Medicare's Political Life Expectancy

DATE May 26, 2005 ACCOUNT NUMBER N/A
TIME 12:00 Noon-1:00 PM AUDIENCE N/A
NETWORK NPR
PROGRAM Fresh Air

Interview: Jonathan Oberlander discusses the history and future of
Medicare
TERRY GROSS, host:

This is FRESH AIR. I'm Terry Gross.

Most Americans have parents or grandparents who rely on Medicare, or they're
enrolled in the program themselves. Although Social Security is getting the
attention now, Medicare may soon be facing an even bigger financial crisis.
In the meantime, the new prescription drug benefit goes into effect in
January, and it promises to be very confusing.

To better understand how Medicare took the form that it did and what problems
it's about to face, we invited Jonathan Oberlander to talk with us. He's the
author of the book "The Political Life of Medicare." He's an associate
professor of social medicine in the School of Medicine at the University of
North Carolina in Chapel Hill. He says that Medicare's roots are in the
Truman administration proposals for national health insurance in the early
1950s. After years of debate, Medicare legislation was signed by LBJ in 1965.
I asked Jonathan Oberlander about the arguments that were made then for and
against the program.

Dr. JONATHAN OBERLANDER (Author, "The Political Life of Medicare"): The
argument for it was simply that health insurance had been spreading among
workers in the employed population in the 1940s and early 1950s, and the
elderly had largely been left out of that. They--to us, they're our parents
and grandparents; to insurance companies, they're bad risks, so they were very
expensive to insure, and they had been left out of it. So that was the
argument for it.

The argument against it, which was broached mainly by the American Medical
Association, was that this was a slippery slope to socialized medicine, and if
we started with Medicare we were going to get a full-blown national health
insurance system.

GROSS: Yeah, I'm glad you said that, because one of the major arguments that
we hear in America against a single-payer national health insurance plan is
that it's like a first step to socialism. It's a socialistic program, and
that would be terrible. So how did Medicare get around that and get around
the label of it being socialistic?

Dr. OBERLANDER: Mainly by picking a really popular group to ensure. So they
took the elderly, and that wasn't by accident. The United States is the only
industrialized country that began its national health insurance system with
the elderly, and they picked the elderly because they commanded sympathy.
They were uninsured through no fault of their own, so it was harder to oppose
that legislation as socialized medicine.

GROSS: What was the debate over Medicare like in the House and the Senate?

Dr. OBERLANDER: It was very intense. It was very polarized. It was very
ideological and very partisan. The Democrats, who favored Medicare, thought
that this made sense. In the 1950s there was increasing attention to the
problems of the elderly in the United States, and it just seemed the logical
thing to do, as you had a population over half of whom didn't have any health
insurance at all, and yet they were the part of the population that arguably
needed health insurance the most. That was their argument.

The opponents of the legislation, Republicans and conservative Democrats, said
this is too expensive, that this is a illegitimate intrusion of the federal
government into the private sector, and again, that this would lead to
socialized medicine. And of course, this was during the height of the Cold
War when those claims really meant something.

GROSS: So how did Medicare end up passing?

Dr. OBERLANDER: What really broke the logjam--and you know, they carefully
constructed the Medicare strategy to narrow President Truman's original
proposal for comprehensive national health insurance into a plan just for the
elderly and linked to Social Security. And they narrowed it, and nevertheless
it took 15 years to get it through, and what really broke the logjam is the
1964 elections, where Lyndon Johnson was elected with huge liberal Democratic
majorities in the House and the Senate, and so it's no accident that at the
same time you get civil rights legislation and education legislation and
anti-poverty legislation, that you also get Medicare in 1965.

GROSS: The AMA, the American Medical Association, threatened a strike if
Medicare was passed. Why were the doctors opposed to Medicare?

Dr. OBERLANDER: You know, if they had known what was going to happen after
Medicare was enacted, they wouldn't have threatened to boycott Medicare,
because Medicare helped make the American medical profession rich.
Beforehand, they were worried about national health insurance, worried about
the federal government telling doctors how they should practice medicine, and
they had a long record in the 20th century of opposing any expansion of
federal authority in health care. Medicare was just the latest battle for
them. And the president of the AMA during the Medicare debate said that
Medicare was nine parts evil and one part sincerity, and that one part
sincerity was a significant concession on his part.

GROSS: So did the Medicare bill, as passed, take into account some of the
doctors' concerns? Were there compromises to make the doctors happy?

Dr. OBERLANDER: Absolutely. The architects of Medicare wanted to show that
federal health insurance could work. And they wanted to have a smooth takeoff
for the Medicare legislation after it was enacted in 1965. And so they wrote
what I call a sort of open check, a blank-check policy into Medicare, that
Medicare would pay hospitals and physicians essentially whatever they asked.
That, of course, was a recipe for inflation, but it helped assure that
physicians and hospitals would participate in the program. Medicare also from
the beginning contracted mainly with Blue Cross and Blue Shield to administer
the program, and that provided a sort of buffer between physicians and the
federal government.

GROSS: Well, what about the pharmaceutical industry? What was its position
on Medicare when it was being debated in the '60s?

