT: Very good. Thank you all very much.

MR. MacNeil: Well, the President did not go into the details of his plan last night. The White House released copies of the plan which takes nearly 300 pages to describe. Here is a review of the main points by Correspondent Tom Bearden.

MR. BEARDEN: At the heart of the plan is security. Every American would be guaranteed health coverage. The main way that's achieved is through a requirement that employers, no matter how small, pay for insurance coverage for all workers. Businesses would pay 80 percent of the premiums for all employees, even part-timers working 10 hours a week. Employees would pay 20 percent of their premiums. To cushion the blow to small businesses, the government would offer some subsidies. The government would define the basic package of benefits and require all insurance plans to offer it. The basic package would include: routine doctor visits and check-ups, hospital care, emergencies, prescription drugs, mental health care, vision and hearing care, for children dental care, and home care for the elderly. Even though all businesses would pay for coverage, they would not choose insurance plans for their employees, as they may do now. That's because each state would establish regional health alliances. These regional health alliances would be like huge buying clubs, negotiating with doctors and hospitals to provide health care for all members of the alliance. Every family or individual must join an alliance, which will collect the premiums and pay the doctors and hospitals. Consumers would get to choose from a variety of health plans, which ever best meets their needs, whether it's a health maintenance organization, or the more traditional fee for service plans, and all insurance plans would be community rated, which means they would charge everyone the same premium. They could not exclude patients because of preexisting conditions such as cancer or AIDS. Regulating all of the alliances and the states would be a national health board. It would have the ultimate responsibility for policing the system. And to keep costs down, the board would set caps on insurance premiums within each alliance. NEWSMAKER

MS. WARNER: The Clinton health plan was drafted by a White House task force run by former business consultant Ira Magaziner. I talked with Mr. Magaziner this morning and asked him about the making of the plan.

IRA MAGAZINER, Clinton Health Adviser: The President laid out his vision of health care reform during the campaign, going way to before theNew Hampshire primary. And he said he wanted a private system that relied on competition but he wanted it backed up by capping of the rate of growth of premiums. He said he wanted a system where everybody had responsibility, where there was health security for everybody, and where we really got costs under control. So he had painted the framework that he wanted to operate in, and our job on the task force, he wanted us to question that framework. He said, you know, explore alternatives, and see if we're off base here. But mainly our task was to try to flush out his vision. And so there are many areas, for example, how you deal with under served populations in urban and rural areas where just giving a health security card to everybody may not be enough because there's not a good enough health care infrastructure to deliver high quality care. So we had to do a lot of work to analyze and develop ideas on how to make sure that those populations were served well. Similarly, if we looked at the academic health centers in a purely competitive system, teaching hospitals and academic health centers could be disadvantaged unless there were special provisions taken to ensure that the important role they play for quality in our health care system was preserved. So there were hundreds literally of areas like that where we had to go in for a lot of details to make his vision reality.

MS. WARNER: The President said, of course, that he wanted to have simplicity in saving -- his principles. And of course, the simplest and most efficient, I think you would agree, is a single payer, government as insurer.

MR. MAGAZINER: No.

MS. WARNER: No?

MR. MAGAZINER: I think --

MS. WARNER: My question was: Why didn't you go for that system?

MR. MAGAZINER: I think Americans are probably more comfortable, in general, with a private system and a system that has and allows for competition. And the idea of trying to raise a very large, three or four hundred billion dollar national tax to pay for a single payer system was something that the President didn't feel the American people would want. Now, we are allowing individual states to go for a single payer alternative, and that's what the people of that state want. And so we're not rejecting the idea of single payer. But we do think that the competition that exists in many states will help simplify and control the growth of costs, and for those who states feel a single payer suits them best, they will be able to do that.

MS. WARNER: Then, of course, on the other extreme -- I shouldn't call it an extreme -- but what would be a more Republican approach, which would be let's reform the insurance business and make sure they can't cut people off, but otherwise, let people go out and just force them to buy their own insurance as everyone's required to say buy car insurance or the basic package, why wouldn't you go to that approach?

