MS. DIANE REHMThanks for joining us. I'm Diane Rehm. House Republicans announced a 2012 federal budget plan this morning, one with major changes to Medicare, dramatic cuts to Medicaid and overall savings to the federal government of an estimated $6 trillion. Joining me to talk about the plan, its implications for the ongoing budget debate in Washington, Alice Rivlin, she is senior fellow at the Brookings Institution. Tom Daschle of the Center for American Progress, he is former Democratic senator from South Dakota. Gail Wilensky is an economist at Project HOPE, she was administrator of Medicare and Medicaid in the George H. W. Bush administration. And Ron Pollack, he's executive director of Families USA.

MS. DIANE REHMWe'll talk for a bit and then take your calls. Don't forget, if you're not near a radio, you can join us streaming online at your computer. Good morning to all of you. It's good to see you.

MR. RON POLLACKGood morning, Diane.

MS. ALICE RIVLINGood morning.

MR. TOM DASCHLEGood morning, Diane.

REHMAlice Rivlin, tell us what we know about the plan that Congressman Paul Ryan is going to propose this morning.

RIVLINWell, we'll know later this morning the details. I think what we do know now is that it is a comprehensive spending reduction plan, but it does not raise revenues. Most people think, in the end, we have to put everything on the table and have revenue increases as well as spending cuts.

REHMWhen you say put everything on the table, you're talking about defense spending or military spending? You're talking about Social Security as well?

RIVLINYes, but particularly I'm talking about taxes. I think the Ryan plan will not have any revenue increases in it. It will have tax reform and lower rates and probably a simpler tax system. That's all good. But we are going to need more revenue if we're to get on top of the fact that we have a greatly increased number of older people with claims on programs like Medicare and Medicaid. The -- a major feature of the Ryan plan is a drastic reform of Medicare and Medicaid, but reform with deep cuts -- and deeper than, I think, many of us would feel were realistic or humane.

REHMDeep cuts, deeper cuts, Ron Pollack?

POLLACKWell, there are huge cuts. But I think the most important thing to understand first with respect to these health care changes, this is not a cut in costs. It's a shifting of costs, meaning it shifts the costs from the federal government onto the shoulders of seniors who need nursing home and other long-term care in the Medicaid program and who get their basic health care in the Medicare program, and it shifts costs onto children, who get basic health coverage through the Medicaid program. What we believe we understand of this proposal -- and Congressman Ryan will disclose it in about 20 minutes -- is that the cuts in the Medicaid program alone, the shifting, is $1.4 trillion over the next 10 years.

POLLACKMost of it will come through what is called a block grant, meaning the states will receive a finite amount of money, irrespective of circumstances like recession or an epidemic or other factors. And as a result, the states, in turn, will shift the cost burden onto the beneficiaries of the program. And so we're going to see huge cuts for people who need nursing home and long-term care. We're going to see big cuts for children. And mind you, in the last year of the Ryan proposal, 2021, we understand that the cutback in that year will be 33 percent. And that means a huge reduction in money that the states receive. And in turn, it's going to mean a real burden on the beneficiaries of the program, seniors and children.

REHMGail Wilensky, do you agree it's a shifting and -- shifting onto people who can least afford it?

MS. GAIL WILENSKYNo, I don't agree with that description. I assume, in part, that's why I'm here this morning, so thank you for having me. The spending starts, particularly for the Medicare population, where we are. And the attempt is by changing the structure, moving to what federal employees, members of Congress, have now, the federal employees health plan model, that that will lower the rate of growth and spending enough so that you don't need to shift the burden to beneficiaries.

MS. GAIL WILENSKYWe've seen an example where this can happen pretty successfully at least for the first decade in Part D of Medicare, the new prescription drug benefit, where individuals have a choice in terms of private plans available to them. And the spending growth has been way lower than either the administration predicted or than the Congressional Budget Office predicted. So the question is, can you actually put downward pressure on spending growth by changing the structure of the program? If you can't, then you could end up shifting cost to the individuals.

REHMTom Daschle, you haven't seen the whole plan anymore than anybody else has, but what do you think in regard to the general outlines?