Dr. OBERLANDER: They really weren't a significant force in American health
policy at the time. Prescription drugs were there, but we hadn't had the sort
of explosion in prescription drug spending and discovery that we've had in the
1980s and 1990s, so they were sort of on the periphery of the debate.

GROSS: And what about the health insurance industry?

Dr. OBERLANDER: The health insurance industry also was not as powerful as
they are now. As I said, most seniors did not have good health insurance at
the time Medicare was enacted. Some did, and certainly one of the
alternatives that was discussed at the time was giving a subsidy for seniors
to purchase private health insurance as opposed to Medicare providing it. But
simply the size of the margins in Congress, the Democratic margins and the
power of the Johnson administration meant that they couldn't get their way.

GROSS: You said before that Medicare made doctors--helped to make doctors in
America rich. How?

Dr. OBERLANDER: By paying them a lot of money, and by paying them anything
they wanted. And they had a particular formula that paid physicians according
to what was the prevailing practice in a community, and it--you know, doctors
are smart people; I teach doctors--and it didn't take them very long to figure
out that if they kept raising their prices, the prevailing rates, so to speak,
would keep going up, and that's what they did. And so American health-care
spending was already, so to speak, on fire, but this added significant flames
to it.

GROSS: And how did that, in turn, affect the funding for Medicare?

Dr. OBERLANDER: Almost from the beginning of the program, Medicare has been
in intermittent fiscal crisis, and as early as 1970, people were
worried--Senator Russell Long from Louisiana, on the Senate Finance Committee,
said that Medicare was, quote, "a runaway train." And those concerns over
Medicare's affordability, whether it's going to go bankrupt, have really
defined the program all the way back for the last 35 years.

GROSS: And how do you think the promise of Medicare has compared with the
reality?

Dr. OBERLANDER: I think the reality has fallen short, and I think that
something that's actually not well understood not even today, Medicare pays
for less than half of the elderly's health-care expenses, less than 50
percent. That's mainly because Medicare doesn't pay for long-term care.
Until recently it didn't pay for prescription drug coverage and a number of
other things. The promise of Medicare is really to assure, as people
understand it, that the elderly have access to medical care, that their care
is paid for. But Medicare doesn't pay for all that care.

GROSS: Well, there's a whole industry of supplemental insurance that grew up
around the things that Medicare didn't pay for, so can you talk a little bit
about the effect of these supplemental health insurance plans and how that's
affected the whole Medicare system?

Dr. OBERLANDER: Very few people actually have just Medicare. As some
analysts have called it, there's Medicare and then there's real Medicare. And
real Medicare includes about 30 percent of the population that has
supplemental health benefits from their employers, retiree health benefits.
Another 15 percent of the population or so has Medigap insurance that they buy
on the private market, and low-income Medicare beneficiaries have Medicaid.
So that helps to fill in a lot of holes.

On the other hand, it also creates inequity because it's the wealthier
Medicare beneficiaries that really have the better supplemental coverage.

GROSS: When Medicare was passed in 1965, it sounds like it was at that point
pretty uncontroversial. And I guess it remained pretty uncontroversial for
about three decades. When did the debate around Medicare really kick in
again?

Dr. OBERLANDER: Not until 1994. It really had three decades of quiet, and
that's mainly because Medicare was a very popular program. It was popular
with beneficiaries. It's popular with their children and grandchildren. It's
popular with politicians, and it's really the elections of 1994 that helped
bring it back into that center of controversy in American politics. The
Republicans won majorities in the House and the Senate for the first time in
four decades, and their speaker of the House, Newt Gingrich, was intent on
reforming Medicare. Partly that's because it was a symbol of the Great
Society, and he wanted to remake it. You know, Medicare, I always call it a
sort of programmatic flower child. It is really a child, programmatically
speaking, of the 1960s, and Newt Gingrich and the Republican leadership wanted
to make it into something that looked more like their conservative vision of
the welfare state.

At the same time, they needed to make substantial cuts in Medicare because
they were trying to balance the budget while they were cutting taxes, so they
went after Medicare in 1995, and that really has unleashed a whole decade of
conflict over the program.

GROSS: So what were some of the proposals that Republicans in the mid-'90s
made to change Medicare, and how does that compare with the debate today?

Dr. OBERLANDER: They initially proposed in 1995 cutting $270 billion from
Medicare over 10 years, which was an unprecedented amount of money to cut from
the program. They also proposed imposing a budgetary cap on what we spend on
Medicare, and that's a radical change from what we have come to know as the
Medicare program. Medicare is an entitlement. It's really an open-ended
spending commitment, and they suggested that we put a budgetary cap that would
limit each year what we spend on Medicare, and there were a lot of concerns if
we did that, what that would do to access.

The other main part of their reform program was moving Medicare beneficiaries
into HMOs. There are about 40 million beneficiaries in Medicare right now,
and in between now and 2030, that population is going to double to 80 million.
And so spending in the program is going to increase substantially, and the
stakes of Medicare reform are going to increase along with it. The debate in
Medicare reform right now is submerged because everybody is concerned with the
implementation of the Medicare prescription drug benefit, but it's not going
to be long before we're back on this question of how do we afford Medicare and
what kind of Medicare program should we have.