MR. MAGAZINER: Well, it's okay to talk about forcing people to buy their own insurance but if it's not affordable, then you really don't have health security. And so what we're concerned about is that if you make a radical departure from what we have now, which is an employer and individual based system for over 75 percent of the companies in the country, that you're going to put too much burden on individuals. And, you know, if you're making even $20,000 a year, or $25,000 a year, to go out and have to pay five or six thousand dollars for health insurance can often not be affordable. So we think there needs to be an employer contribution. We can't put it all on the individual.

MS.WARNER: What is non-negotiable for you? Of all these objectives, what won't the administration negotiate away?

MR. MAGAZINER: Well, first of all, we don't believe we have all the answers on all the details. This is a very complex area. We're very open to listening to the national discussion and to taking ideas that are better than ones we proposed and modifying our proposals, however, the President made clear last night there are certain principles we will not compromise in what comes out at the end of the day. There has to be national health care security for all Americans, which means that it has to be affordable health care, with a comprehensive set of benefits for everybody. Secondly, we have to get the growth of costs under control. They're bankrupting the economy. They're bankrupting families and businesses, and government. We have to have clear ways to control the growth of costs. The third thing is we do have to simplify the system. We can't allow a system that has 1500 insurance forms and so on that are stifling doctors, nurses, and consumers. The quality, we want a new quality system introduced, and, you know, the other principles that the President made out are the fundamental ones. We want to preserve choice of doctor, and we want to increase the ability of all Americans to choose their own physician and their own health plan. Today close to 50 percent of the employers, meaning small size employers who do provide insurance, force their employees into one health plan. We want to provide choices. So those are the kinds of principles we won't compromise away.

MS. WARNER: Well, let me tick off a few of the mechanisms you've set up for this. For instance, employer mandate. Could you imagine signing a bill that did not include this employer mandate, i.e., that the employers have to pay a good chunk of the cost?

MR. MAGAZINER: Well, only if it guaranteed health security. We tried very hard to look --

MS. WARNER: You don't see how it could?

MR. MAGAZINER: We don't see how it could. We, we think the only way you can do that is you raise some huge tax nationally to pay for comprehensive health insurance without an employer mandate, then yes, maybe you could do that, but we don't think that's feasible, nor desirable. Beyond that, we think building on the employer-individual system we now have is the only way to get the health security. If somebody comes up with a new idea, we'll listen, but we haven't been able to find it.

MS. WARNER: Or the idea of a national budget, setting a national health spending budget, could you imagine signing a bill without that?

MR. MAGAZINER: Well, I think what we're trying to do is cap the rate of brokered premiums or the national guaranteed benefits package because we want to be sure that we get costs under control. You know, it's part of a compact that we're making with businesses and individuals. We're saying, we're going to require you to pay something for health insurance. But we can't make that a blank check for the health care industry. We have to say, while we're going to require you to do that, we're also going to get costs under control so that what we're asking you to pay is manageable for you. So we think those things really have to be there.

MS. WARNER: And do you see any other way of doing it, other than this mechanism you've set up?

MR. MAGAZINER: Well, I'm sure there are a lot of different detailed ways about how you could do premium caps, or how you could budget the growth in the system, and we'll, again, be happy to listen to those ideas, and if somebody has, you know, different specifics on how to get that rate under control, we'd be happy to listen to them. But the important thing is that we can guarantee to the American people and American businesses that we are going to get the growth under control.

MS. WARNER: Let me ask you about the savings, because that's been the most controversial element, and your plan depends on sort of bleeding out 238 billion dollars out of Medicare and Medicaid. Now, setting aside whether that's doable -- you know -- as a fiscal matter, how is it doable politically? I mean, it was very difficult just to get 53 billion out of Medicare and Medicaid in this budget fighting.