DASCHLEWell, first of all, Diane, I'd characterize this as sort of a philosophical and ideological debate about the role of government. I mean, you've got the Republicans who believe very strongly that we need to move most of the responsibility towards the private sector. You got Democrats and others who have argued for a long time that the private sector isn't really capable of taking on this responsibility. And so, the ongoing debate that we've had over health care reform and over the role and the scope of Medicare and Medicaid continues.

DASCHLEThe bottom line is that unless we deal with the underlying core problems of health care, we will never get our arms around cost containment. And that really is a structural issue that goes way beyond Medicare and Medicaid. It has to do with all the unnecessary care. It has to do that we reward volume in our system and not value. It has to do with the tremendous amount of paperwork. We are a paper-driven system we have in our health care marketplace that really has to change. It has to do that we're still more of an illness system than a wellness system. And so, we don’t' keep people as well as other countries do in part, because we don't put the emphasis on wellness. All of those factors really have to be addressed.

DASCHLEUntil we do that, we can shift the cost between Medicare and Medicaid on to the private sector and back as much as we want, but it's not going to address the problem.

REHMThis plan, it's my understanding that it also includes tax cuts for the wealthiest portion of the population, as well as corporate tax cuts. Is that your understanding as well?

DASCHLEThat is my understanding, that the theory continues among some on the Republican side at least that by cutting taxes, you generate more economic activity, and that's supposed to generate revenue. I think most objective analytical data suggest that you do generate some, but you certainly don't offset the overall cost of the tax cuts that have -- we've already enacted. That was true with the Bush cuts in 2001. It's been true of tax cuts in the past. I think Alice Rivlin is exactly right. If we're gonna tackle this deficit and debt problem, all five categories of spending and revenue have to be on the table if we're gonna get this job done.

REHMAlice.

RIVLINI certainly agree with that. I think we ought to distinguish some of the conceptual changes that are in Ryan's budget from the fact that the balance is entirely on the spending cut side and nothing on the revenue increase side. But abstracting from that, if I may, the idea of premium support in Medicare is an idea that, I think, some Republicans and Democrats could get behind.

REHMExplain what you mean.

RIVLINMedicare at the moment is a fee-for-service system largely. The government doesn't decide how much to spend for Medicare. They just have to pay the bills that eligible beneficiaries present through their providers. So -- and it's an inefficient system, fee-for-service. The idea of premium support is that you move to a defined contribution by the government. It's sometimes erroneously called a voucher, but it's not a voucher.

RIVLINIn the version that former Senator Domenici and I put forward, what would happen is this. At some point, we said 2018, people in Medicare would have a choice. They could stay in fee-for-service Medicare or they could choose a plan on an exchange, like as Gail said, the federal employees, and the plan would get a risk-adjusted payment. That means you'd get -- they get more if you are older or sicker. But in no case would the total go up faster than the economy was growing plus one percent.

REHMRon.

POLLACKI think we have to separate out the changes in Medicaid and Medicare first with respect to Medicaid. What we're talking about is that there would be $1 figure provided to the states irrespective of what's happening in the economy. If the economy is in the doldrums and more people are unemployed and more people need health care coverage, the states do not get more money. As a result, there is going to be a lot of pressure for them to cut benefits. And I wanna separate that, perhaps during the break, in terms of how that differs with the Medicare proposal.

REHMAnd when we come back, you'll hear more from Ron Pollack, Alice Rivlin, Tom Daschle and Gail Wilensky.

REHMAnd if you'd like to join us as we talk about the Republican proposal for a budget, beginning 2012, that Congressman Paul Ryan is set to present in just a few moments, you can join us on 800-433-8850. Send us your email to drshow@wamu.org. You can join us on Facebook. You can send us a tweet. And you can listen live as we stream on our computers. Now what I wanna understand is, are we essentially cutting back on the number of people who will be eligible for either Medicare or Medicaid? Ron Pollack.

POLLACKThe short answer is yes, but it doesn't happen directly. What happens is the states in the Medicaid program will receive a specific sum of money. And as that money is much lower than what they receive today -- and that lowering gets worse and worse with each passing year -- the states either will have to decide that they're gonna add their own money to the Medicaid program to make up the difference, or they're going to cut the program. We have 17 governors that just sent a letter to the leaders in both houses of Congress, saying, do not give us a block print.