GROSS: My guest is Jonathan Oberlander, author of "The Political Life of
Medicare." We'll talk more after a break. This is FRESH AIR.

(Soundbite of music)

GROSS: My guest is Jonathan Oberlander, author of "The Political Life of
Medicare." He's an associate professor of social medicine in the School of
Medicine at the University of North Carolina, Chapel Hill.

Well, let's back up and look at the prescription drug benefit, which actually
kicks in in January of next year. So that's when people will actually be able
to use the prescription drug benefit. Why don't you describe the way that
plan works now?

Dr. OBERLANDER: Well, you know, sometimes with laws you can say they look
good on paper, and they're not going to work in reality. This law really
doesn't look good on paper, so it's difficult to describe. Right now,
Medicare beneficiaries have access to a stop-gap drug discount card, and that
is going to go out of existence; and come this fall they can sign up for the
Medicare drug benefit. It's a voluntary benefit. It's universal, so it's
available to all Medicare beneficiaries.

Here's how it would work. You would pay on average $35 a month in premium,
and we don't know the exact amount because it's going to vary depending on
where you live in the country. After you pay that $35 a month, there's a $250
deductible. Medicare then covers 75 percent of your costs, up to about
$2,200. After that, there's what has been called `the doughnut hole,' and so
Medicare actually pays nothing for the next $3,000. And then the coverage
picks up again and pays 95 percent of your costs.

GROSS: I mean, that's a really confusing system to follow, and it will
require a lot of really good bookkeeping from anyone who participates in that.
Is this some kind of strange compromise that grew up out of different points
of view?

Dr. OBERLANDER: It's a very strange compromise. It is--in part, it's because
there is a budgetary limit in Congress on how much Democrats and Republicans
were willing to spend. And there was a compromise made. Republicans really
didn't want this to be a universal bill. They wanted it only to go to
low-income seniors. Democrats wanted it to go for everybody and wanted a much
more generous bill. And so they sort of split things in the middle, and they
said, `We're only gonna spend $400 billion.' Now how do we design a drug
benefit around $400 billion? Well, they got some people to sit around, and
they came up with this crazy scheme with the doughnut hole. Of course, it's
all sort of smoke and mirrors because we know now from the revised forecast
that the bill is likely to cost over $700 billion in the next decade. So even
the compromise really didn't amount to much.

GROSS: Now to make this new Medicare prescription drug benefit program
slightly more confusing, seniors also have a big choice of prescription drug
plans that they can sign up for. Tell us a little bit about how that works.

Dr. OBERLANDER: Yes. They can choose between what's called a prescription
drug-only plan; that is, they can stay in the traditional Medicare program, as
about 88 percent of beneficiaries are today, and they can simply choose from
one of many competing plans. And we don't know how many plans there will be
yet, but there are going to be competing plans across the country. They also
have the choice of getting their coverage through a managed care plan, such as
an HMO, which would provide them not only their prescription drug coverage,
but all their health coverage.

GROSS: Maybe I'm projecting here, but I always find it kind of challenging to
figure out the different HMO plans, and which one is best, and which one will
save you the most money but give you the best care. And when I think of some
of the people who I know who are seniors and the problems that they have
reading now or remembering things, figuring out new things, I find it very
difficult to imagine them really navigating their way through some of the
really difficult choices you have to make. And I'm talking about some of
the--let's face it. People are living in their 80s and 90s now and, you know,
your abilities sometimes diminish a little bit as you reach those ages.

Dr. OBERLANDER: It's insanity. My parents are turning Medicare age, and I
have a lot of relatives in the Medicare age group, and I'm just fearing in the
fall that my phone is going to ring off the hook. And I don't have any good
answers to give them because I'm confused; I can't figure it out, either.
And, you know, this bill was really--it was a theory in search of a
population. And the theory is we should have a competitive health-care system
with a private market and sort of consumer-driven health care where people get
to choose, and they really drive the health-care system and make it more
efficient. And unfortunately, they've imposed this on a population, as you've
suggested, that really isn't well-disposed to make those kind of choices. And
I and a lot of other people who study this really fear when this becomes
reality in January that we're going to have an $800 billion mess on our hands.

GROSS: Is there any good manual that has been printed yet to help people
navigate their way through these choices?

Dr. OBERLANDER: Well, there's an incorrect manual, the--there have been some
stories recently about the federal government producing a guide to Medicare
benefits next year that actually has wrong information about the drug benefit,
but they're supposedly correcting that. I think what people can do is go to
places like the Medicare Rights Center, which has a Web site, and they have
very good information on there about the drug bill, and that will help people
navigate through the choices.

GROSS: What direction is the health insurance industry pushing in?