MR. MAGAZINER: But, you know, we have a very different context when we're talking about health care reform. The fights we've had in the past about producing savings in Medicare, for example, have all been to go for deficit reduction. What we're doing is while we are trying to get over the next seven years a hundred and twenty- four billion in savings from growth in the Medicare program by slowing down the growth, we're going to reapply those funds for a new prescription drug benefit in Medicare and also for the beginnings of a new home and community-based long-term care program. So what we're saying to the senior community is yes, we're looking to slow the rate of growth in this, but we're going to reapply it to new benefits for you. That's a very different political equation than just saying you're going to cut Medicare in order to fund the budget deficit.

MS. WARNER: And do you have the senior citizens lobby on this?

MR. MAGAZINER: Well, I think you'd have to speak to them directly, but at least so far groups like the AARP and the National Council of Senior Citizens and other groups have been very supportive of our general efforts. And we need to put into context what we're really doing here. I mean, we are slowing the rate of growth of the Medicare system. That does not have to hurt beneficiaries. When you do that, what we're trying to get at is to get out a lot of the waste that's now there, so we're also going to be cutting a lot of the requirements, reimbursement requirements in the Medicare program that add to all that paper work the President talked about last night. So it should make it cheaper for doctors and hospitals to work with the Medicare program because they won't have to fill out so many forms.

MS. WARNER: But won't the insurance company on one side, and doctors and hospitals on the other side be still in the same sort of vicious circle they are now, with insurance companies trying to keep the doctors' and hospitals' costs down and the hospitals trying to justify their costs, and the paper work going back and forth?

MR. MAGAZINER: No. We expect not. Basically a health plan that tried to organize itself that way we don't think will be competitive. Basically, what has to happen is that the people on the front line, the providers, the doctors, the hospitals and so on have to, themselves, get more involved in organizing the care, and then to policing themselves in terms of cost effectiveness and quality. You don't envision, you know, separate layers of insurance bureaucracies sitting on top of the doctors and hospitals we envision as an integrated operation. And there are examples like that around the country now. There are examples in other countries. So I don't think you can judge by today's system what will emerge in the future because today's system has very few players that are competitive.

MS. WARNER: Let me ask you about this paper work and administrative costs because that's another savings you're hoping for. You're going to set up a national health board, a national sort of drug pricing committee, a quality management council, a council to look at specialists and medical schools, and more than 50 states what health alliances purchasing clubs. How can you do that without generating more bureaucracy?

MR. MAGAZINER: Well, let's talk about what we're doing here. First of all, the national health board, if it has a hundred employees it'll be too many. It's basically a board of directors that is setting the guarantees for the system. It does not run the system.

MS. WARNER: But don't they have to have research --

MR. MAGAZINER: No.

MS. WARNER: -- to make these decisions?

MR. MAGAZINER: No. Basically, the research functions that already exist would be the research functions that they would call upon. For example, we will be funding out in the academic health centers and elsewhere in the country quality outcome research to help us know better what produces the quality in health care. That won't be done by any federal bureaucracy. That'll be housed in the academic health centers and teaching hospitals and so on, and medical schools in the country, that won't be a federal bureaucracy.

MS. WARNER: Let me ask you about one other thing that drives costs, and that is, of course, consumers' demand for quality, which when someone's sick quality means the highest high-tech thing I can get, whether my father is 90 and wants a quadruple bypass, or whether I want some fancy operation for gallstones when I could probably live with the pain. How are you going to control that, or aren't you?

MR. MAGAZINER: Well, first of all, what we've learned over the past 20 years in all walks of life in this country is that better quality and lower costs often go hand in hand. That's what the total quality movement has been all about, and what we find is that technology also works both ways. Yes, you can give examples of a very high tech procedure that costs more money and improves quality of care, but also, I mean, I had my knee operated on 20 years ago, and that operation put me in the hospital for two weeks, plus a lot of money, that same operation today could be done with orthoscopic surgery, and I'd be in and out in two or three days. So technology can also save cost.

MS. WARNER: But there will be some rationing, won't there, but just by a different, by a different mechanism now, as rationed by costs?

MR. MAGAZINER: No.

MS. WARNER: You think everybody will be able to have every procedure?