POLLACKAnd mind you, the Medicaid program is not a generous program to begin with. For a three-person family in Arkansas, eligibility ends at $3,150. In Texas, $4,800. In Pennsylvania, $6,300. And so we're cutting from what is a low base to begin with. And by the way, for adults who don't have children, in four out of five states, you can literally be penniless and you're ineligible for Medicaid. That's where the cuts will begin. And, of course, the people who depend on Medicaid the most -- seniors needing nursing home and long-term care and children -- will be hurt the most.

REHMGail. Gail.

WILENSKYAgain, Ron has assumed that the growth in spending that we are expecting is the only growth that can occur. The kinds of changes that are being proposed assume that you can lower the spending growth rates if you change the structure of the program. That's why so many Republican governors have said, give us the money and give us more flexibility, and we can provide the care cheaper. As Ron knows, most of the spending is not for the younger people and the mothers on the program.

WILENSKYIt's for the older people who are in nursing homes, who are not the moms and kids. That's where we need to find ways to provide care better and cheaper. If you assume the growth in spending that's been projected is the only growth that we can experience in the future, we are all doomed to a very bad budget year.

REHMTom Daschle.

DASCHLEWell, I agree with Gail about the need to address the larger question of growth in health care spending. As we've said earlier, this is really the key question: How do we bring down the overall cost? My fear is that what we're simply gonna do, in this case, is reduce the amount of money available in two of the most important programs affecting the disabled, the elderly and the poor in a way that could really exacerbate the problem because you do see a dramatic cost shift onto the rest of the health care marketplace. So that's really the key question.

DASCHLEAlice put her finger on something earlier. The real distinction here is that we are moving from a defined benefit plan under Medicare and Medicaid to a defined contribution plan. And that defined contribution is likely to be a lot less than it is today.

REHMBut some have said that Congressman Ryan's plan is very similar to the Affordable Care Act that President Obama has gotten through.

DASCHLEBoy, I don't see much resemblance.

REHMYou don't.

DASCHLEI'd have to take a look at...

POLLACKYou know, what's actually...

REHMAll right.

POLLACK...incredible is that what Congressman Ryan is proposing to do is to eliminate the expanded coverage for people. He eliminates the expansion of Medicaid. I don't know whether this is true. But I believe he also cuts the subsidies for people to make health coverage affordable. So the Affordable Care Act, among other things, will add coverage. The latest figures are 34 million people. This would eliminate that. This is the antithesis of the Affordable Care Act.

REHMAlice.

RIVLINThe similarity is in the creation of exchanges, of using the market to allow, in this case, seniors on Medicare to pick from a set of comprehensive plans on an exchange. That idea is in the Affordable Care Act. I don't understand why Congressman Ryan and other Republicans who support exchanges and principle don't support them in the Affordable Care Act. That's just a disconnect in my opinion. But I do think that, in defense of Congressman Ryan, the idea of a defined contribution plan for Medicare is an idea we can work with.

RIVLINIt wouldn't necessarily mean, as Tom suggests, that the defined contribution would be a lot less. It could -- Congress can set it anywhere. In the Domenici-Rivlin plan, we said it would only grow as fast as the economy plus 1 percent. One would hope that we could keep health care costs from growing much faster than the economy. If we don't, we're all in trouble.

DASCHLEAnd that's the problem. We haven't been able to do that. Witness the last 10 years, the last five years. You can pick any segment of the last 20 years you want to, and it's almost impossible to find a time when health care costs were not far greater than the overall cost and growth in the economy. So unless we have the tools for cost containment, we're simply not going to do it. And as Ron has indicated, the most likely outcome of this is that, more and more, the cost will be put on those who have the least capacity to be able to pay for these benefits in the first place.

REHMGail.

WILENSKYI agree with that. And the question is, how do we best change those incentives involved? Alice and I have been outspoken on premium support as a structure for Medicare -- for me, for the last decade and a half, for Alice, I know for some time as well -- that changes the dynamics. And either we will slow spending to GDP plus one or some other slower number than what we've been experiencing, or we will have this terrible budget mess on our shoulders and not be able to slow health care spending.

WILENSKYIn the past, Congressman Ryan has proposed expanding coverage by changing the tax code so that everyone gets a substantial credit that they could use to buy health care. Now, none of us have seen what's in this package being announced today, but I think we ought to be at least cautious about saying, he would roll back all of the coverage expansions because, in the past, he has proposed a different way of getting people covered. Now a lot of Republicans have not, but he has. So I think we need to be a little careful before we assume something else.