Dr. OBERLANDER: The health insurance industry has had a sort of uneasy
relationship with Medicare. In the early days of the 1990s, there was a sort
of gold rush because they thought they could do really well in Medicare. And
they did well for a while, but then as managed care more generally faded,
their experience in Medicare turned sour. And, actually, we had a decline in
managed care plans' participation in the Medicare program. There is no doubt
that they would like a bigger share of the Medicare program, but they don't
want all beneficiaries--you know, we would--we should remember that 10 percent
of Medicare beneficiaries account for 70 percent of Medicare spending, and so
if private plans enroll the other 90 percent of Medicare beneficiaries, they
can do pretty well financially. But if they get those 10 percent that are
really sick, they're not going to do well financially. And one of the things
we've seen over time is that private plans tend to enroll healthier
beneficiaries than the average.

GROSS: So do you think the debate today about the shape of Medicare and what
proportion should be private health insurance vs. Medicare for senior
citizens--do you think that that debate is basically the same as the original
debate around Medicare? Are the different sides basically arguing the same
things?

Dr. OBERLANDER: We are back to the original debate; we've come full circle
after all this time. For 40 years the--there are two differences. One is
that we now have managed care as part of that debate, and managed care really
wasn't a large alternative in 1965. The other difference is with the coming
of the baby boomers, the stakes around that debate are much higher because
you're talking about how much is the government going to be willing to spend?
How much can it spend for this aging population? And that really wasn't part
of the debate in 1965, either.

GROSS: With what tax money has Medicare been funding, and how have the recent
tax cuts that have gone on during the Bush administration--how have those tax
cuts affected the funding for Medicare?

Dr. OBERLANDER: Medicare is funded primarily in two ways. The first is
payroll taxes, and we all pay 1.45 percent on top of what we pay for Social
Security, and so do our employers. And that funds Medicare hospital
insurance. General revenues are used to fund Medicare Part B, which is
Medicare physician services, as well as premiums from beneficiaries.

The question about the link to broader tax issues is really an important one
and, I think, often an overlooked point. And that is the choices that we make
in tax policy generally affect the future of Medicare and the future of all
our social programs. The tax cuts that we've enacted in 2001 and 2003, and
that we're talking about making permanent, take money away--general
revenue--and that means, quite simply, there is less money there on the table
to pay Medicare. And when the baby boomers age into Medicare in 2010 and
beyond, we don't have as much money there to pay for them. It's gone.

GROSS: Jonathan Oberlander is the author of "The Political Life of Medicare."
He's an associate professor of social medicine in the School of Medicine at
the University of North Carolina, Chapel Hill. He'll be back in the second
half of the show.

I'm Terry Gross, and this is FRESH AIR.

(Soundbite of music)

(Soundbite of applause)

GROSS: Coming up, we remember the late film producer Ismail Merchant. In
collaboration with James Ivory, he made over 40 feature films, including
"Howards End" and "A Room with a View." He died yesterday at the age of 68.
And we continue our conversation with Jonathan Oberlander, author of "The
Political Life of Medicare."

(Soundbite of music)

GROSS: This is FRESH AIR. I'm Terry Gross back with Jonathan Oberlander.

We've been talking about the past, present and future of Medicare. The
program is facing a potential financial crisis bigger than the one facing
Social Security. The new prescription drug benefit plan goes into effect in
January. Oberlander is the author of "The Political Life of Medicare." He's
an associate professor of social medicine in the School of Medicine at the
University of North Carolina-Chapel Hill.

How does the potential crisis in the funding of Medicare's future compare with
the funding problems with Social Security right now?

Dr. OBERLANDER: The irony is we're spending all of our time debating what to
do about Social Security, and the funding crisis in Medicare is actually much
more serious. And if you look at it going out a few decades from now,
Medicare is going to be a more expensive program than Social Security and
there's going to be a much bigger financial gap in it than Social Security,
though we're not talking about that crisis at all. Nobody wants to talk about
Medicare, because we don't know what to do about it. There are no good
choices.

Social Security, not to suggest that the problems are trivial, but they are
quite fixable, and they're simple, by comparison. The problems in Medicare
are of a much bigger magnitude, they're harder to fix. The solutions that are
available are not good and, politically, it's much more charged because in
Social Security you don't have physicians, you don't have hospitals and you
don't have nursing homes. And every time you talk about cutting Medicare
spending, we have to understand we're talking about cutting providers'
incomes.

GROSS: And so can you talk a little bit more about why Medicare's harder to
fix than Social Security?

Dr. OBERLANDER: Because of health-care spending. Social Security is simply a
demographic problem. Medicare is compounded--not only do we have the aging of
the baby boomers--and I want to add that I think, and I have a sort of
contrarian view here, that the aging of the baby boomers into Medicare is not,
in and of itself, a crisis. It would be a crisis if we didn't have Medicare,
and we had 80 million seniors without health insurance. That's a crisis. So
the fact that Medicare is growing is not, by itself, a crisis. However,
Medicare is part of the most expensive health-care market in the world. And
if you look at the forecast of health-care spending over time, health-care
costs are going to go up substantially, and that means the Medicare bill is
going to go up substantially, and that's why it's a worse problem than Social
Security.