MR. MAGAZINER: No. What I see is that consumers, if they're really informed and really put in the driver's seat, will very often make a decision that is cost effective.

MS. WARNER: As you look ahead to this next year, after putting your heart and soul into this for the past year, you said earlier, this spring that sometimes you woke up with nightmares that something would go wrong. What's the nightmare between now and getting it passed in say a year?

MR. MAGAZINER: Actually, I'm very excited now. I think that we've got a proposal that we're going to put forward to the country that's a good one. I don't think it's -- we thought of all the good ideas, and I'm looking forward to getting ideas from people around the country and modifying our proposals to be even better and better. But I think what I'm excited about is that we've engaged in national debate now, that there seems to be a real momentum building for health care reform, and that I think after the President's speech last night it's going to be hard for the Congress not to act in a serious way. And so I'm very excited now. I'm very much looking forward to this discussion.

MS. WARNER: Well, thanks, Mr. Magaziner, thank you for being with us.

MR. MAGAZINER: Thank you. FOCUS - THE RIGHT DIAGNOSIS?

MR. MacNeil: Now we begin that discussion with four of the nation's leading health care economists. Prof. Alan Enthoven of Stanford University's School of Business is one of the principal architects of managed competition. He's a founding member of the Jackson Hole Group, a health policy think tank. Stuart Altman, a health adviser to President-elect Clinton during the transition, is the dean of the Florence Heller Graduate School of Social Policy at Brandeis University. He chairs the Independent Commission which advises Congress on Medicare. Gail Wilensky was former President Bush's chief health policy adviser. She's currently working with House & Senate Republicans on health reform legislation and is a senior fellow at Project Hope, a health education foundation. And Rashi Fein is the professor of the Economics of Medicine at Harvard University's School of Medicine. Ms. Wilensky, as President Bush's former top health adviser, what's briefly your overall reaction to the Clinton plan?

MS. WILENSKY: Well, the principles and the rhetoric we heard last night are terrific. The difficulty that I have is with some of the specifics that I don't think match the plan, and there are three areas at least that I'm concerned about. I think there are benefit expansions that are promised that go way beyond the financing that we've heard. I just don't think the financing is real, and we can talk about that, and it goes to the Medicare hits that we heard about, some of the increased personal income tax savings that they are counting on, et cetera. The second problem that I have is that while they talk about simplification and less paper work and single forms, there is an awfully lot of bureaucracy that's being talked about with national health board and health alliances, and groups to make sure that health alliances function well, and other councils to make sure there are the right number of specialists trained. It sure seems like an awful big bureaucracy for a simplified system. And the third, I'm worried about some of the employment effects, the early retiree benefit in particular, also the general concern about employer mandates, what will happen with small businesses.

MR. MacNeil: Okay. Well, we'll come back on some of those points. Mr. Altman, as a former adviser to Bill Clinton, did he get it right?

MR. ALTMAN: Well, I was impressed. I read through the document, and while I thought we did a good job during the transition, they really did take where we had left off and added a lot of features that I thought made sense. Obviously, I don't agree with all aspects of it, and, you know, of course, if I was doing it all, I'd do it a little differently. But for the most part, he did make true on his commitment to cover every American, to develop a mechanism for controlling costs, and to really put Americans at ease that they have financial security for health care.

MR. MacNeil: Mr. Enthoven, as one of the architects of managed care, are you happy with what the President has come up with?

MR. ENTHOVEN: Well, I think there are a lot of wonderful features in the President's proposal. I think universal coverage in a premium-based system, doing it through the private sector, through competing managed care organizations that compete to provide value for money, all that is very positive. I do have some serious concerns about details that are important details because my second and third reading of the 240-page report led me to think that there are going to be too many government controls too soon, so I would like a design that relies more on market forces and less on direct government control.

MR. MacNeil: Okay. Mr. Fein, as an advocate of the single payer system like the Canadian one, how do you assess the Clinton plan?