REHMNow I understand, Ron Pollack, that you do have a little bit of inside information.

POLLACKWell, the inside information is, to be sure, is incomplete. But the inside information clearly shows that the Medicaid program is going to be cut far worse than any of the accounts we have seen so far. And as I mentioned, the total cut over 10 years is $1.4 trillion. And in the last year of the Ryan budget, it cuts the funding, expected by states, by 33 percent. Now Alice mentioned before, she talked about premium support and mentioned the term vouchers. Those are somewhat different, but conceptually they're very similar.

RIVLINWell, I said that...

POLLACKIt means that...

REHMLet Alice say what she did say.

RIVLINI said that premium support was not a voucher.

POLLACKRight. Okay.

RIVLINAnd I'll stick with that.

POLLACKAll right. It's very similar in concept.

RIVLINNo, it isn't.

POLLACKAnd -- yes, it is. It is for the following reason. The amount of money that people, in effect, will get to help them with their premiums will be a set amount. Now premium support pays it directly to the insurance company. A voucher gives it to a beneficiary.

REHMOkay. Here's what I want to understand. What happens to people at these lower income levels who do not receive Medicaid any longer as a result of Congressman Ryan's proposal? What do they do? Where do they get health care? How do they manage?

POLLACKWell, two things, Diane. Most likely, they will probably be prevented from getting some of the care that they need. In cases...

REHMJust prevented.

POLLACKExactly. In cases of emergencies, most likely, they'll go to an emergency room as we see...

REHMAnd then you and I and everybody else pays for it.

POLLACKAnd then what happens, of course, is that everybody else is required to offset those costs through higher bills of their own. Those are the only two options available, unless there are some humanitarian organizations of some kind to provide help in those cases where it's needed. But generally, in the past, those have been the two outcomes, less benefits, pure opportunities for real access to good care. And then, in those emergency cases where it happens, everybody else pays. And, of course, it's the most expensive form of care.

REHMSo, what are we doing? Are we simply saying, tough luck, folks, you're out of care because the government no longer wants to pay even those at the lowest income for medical assistance? But we continue to wanna cut taxes for the highest earners and corporations, Alice.

RIVLINI would be very worried if we adopted the Ryan budget for exactly those reasons. I think it would cut much too deeply into services for low income people on Medicaid, among other things, and would not give us the tax increases that we need to pay for needed government services. So I'm not a defender of that. But remember, this is an opening offer in a long negotiation. What we do know about solving the budget problem is that it must be a bipartisan consensus. And we have several plans on the table, including Domenici-Rivlin, but even more important, the Simpson-Bowles plan, that have both revenues and spending reductions. But we're going to need to do some of each if we're gonna solve this problem.

REHMDo you agree with that, Tom Daschle?

DASCHLEI agree, Diane. In fact, I think it's important to put revenue in perspective. We currently have the fourth lowest revenue stream per capita in the world. Turkey and Mexico and South Korea are the only three countries with lower revenue streams. If we had the same revenue stream today as Canada, we'd have a balanced federal budget next year.

REHMTranslate what you mean by revenue stream.

DASCHLEWell, there are three forms of revenue streams. There are the, of course, the rates upon which we derive most of our income. There are tax expenditure that are also a source of -- we have more tax expenditures and overall amount than we do revenue coming in to the country today, $1.3 trillion of tax expenditures. And then you have fees of various kinds, revenue streams that come in the form of federal fees. All three of those revenue streams have really been unaddressed now for the last decade or more.

REHMTom Daschle, former Democratic senator from South Dakota. He is currently at the Center for American Progress. And you're listening to "The Diane Rehm Show." Gail Wilensky.

WILENSKYSome comments they had made in the last few minutes that I want to at least challenge. The notion that there are large numbers of people who are currently on Medicaid, who will not be on Medicaid or whatever its successor is is not clear from what we know yet. What is being proposed are some basic changes where Medicaid goes to a block grant, that it is an amount of money based on the number of poor people in a state with a lot more flexibility. That is one debate we're gonna have. My understanding is that it's based on the number of poor people, not on just a number of money.

REHMA number of poor people currently in those states.