GROSS: So you think that one of the reasons why the debate around Medicare's
future hasn't been louder is that a lot of politicians who want to change
Medicare and limit funding for Medicare are a little afraid to tamper with it
because it could prove to be very politically unpopular. But for those
politicians who are challenging Medicare and trying to change it and limit
funding to it, how are they taking it on so as to try to limit the amount of
political damage that it would cost?

Dr. OBERLANDER: Well, the obvious solution politically is to make changes
that nobody understands. And that's part of what was done in the Medicare
drug bill in 2003. More long-term, I think the goal is to change Medicare,
from what is called the defined benefit program, where people have a set of
benefits that the government assures, to a defined contribution program, where
they, essentially, have a voucher and they're responsible for the increases in
health-care spending. If you're able to convert Medicare, and do it through a
sort of complicated formula, that people don't quite get, into a defined
contribution program, you can cut benefits implicitly over time simply by not
increasing the amount of the contribution. That, I think, is really the goal.

GROSS: Do you have any idea of what the administrative costs are now for
handling Medicare and how those administrative costs are likely to change when
the new prescription drug plan kicks in in January?

Dr. OBERLANDER: It costs about 2 percent, which is very low, in the United
States. And, in fact, a lot of people would say Medicare should spend a bit
more on administration. I don't know how those costs are gonna change once we
get to the prescription drug benefit but it--they certainly should change,
and, honestly, one of the problems that we're having with the implementation
of the drug benefit is Medicare doesn't have an infrastructure across the
country to help beneficiaries. There was a lot of attention last year to the
1 (800) number and beneficiaries calling in and getting answers on this
toll-free line to the government about what they could do. And there's a
tremendous need for one-on-one counseling about the choices that we were
discusing earlier that they're going to have to make in choosing drug plans,
in choosing health plans. I don't think that can be done through a 1 (800)
number.

GROSS: One of the provisions within the Medicare prescription drug package
that passed, and is going into effect, is that the government cannot negotiate
for discounts with pharmaceutical companies. What were some of the political
and economic reasons that that was negotiated into the final package?

Dr. OBERLANDER: The political reason is simply that the drug companies wanted
this legislation, if it was gonna come, on their terms, and their terms were,
again, harkening back to Medicare's beginnings, `We want a blank check.' And
they didn't get a total blank check, but something equivalent to it. You also
had a number of conservatives in Congress who were sort of uneasy about
aggressive federal regulation and so they didn't want regulation of the drug
companies and I think what's interesting going forward is to see whether that
bargain will hold.

Now in the case of hospitals and physicians, it held in Medicare for 20 years.
But once you got to 1983, Medicare canceled the blank check that it wrote at
the beginning of the program. And my guess would be that, even though drug
companies are going to make out very well at the beginning of the Medicare
drug legislation, over time the federal government is going to step in and
start setting prices for them, as well, just as they so with hospitals and
physicians.

GROSS: So what you're talking about with physicians--like, initially,
Medicare would pay doctors whatever fee they charged, but then finally
Medicare said, `Here's what we pay for a procedure,' and the doctor needed to
accept that?

Dr. OBERLANDER: Exactly right. They enacted a fee schedule. And they did an
equivalent thing for hospitals. Now they shrouded them in these technical
formulas that nobody could understand, and where they could say to people,
`No, we're not enacting fee schedules, we're just fixing the method of
Medicare payment.' And they'll probably do the same thing when they get
around this, to ...(unintelligible) prescription drugs. But I think you're
going to have the same dynamics, which are costs are gonna increase, the
government is gonna say, `Look, we simply can't afford this anymore, guys,'
and they're gonna start setting prices on prescription drugs.

GROSS: So do you think that doctors now feel like the Medicare system is good
for their profession?

Dr. OBERLANDER: No. It's interesting. If you would have asked that question
in 1970 or 1975, physicians probably would have been far happier with
Medicare. Since Medicare has started to cut what they pay physicians, not
surprisingly, physicians' satisfaction with Medicare has declined, so there
are a lot of physicians who see a heavy, heavy share of Medicare patients, and
my guess, if you ask them, they would say this is an important program, it
plays an important role, but, boy, we sure wish it paid us more money.

GROSS: My guest is Jonathan Oberlander, author of "The Political Life of
Medicare." We'll talk more after a break. This is FRESH AIR.

(Soundbite of music)

GROSS: If you're just joining us, my guest is Jonathan Oberlander, and he's
the author of the book "The Political Life of Medicare," and he's an associate
professor of social medicine at the University of North Carolina-Chapel Hill.
It seems to me there's a lot of ethical questions that underlie the Medicare
issue, and I know you're more--you're studying social policy and not ethics,
but I thought you still might be able to frame some of those issues for us
because, I mean, somebody has to pay for the health care of older people,
unless we expect them to die sooner than they need to, or to live like
incredibly uncomfortable lives in great pain.

So the options are they pay for it themselves, their children and
grandchildren pay for it for them, or there's some kind of, you know, Medicare
type of system that pays, and I'm talking here, too, about things that
Medicare doesn't cover now like long-term home health care or long-term
nursing. And the private policies that do cover that are really exorbitant.
So can you talk a little bit about some of the ethical questions that we
really have to face as a nation to confront this issue?