MR. FEIN: I think it depends on the standard that one would use. If I use the standard is the world going to be a better place if this is enacted, for sure. If I use the standard, can this program, even within the broad dimensions that have been sketched be improved, I think it can, and I'm happy to see that the President will welcome suggestions, comments, that there will be a period in which perhaps this program will become even better.

MR. MacNeil: Speaking of single payer, let's just discuss that for a moment. What did you make of Mr. Magaziner's statement that states could adopt single payer if they like?

MR. FEIN: It's not the way I read what we who have been in favor of single payer have meant. I think what Mr. Magaziner means is that a state could have an authority that would pay all the bills. Useful as that would be, what many of us have meant and what I have meant when I said single payer, which is really not only a Canadian-like system, but let's bring it a little bit closer to home, it's Medicare for everybody. That's a single payer. To me, that means a system that is not linked, where insurance is not linked to employment, and a system that depends on broad-gaged taxes. It's hard to see how any individual state would be permitted to do that under this plan. I hope that's changed.

MR. MacNeil: Okay. Now, Ms. Wilensky, do you have -- let's just go through -- do you have any disagreement -- let's just go round - - is there any disagreement on the basic idea of universal coverage and a mandated basic package -- do you have any disagreement with that principle?

MS. WILENSKY: The universal coverage, no, not at all. Everyone should have coverage. The mandated package, it really depends what's in there. I find it unlikely that if we insist on having the same package present that we'll have something that's good enough for the poor that isn't overly generous and, therefore, too costly for the very wealthy. But I think we have to think a little bit about what does it mean to have the benefit, benefit package that is the same, but absolutely everyone has to have insurance coverage at least for the most expensive type of services? We need to discuss what else after that.

MR. MacNeil: Okay. And Stuart Altman, you obviously don't disagree about the universal coverage, and what about the basic benefit, mandated basic benefit package?

MR. ALTMAN: I don't see any reason why every American shouldn't be getting the same basic services. There may need to be differences in terms of the cost sharing based on people's incomes. But for the most part, the services that are needed by the poor are also the ones that are needed by the middle class and the rich. So the basic services that are in the package are, are reasonable, but there is some concern, particularly by the low income advocates, that this plan does ask Medicaid people to pay more than they're used to paying, and it may hold them back from getting some services.

MR. MacNeil: Mr. Enthoven, any quarrel with the idea of the basic, mandated package?

MR. ENTHOVEN: No. I think first of all there are a lot of benefits to standardizing the package that will simplify life and make things work a lot better, and I think that the administration is right in the view that everyone who can pay must be required to pay. We can't have free riders and unfair cost shifting because some people are paying their premiums and taxes and other people are not buying coverage when they could.

MR. MacNeil: Mr. Fein, on the basic package, coverage package.

MR. FEIN: Universal insurance, very important. There ought to be a basic package. It ought to be defined by the federal government, and I'm happy to say that the plan does not prevent -- in fact, it calls upon the federal government to have special programs for populations that need more than that basic package and need outreach programs, need rural intervention, et cetera, et cetera. So there ought to be a basic package, and it's good that we are adding to it.

MR. MacNeil: Let's discuss paying for this, starting with you, Mr. Fein. The President laid great stress last night on the credibility of his figures and said they'd been studied by all sorts of people. Is the way of paying for what he is promising credible to you?

MR. FEIN: I believe that the President is being unduly optimistic about the savings that can be achieved in the short run. It is possible that some years hence this kind of a program will bring costs -- I won't say down -- will slow, will significantly slow up the rate of increase in cost. But, look, the program relies on development of HMO's, on the development of quality HMO's, on the development of data to support our judgments about quality, on the change in the proportion of specialists and primary care physicians. It calls for a compressing and evolutionary change in the health care system into a revolutionary timeframe. So I think it falls short, and I'm very concerned about that, and I hope we get to what's the solution to that problem.

MR. MacNeil: Okay. I will come back on that. Ms. Wilensky, the credibility of the figures you called into question.