WILENSKYAnd it will -- but it will be altered, going forward, based on the number of poor people. It varies with the number of poor people. That was my understanding of the block grant that Republican governors have been proposing. They know that if the numbers of people change that are poor, there needs to be a modification of the payment. It's still a question of how much money per person, so that they are not shouldering all of the risks.

REHMAnd, of course, the states are already broke to begin with, so to lay this into block grants beginning now certainly raises questions in my mind.

WILENSKYWell, they understand they will be at risk.

DASCHLEDiane, you can't -- you cannot cut 33 percent out of the amount of money that states would be receiving under current law without big cutbacks for those people who depend on Medicaid as their lifeline, starting -- Gail was right that the key expenditures in the Medicaid program are for seniors and people with disabilities who need nursing home and long-term care. They're the ones who are going to be greatly at risk. Now, look, we've got, right now, 50.7 million people who are uninsured, according to the latest Census Bureau numbers. And you can't cut 33 percent out of expected funds that states have been expecting to receive.

REHMHow do you respond to that, Gail? You might be interested.

DASCHLEThey have to cut...

WILENSKYWell, again, I haven't seen what Congressman Ryan is proposing now. What he proposed, prior to the passage of the Affordable Care Act, is to expand coverage differently. I have great respect that he acknowledge, along with some other Republicans like Tom Coburn an Richard Burr in the Senate, that we need to expand coverage, but we need to change who has control, the kinds of restrictions the government puts in place. That really is a big part of the question. That's why premium support becomes such a philosophical issue for us, going forward, in Medicare.

REHMAlice.

RIVLINI'd like to return to premium support too, because I think that's a conceptual issue that is an important one to talk about. How are we going to control in Medicare? Now, nobody is saying that Medicare should be abolished, or that it shouldn't go to all seniors. There is nothing in anybody's plan that I know about that would take Medicare out of its status as an entitlement for everybody who is eligible at age 65. But there is a question of how this program operates. Does it have incentives within it, because it's very large, to use health resources more effectively? Now, there are lots of approaches to this, but one is to say, we will turn it into a defined contribution plan and take advantage of competition on exchanges.

REHMAlice Rivlin, she is senior fellow at the Brookings Institution. When we come back, it's time to open the phones, take your calls, 800-433-8850.

REHMAnd it's time to open the phones, 800-433-8850. Let's go first to San Francisco. Good morning, Denise. You're on the air.

DENISEGood morning. Can -- I hope you can hear me.

REHMSure can.

DENISEOkay. Okay, good. I think that it's reprehensible and sort of despicable to -- for the Republicans to even pretend like the state could handle a block grant, where we got governors like the governor of Wisconsin and the governor of Florida making sweeping decisions about how our populous is getting its health care and education and every other thing, you know, without consulting the other side, without any consideration for compromises. And as a matter of fact, Medicare is probably the only reason that there's any kind of cost containment, because it's the closest thing we have to a single-payer system.

REHMTom Daschle.

DASCHLEWell, I think that there is a lot to be said when we talk about Medicare. The one comparison that, I think, we have right now with the private sector is, of course, the Medicare advantage program. And over the course of the last couple of decades, it's been shown very clearly that the Medicare advantage program cost more per capita than in the traditional Medicare program. There are a lot of reasons for that. But overhead costs are higher. So I think the caller is correct in that assumption, that it's really a large question as to whether going to the private sector even under these circumstances would save money. I doubt that it would.

REHMHere's an email from Gretchen, who says, "Recalling some seniors' outrage about what they perceived as health care reform threats to Medicare, i.e., keep your hands off my Medicare, I wonder how Congressman Ryan and others think they can sell this to the voters, and how Democrats will use this -- he uses the word outrageous proposal -- in the election?" Gail.

WILENSKYWell, we have frequently heard during campaigns from the American public that they want health care like their members of Congress have. And interestingly, that's really what is being proposed. A lot of details that are very important about what do you mean with premium support, what do you mean with the federal employees plan, but basically, it can't be said to mean, we are going to be giving you exactly what the members of Congress have, choice between a wide range of plans with the government paying a substantial portion, but not all, at least not all for many people.

REHMAnd, Ron Pollack, you know as well as I that the language that's used to frame this debate is going to be all important.