Dr. OBERLANDER: I think the defining ethical question around Medicare is
`What does it mean for there to be a right in health care and to have a right
to medical care?' In 1965, we essentially established a right to medical care
for the elderly in the United States. And now the question has become over
time `What does that right mean? Does that entitle you to all the medical
care that you want or all the medical care that your doctor wants to give
you? Does that entitle you to choose any physician that you want, to go to
any hospital that you want? Or should the government or another insurance
plan have a right to say no? If you want to go to a more expensive provider,
you've got to pay more out of your own pocket?'

And I think there's another set of ethical questions that we see right now
around Medicare and that is: Should we treat all beneficiaries the same? Or
should the government play a lesser role in the health insurance experiences
and the medical care of upper-income beneficiaries? And that is a debate that
is widening and is going to define Medicare in the next two decades.

GROSS: And what are the sides of that debate?

Dr. OBERLANDER: Well, we saw a little bit of it in the prescription drug
legislation in 2003. As part of that legislation, more affluent beneficiaries
are gonna pay more in their Part B premiums; that is, their premiums for
physician services, than they are right now. So we're introducing what we
call income-related premiums into Medicare. On the one side, you have people
who support that, who say it's a progressive thing to do. You know, why
should we take--when Bill Gates retires, why should Bill Gates pay the same
amount of Medicare premium as a political scientist? He's a--low-income.
And--a very low-income. And people say, `Look, you know, Medicare's in
financial trouble. We've got to get the money from somewhere. Shouldn't we
get it from people who can afford to pay?'

On the other side, you have people who say, `Medicare's strength, politically,
has always been that it's a universal program.' And if you start to make
distinctions among beneficiaries, and if you start to charge upper-income
beneficiaries more, you're gonna unravel the political coalition that has made
Medicare the program that it is today.

GROSS: What are some of the ways that the United States could raise more
money to fund the Medicare system? And what are some of the problems that go
along with those ways?

Dr. OBERLANDER: A really simple and available way is simply to increase the
payroll tax that goes to Medicare, and, you know, we haven't increased that
tax since 1986. And there's an interesting political dynamic here.
Republicans are opposed to it because they're opposed to raising taxes.
Democrats, I think, would like to raise it, but they don't want to be seen as
tax-and-spend liberals, so they're too afraid to raise it. So as a result
nobody is talking about it. In fact, when they had a bipartisan commission to
consider Medicare's future, over the next 75 years, in 1998 and 1999, by
agreement with Speaker of the House Gingrich, they were not allowed to
consider or discuss an increase in the Medicare payroll tax. And there's no
way to double the size of the Medicare program without increasing that tax.
That's not a sign that the program is failing or something is wrong. It's
simply common sense that the tax has got to go up if more people are enrolling
in the program.

GROSS: Are there other options?

Dr. OBERLANDER: The other options have to do with bringing in more general
revenues, of course, and more income-related premiums from wealthier
beneficiaries. Some people have discussed in health care adding a VAT, a
value-added tax. Economists are a huge fan of the value-added tax, but
economists don't run for office very often, although we've got a few of them
up there in Washington. And every--so far the VAT has not caught on in
Washington so we'll see.

GROSS: We've been talking about Medicare. Let's talk a little bit about
Medicaid, which is facing a lot of financial difficulties now. Historically,
what is the connection between Medicare and Medicaid?

Dr. OBERLANDER: Medicaid is the stepchild of Medicare. The Medicare debate,
which started in 1951 and went all the way up, almost to the end in 1965, with
virtually no discussion of Medicaid, and in the last few months Medicaid was
actually inserted as part of the Medicare legislation. And it grew out of a
program in 1960 called the Kerr-Mills program, which provided federal money to
states to pay for medical care for low-income seniors.

GROSS: And what are the problems that Medicaid has run into?

Dr. OBERLANDER: Medicaid, in contrast to Medicare, is a welfare program. And
historically it was linked to welfare programs and its experience has been a
bit like that of a seesaw. It went up, and then it would go down, depending
on the state of the economy. And when the economy was bad, states would
simply knock people off eligibility. They would knock them off the Medicaid
program rolls, which is something that can't be done in the Medicare program.
Having said that, Medicaid really experienced a sort of renaissance in the
late 1980s and in the 1990s. It really grew as a program and it's no longer
so connected to welfare. In fact, about half the people on the Medicaid
program at the moment are children. And a lot of the adults that are on the
Medicaid program are working adults.

GROSS: A lot of states are saying they just can't afford the Medicaid bills
anymore so what are the states doing?

Dr. OBERLANDER: The states have a real dilemma, which is they are still in
the budgetary hole that they were put in following September 11, 2001, and
while the economy has improved, it hasn't improved enough for them really to
put their budgetary houses in order. Meanwhile, you know, someone told me
once that Medicaid is the canary in the coal mine, which it is. Medicaid costs
are going up. They're going up probably because Medicaid is working. More
people are becoming uninsured because they're losing private health insurance
from employers so they're qualifying for Medicaid. And that's a good thing.