MS. WILENSKY: I think one of the most serious problems, a lot of benefits have been promised, a lot of expansion. I don't find these estimates credible. The $124 billion hit on Medicare comes after a $56 billion hit that was part of the economic plan. To do that, in my opinion, would devastate the physician and hospital, the acute care part of Medicare, and would do great damage to rural hospitals and the hospitals that have very big Medicare populations. There's an assumption that personal income tax receipts would go up by over 50 million because employers would increase wages with the health care costs controlled. The fact of the matter is lots of parts of the economy would lose wages and would lose income because of all these changes. Nowhere is that factored in. The kinds of savings that are assumed in the public sector and even more in the private sector are faster than any country has ever experienced, and these are, at least in the private sector, with institutions that don't even yet exist. It's the promising of benefits but not having real financing that we've got to stop. It's easy to promise benefits if you're not telling the public how you're going to pay for them.

MR. MacNeil: And Mr. Altman, how do you feel about the costing?

MR. ALTMAN: There's no question. I share some of the concerns that Gail and Rashi say, but I think we're losing sight of what the President has been pushing, and he's been pushing it for a long time. He looks at our health care system and says, look, we're growing at 9 percent a year, we're growing three times faster than inflation. Germany and Canada, and England have managed to bring their health care in line with their GDP. We ought to be able to bring our health care to grow more in line with our capacity to pay for it, and we ought not to be asking the Americans to pay even more in taxes for a system that's overblown. Now, I personally would like to see those numbers come down a little slower, as Rashi said. I think where -- he's asking for it come down quite far, but we can get caught up in the idea, oh, these numbers don't add up here and there and therefore, we need more taxes, whereas, I fear somebody will say, well, we can't pay for it, therefore, we shouldn't have universal coverage. I think by thinking that way, we're going to sort of let this opportunity slip by. So for the most part, I think it does hold together, although it is very aggressive. There's no question about that.

MR. MacNeil: And Mr. Enthoven, what's your view of the credibility of the numbers?

MR. ENTHOVEN: Well, I believe that over the long-term through incentives and organization we could greatly slow the growth in health care cost and even reduce it as a share of GNP. But I think starting to do what they lay out by 1996 is unrealistically optimistic. But here's what really bothers me, or one of the things that really bothers me, and that is in this plan the federal government guarantees all employers who are in the health alliances that their payments toward premiums will not exceed 7.9 percent of payroll. In fact, with lower income employers it's even a lower percent. That poses a huge risk to the federal budget because if health care costs continue to rise faster than wages, as they've been doing for many, many years, then the federal government is going to have to make up the difference, and that could be a large increase in the deficit. And then what worries me about that is the following: Firms with lower incomes will be paying let's say their 7.9 percent of payroll on health care premiums, firms with higher incomes will be paying a lower percent, maybe half that. And at this point, the federal government's going to need a whole lot more money to make up that shortfall. But my concern is then that what we're going to hear is those firms and employers with higher incomes are not paying their fair share. I can almost hear the President's of last summer ringing in my ears, and their fair share is going to turn out to be 7.9 percent of payroll. And, in effect, what we'll end up with through the dynamic of this system is a payroll-financed system which will greatly increase people's marginal tax rates.

MR. MacNeil: So to go to Mr. Fein's point -- and we'll go round -- starting with you, Mr. Enthoven, how would you fix what you think is wrong in the funding aspects of it?

MR. ENTHOVEN: Well, on this particular point, I don't think that the government ought to guarantee employers that their premium costs will not exceed 7.9 percent of payroll.

MR. MacNeil: You don't quarrel with the employer mandate.

MR. ENTHOVEN: No.

MR. MacNeil: You just quarrel with the percentage put on it.

MR. ENTHOVEN: That's right. I don't quarrel with the mandate. I think the administration is right on that and on the principle of no free riders. What I quarrel with is the idea that the government is going to say to employers, we will guarantee that whatever happens to costs, you don't have to pay more than X percent of payroll. And what worries me about that is it takes employers out of the battle as a force in favor of cost containment. Already, you could say that what's brought us to this serious problem with health care costs is that we have anesthetized everybody to the costs of health care, and so that, that people want everything because somebody else is paying for it. I think employers ought to be at risk for the cost and employees too ought to be at risk for the cost of care so that they're interested in making economizing choices.