But Medicaid costs are going up because health-care inflation is going up.
And, as a result, Medicaid spending is going up faster than tax revenues are
coming into the states, and that's not a good combination. So a number of
states are looking this year at very deep cutbacks in Medicaid. Tennessee, of
course, is one of them, and they've had one of the most generous programs in
Medicaid in the United States. It's called TennCare. And their governor has
proposed cutting over 300,000 people from that program.

GROSS: Do you think it's politically easier for politicians to cut money from
Medicaid than from Medicare?

Dr. OBERLANDER: The poor don't vote. And the poor don't count in Washington.
They don't have strong advocacy groups like the AARP. They obviously don't
have a lot of resources to influence the congressional process. They're not
as organized and so it's absolutely easier to cut Medicaid, and even though
they had that sort of renaissance in the 1990s, when Medicaid was growing,
when the rubber meets the road, and the economy gets in trouble, we see the
first thing that they turn to is cutting Medicaid again, and they--simply they
can't do it in Medicare.

GROSS: You've written extensively about health-care policy and, specifically,
about the political life of Medicare and Medicaid. You don't hear that much
discussion about--although we're all affected by health-care policy, and we
all have people in our family who are, or will be, affected by Medicare, it's
not the national obsession when it comes to debate and talk shows and
everything. And I suspect it's because these kinds of policy issues are not
that easy to talk about. They're kind of complicated in every way. So they
don't make for the greatest, like, spin debates or anything. And I'm
wondering if that's a source of frustration to you?

Dr. OBERLANDER: Are you saying that I'm not going to be asked back any time
soon?

GROSS: No.

Dr. OBERLANDER: Yeah, you know, I wish as a country we did spend more time on
this. And I think--in particular, I wish we spent more time--I think we spend
a fair amount of time on Medicare. We could do a better job in terms of the
quality, if not the quantity. But we don't spend nearly enough time talking
about Medicaid, in talking about the uninsured, and one of the problems we
have, politically, is that 15 percent of the country does not have health
insurance, 45 million people. But 85 percent of the country does. And for a
lot of us who have health insurance, we're not losing sleep at night about
what's happening to those who are uninsured or what's happening to people on
the Medicaid program. And most people are healthy. Most people are healthy.
And so these issues simply don't resonate with them until it's too late, until
it really matters and they've got a relative in the hospital or they need to
go in the hospital themselves. So, yes, I am--that's a long way of saying I
am frustrated.

GROSS: Jonathan Oberlander, thank you very much for talking with us.

Dr. OBERLANDER: Thanks so much for having me.

GROSS: Jonathan Oberlander is the author of "The Political Life of Medicare."
He's an associate professor of social medicine in the School of Medicine at
the University of North Carolina-Chapel Hill.

Coming up, we listen back to a 1987 interview with producer Ismail Merchant.
He died yesterday. In collaboration with James Ivory, Merchant made such
films as "Howards End," "The Remains of the Day" and "A Room With a View."

This is FRESH AIR.

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

Profile: Ismail Merchant, producer of more than 40 films, who has
died at the age of 68
TERRY GROSS, host:

The film producer Ismail Merchant died yesterday at the age of 68, after
undergoing surgery Tuesday for abdominal ulcers. In his 44-year collaboration
with the director James Ivory, he made such films as "A Room With a View,"
"Howards End" and "The Remains of the Day." In his New York Times obituary,
Warren Hoge wrote, quote, "Merchant-Ivory came to symbolize scenes of rich
decor and period atmosphere, palaces and parade grounds of India, castles and
country houses of Europe and lavish dinners and drawing room intrigue. The
two men asserted that the opulent settings were essential to portraying the
breadth and diversity of the culture clashes central to their screenplays,"
unquote.

Merchant and Ivory had been shooting a new film, "The White Countess," based
on a novel by Kazuo Ishiguro. He also wrote "The Remains of the Day," which
Merchant and Ivory adapted into an acclaimed 1993 film of the same name.
Here's a scene from it. Anthony Hopkins plays the impeccable and devoted
butler Stevens. James Fox plays Lord Darlington, the master of the house.
The film takes place just prior to World War II. Darlington Hall is hosting a
meeting of diplomats and aristocracy who are inclined to appease Germany and
come to an accommodation with Hitler. In this scene, Lord Darlington tells
Stevens that two of the cleaning girls must be let go.

(Soundbite of "The Remains of the Day")

Mr. JAMES FOX: (As Lord Darlington) Stevens?

Sir ANTHONY HOPKINS: (As Stevens) Yes, Lord?

Mr. FOX: (As Lord Darlington) We have some refugee girls on the staff at the
moment, I believe.

Sir ANTHONY: (As Stevens) We do, my Lord. Two housemaids, Elsa and Irma.

Mr. FOX: (As Lord Darlington) You'll have to let them go, I'm afraid.

(Soundbite of newspaper rustling)

Sir ANTHONY: (As Stevens) Let them go, my Lord?

(Soundbite of newspaper rustling)

Mr. FOX: (As Lord Darlington) It's regrettable, Stevens. But we have no
choice. You've got to see the whole thing in context. I have the well-being
of my guests to consider.

(Soundbite of footsteps)

Sir ANTHONY: (As Stevens) My Lord, may I say, they work extremely well,
they're intelligent, polite and very clean.

Mr. FOX: (As Lord Darlington) I'm sorry, Stevens, but I've looked into this
matter very carefully. There are larger issues at stake. I'm sorry, but
there it is. They're Jews.

Sir ANTHONY: (As Stevens) Yes, my Lord. Thank you.

GROSS: A scene from "The Remains of the Day." The screen adaptation was
written by Ruth Prawer Jhabvala who often collaborated with Merchant and
Ivory. Ismail Merchant grew up in India in the city then called Bombay and
came to the US in 1958 where he started making movies. In 1987, I asked him
what kind of movies he hoped to make.

(Soundbite of 1987 interview)

Mr. ISMAIL MERCHANT: What I want to do is just not make purely American films
as such. I wanted to make films with India and America, a theme which would
be more interested from the point of view of East and West, a cross-cultural
thing. That's...

GROSS: How is it going to be cross-cultural, in terms of the cast, the
subject...

Mr. MERCHANT: The cast, subject matter.

GROSS: ...matter?

Mr. MERCHANT: I mean, I wanted--when I was in college, in Davis, in Davis
College in Bombay, I--you'd make a list of future films I would do and in that
future films I would have Susan Hayward with Dilip Kumar or Raj Kapur with
Rita Hayworth. You know, that kind--Raj Kapur and Dilip Kumar were the two
biggest stars in India for me. And I would then draw these--you know, casts
from different countries, particularly Hollywood and India. Because Bombay is
Hollywood of India. So there was no resistance at all. Because this was
something new. Hollywood had made Indian films from one point of view. I
mean, they had "Gunga Din" and they had--but these are all studio films. Very
rarely did they have a film entirely set on location in India.

GROSS: Did you go to see many of the American films about India, and what did
you think about how they portrayed India and Indian people?

Mr. MERCHANT: Well, that was very comical. It was like a joke. You know? I
mean, you saw the rope tricks and the mongoose and the snake charmers and the
maharajas and, you know, I mean, all that kind of a thing but it was a
Hollywood version. You know, you could see that the costumes were quite
wrong, and the accent was wrong because they always thought that Indians spoke
in a certain way, and so they tried to depict that accent, you know. And then
I remember Sabu being introduced in Hollywood, you know, the elephant boy.

GROSS: You obviously have a passion for movies and you've been able to define
your job as you've wanted to because you're, you know, the head of your
company, really. How do you find your job this--how do you define your job as
producer? How involved do you allow yourself to get in the actual production
decision--casting, screenplay-writing, editing, what the shoot's gonna be
like?

Mr. MERCHANT: Well, first of all, the subject matter, you know, the story,
which I'm involved in, Ruth is involved in and Jim is involved in. Once that
is done, then we start with the casting. Then the casting becomes very
important. And when we get that all sorted out, then, while that is going on,
we also look for finance. Mostly me. I go to people and approach them that
this is the possible casting, this is the budget, and this is the location,
this is the script, and then James Ivory--we start planning the shoot. You
know, we hire technicians six weeks before or four weeks before because ours
is a very involved production thing, you know, the production designing.

So once that is done, then I leave Jim to do the shooting. Once the film is
finished shooting, then the editing process. Now the editing process is quite
tricky and involved, and you have to sit there in the editing room,
practically all day, but Jim does it with the editor. So I go away and I
start thinking about publicity, promotion, doing the poster designing and all
of that. Once the rough cut is done, then Ruth, Jim and I see the film
together. And then there is a lot of discussion, arguments, you know?
Sometimes a scene doesn't work. So those things are then seriously either
taken into account and then Jim re-edits it and then brings into a length
because we always have that we should--whatever we want to say in the film
should be said within 90 minutes to two hours.

GROSS: Did you ever think seriously about being a Hollywood producer?

Mr. MERCHANT: I was first--when I went to America--to Hollywood, 1960 and
'61, when I spent a year there, I saw these lots, and, you know, the cars with
the names of the producer on the lot at 20th Century Fox and Paramount, and I
was very fascinated by that. Each one had an office. And all the sort of
paraphernalia that goes, you know, with the Hollywood producer was given to
them, and was available to them. But later on I thought that I really didn't
want to become a part of the Hollywood scene, as such. Because, you know,
meeting people, again, and talking to them, some of the actors, some of the
producers, that they were just there as--What you call it?--a skeleton. You
know? I mean, their entire life was dependent on what the studio wanted them
to do. And I really didn't want to do that. I wanted to be an independent
producer, and make my own films, have my own company.

GROSS: Film producer Ismail Merchant, recorded in 1987. He died yesterday at
the age of 68.

(Soundbite of music)

(Credits)

GROSS: I'm Terry Gross.
Transcripts are created on a rush deadline, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of Fresh Air interviews and reviews are the audio recordings of each segment.