MR. MacNeil: So just to be clear, it shouldn't be a prescribed percentage of payroll. It should be whatever the percentage of payroll is that will pay the premium for the service that they've chosen to buy because they think it's the most economical.

MR. ENTHOVEN: Right.

MR. MacNeil: Mr. Fein, with what you see wrong with it, what needs to be done to fix it on the costing side?

MR. FEIN: It seems to me that the President, the administration will be faced with three alternatives. They will hear, we will all hear. We can't afford to cut back the benefits. I think that would be disastrous. I think that the American public needs this kind of program. The second thing we'll hear -- and I'm extraordinarily concerned about this -- is it'll work in the long run but not in the short run, so let's just pledge and change the timetable and phase it in not in 1996-7 but in the year 2002. And I am very concerned about that, because it seems to me that the corollary of that kind of an approach, let's first save the money and then we'll have the bonus of inviting people into the universal system is wrong, it's not a bonus. Indeed, I would argue that we have to have universal insurance to save the money, because we have to get rid of the cost shifting, and we have to have everyone involved in whatever sacrifices there are. So I am left with a third alternative. If I need money and I don't want to cut benefits, and I don't want to postpone, I've got, it seems to me, to come to the American public and say, as I hope the President will, if that time comes, this is an awfully valuable program. This is a good program. This is the hallmark of a civilized society, and it is worth paying for, and then ask us to do so.

MR. MacNeil: What is your solution, Ms. Wilensky, to what you see wrong with the funding side of it?

MS. WILENSKY: Well, I certainly agree with what Rashi Fein just said, which is we've got to be more honest with the American public. I suspect that if we tell the American public that if they want to have the benefits that are equal to the best Fortune 500 companies, want to have those early retiree benefits for the 55 to 54 year old group, we want to have all of the other benefits that have been promised to the elderly, it's going to cost a substantial amount of money. We need to think about, is that what we're willing to pay for? I suspect, much as he might not want to hear it, people will say, well, if that's the case, if it means giving up something, well, maybe just a somewhat modified package or a lesser package will do. We need to make sure people have that discussion. I personally think that's the way they will opt. I want to raise an issue with regard to the employer mandate. I'm really concerned about that. It increases the myth or furthers the myth that this is somehow free from the employer as being, instead, part of the employee's compensation package. I agree with Alan Enthoven. I don't want free riders. I like the idea of having it be on the individual -- that's where the mandate ought to be -- with subsidies for individuals who need help. And that's what we do now. We just cloak it as part of the employer mandate as though the employer was, in fact, paying the bill,when we all, all of us economists now, it's part of the employee's compensation package. I'm very nervous that this will increase people's feeling that it is really free and also lead to increased payroll taxes because of the various promises that have been made with benefits.

MR. MacNeil: Now, you're working with the Republicans on the Hill, on their alternatives, some of the Republicans, and you've - - what you just outlined really is the most prominent Republican alternative, is it not, not to have employer mandates but to have individuals require to pay for it, themselves. Just let me add one more sentence. You heard Ira Magaziner say he thought that that part of it was not negotiable. Now how do you see that coming out?

MS. WILENSKY: Well, I think that there are two or three issues that I don't understand how they will be negotiable, although I think that there is a genuine sense of goodwill on both the Democrats and the Republican side to try to work together. I think spending limits and premium caps are very serious issues for Republicans and a number of Democrats as well. I think employer mandates are very serious issues for most Republicans and a good number of the conservative Democrats. And I think the bureaucratic mechanism that has been suggested is also an area of great concern, although maybe that one could be negotiated a little easier. I don't know how you compromise on these issues, and it may be that at one point or another one side will be able to come up with 218 House votes and 51 Senate votes. It's not clear how you negotiate those points.

MR. MacNeil: Mr. Altman, what is your area -- go back to your area of discomfort with the funding and what you will do about it?

MR. ALTMAN: Well, maybe the fact that you have four economists on this program indicates more agreement than the general population, but first let me reinforce what Alan Enthoven said. I am concerned that too many sectors of the economy are left out of worrying about the cost. I agree that the business and employers in general and as well as workers should be concerned about their costs, and they shouldn't be capped. Second, we haven't talked about it, but this plan makes it very difficult for a corporation of a thousand employees or even five thousand for that matter to be outside those regional alliances. I think that's a big mistake.

MR. MacNeil: Because they define the size at 5,000 employees in the world.

MR. ALTMAN: Not at 5,000, but they put all kind of penalties on a firm for staying outside, or the other way around. They put all kind of subsidies if you go inside, which we could get into. The problem with that is that it puts all of the pressure for cost containment on these regional alliances when, in fact, large corporations have been the leaders in managed care. They've been the ones that have been pushing hard, and it's a mistake to sort of rely on one sector to sort of be in charge. The second -- let me support what Rashi said -- and that is that I think there should be some broader based financing for this. After all, for the most of us, who are now well insured, we stand the real possibility of seeing a substantial reduction in what we're going to pay in the future. And if that's the case, we should be prepared to pay some of these savings to make sure that it happens. So the American people have indicated in survey after survey that they are willing to pay a small additional amount up front for this financial security.

MR. MacNeil: In direct taxation you mean?

MR. ALTMAN: Yes. And we should do it, and, therefore, notbe forced to make up so much of the cost in the form of the savings. And I, I think as an American people we actually would support it, and it would make the whole financing system that much more credible.

MR. MacNeil: Mr. Enthoven, what do you think of that? You heard what Gail Wilensky just said. She didn't that would go with the voters. What do you think?

MR. ENTHOVEN: I just wanted to pick up on what -- from where Stu Altman was, and that is putting all of the employers -- my reading of this plan is that every employment group is going to end up in a regional health alliance, and at that point, I would read it as - - call it the State Department of Health. In fact, the state is going to be given a lot of powers to regulate the health care system in detail. And I think that will mean decision making based on political considerations, rather than economic merit. I feel very concerned about, about that.

MR. MacNeil: Does it really achieve, Mr. Enthoven, does it achieve cost control this time?

MR. ENTHOVEN: Well, I have the following major concern. I think the administration plan adopts many of the concepts of managed competition and adopted all of those, that would be a significant step forward. For example, it requires employers to make an equal level dollar contribution to the employee's health care, and if the employee chooses a less costly plan, the employee gets a rebate. But the administration, for understandable, political reasons, that is not to antagonize organized labor, left out the single most important incentive reform, and that is the need for a limit on tax free employer contributions, because under the present law and in the administration's plan employer contributions are tax free without limit to the employee, and that means, in effect, a 50 percent subsidy to inefficient health plans. I think people who choose an inefficient health plan -- let's say that costs are 10 dollars more -- ought to pay the whole 10 dollars extra with net after tax income. Then because they weakened the market incentives this way, let me rely on federal price controls. And we all know -- all of our experience tells us government price controls on premiums just don't work.

MR. MacNeil: Well, Mr. Enthoven, thank you, gentlemen, and Ms. Wilensky, thank you all for joining us. We've obviously begun what's going to be a long discussion of this issue. Thank you all. RECAP

MS. WARNER: Again, the major stories this Thursday, there were reports from Moscow tonight that eight armed gunmen failed in an effort to capture a military communications center. The gunmen were reported to be hard-line army officers opposed to Russian President Boris Yeltsin. President Clinton kicked off the official campaign to sell his health care reform plan. The SBC announced it will allow expansion of cellular phones and other wireless communications. And Sidney, Australia, was chosen as the site for the Summer Olympics in the year 2000. Good night, Robin.

MR. MacNeil: Good night, Margaret. That's the NewsHour for tonight. We'll be back tomorrow night with analysis of the political fight ahead for the President's health care plan. I'm Robert MacNeil. Good night.