POLLACKIt is. You asked Gail a moment ago about how various seniors are going to be responding. I can tell you, this afternoon, a good number of senior organizations are going to respond, and they are going to oppose these cuts. Now, your previous caller, Denise, asked about what governors are going to do. I have the letter in front of me from 17 governors who strongly opposed the block grant. They say it provides inadequate funding, it does not help if population increases, aging populations, economic downturns, natural disasters, diseases or epidemics. This is going to result in big cuts.

POLLACKNow, with respect to seniors in the so-called premium support, which I equated to a voucher-type system, in essence, what it does is it provides a certain amount of money to pay for a portion of the premiums that seniors in the Medicare program bear. Now, as that portion that gets contributed grows considerably slower than the cost of health care, then the burden shifts more and more onto the shoulders of seniors. And that's why Tom is absolutely right. Unless, we do something about overall health care costs, which this proposal does not do, it's going to mean that the burden increasingly gets shifted onto the shoulders of those who can least afford it.

REHMAlice.

RIVLINThat's right. If we don't do anything to slow the growth of health care cost...

REHMAnd we haven’t been able to.

RIVLINWe haven't been yet, though there are many things in the Affordable Care Act which go to reducing cost in the future because of changing the incentives to providers. And Gail and I believe that a premium support program, not a voucher, can change the incentives in Medicare so that that program is a leader in reducing health care cost as it has been many times before.

REHMAll right. Let's go back to the phones. To Miami, Fla. Good morning, Robert. You're on the air.

ROBERTGood morning, Ms. Rehm, from Miami, the Medicare fraud capital of the United States. I've been listening to politicians over there on your radio show talk about cost containment, and it is a big issue. One of them mentioned let the market see what's worked. And I'm in agreement with that. It seems to me until hospital start packaging and putting their prices in the public face so we can all shop accurately instead of just worry about how to pay the bills, there will be no constant payment. I had a radioactive treatment here in Miami. For two nights, it cost 24 grand. (unintelligible) there was an article in The Miami Herald about it. I got calls from people that said they get it then for $6,800 and less.

REHMWow. Tom Daschle.

DASCHLEThe caller is exactly right, Diane. The health care marketplace, I believe, is the least transparent of any sector in the economy today. We don't really empower providers, consumers, the government, anybody with the opportunity really to provide the kind of understanding about these costs that are so critical. So if you're gonna have a competitive marketplace, at the very start, you need transparent systems. We don't have that today. The Affordable Care Act begins to put that in place with far more health information technology and a capacity to review things that we just can't do today. But we really have to change that aspect of our health care system.

REHMI want to go back to something Gail said that this plan of Paul Ryan's, as much as we know about it, would allow individuals to have the same kind of care as members of Congress. Do you agree with that statement?

DASCHLEWell, I think conceptually, there is that possibility that they could have the same concept of care. But you got two different -- two very significant differences. Number one, you've got a very generous employer who's helping to offset the premium cost...

REHMThe federal government.

DASCHLE...in the federal government that you don’t have necessarily with Medicare. And secondly, you've got a lot more sophisticated employment base. You've got people who probably know this stuff as well as anybody in the country. And to compare that group of people with those like my mother, who's just turned 88 this last weekend, and expect her to make those same decisions with regard to the marketplace, I think, is asking quite a bit.

RIVLINTom is right. I think about the federal employees, but one would hope that one could improve on this system to make a Medicare exchange more transparent, so you could actually see what you're buying. It's pretty complicated if you're a federal employee, I know 'cause I used to be one. But you could have a much simpler set of choices that gave people much more information about the plan and its outcome.

REHMAll right. I want to take a caller in Montgomery County, Md. Good morning, Laura.

LAURAGood morning. At the beginning of the tax debate start, why are they starting with Medicare and Medicaid as a budget balancer? Is the budget rebalanced on the back of the most needy in our country?

REHMGail.

WILENSKYThey are focusing in part, but not exclusively, on Medicare and Medicaid because it is the entitlements that drive so much of the deficit and the future insolvency of the government. But part of what we understand will be, proposed by Congressman Ryan, is tax reform, broadening the base so that rates can be lowered and structured differently to encourage growth. Of course, it's not the only issues being considered.

WILENSKYThat's why there's currently a fight going on, as we speak, in the Congress that has nothing to do with the entitlements, whether that'll be 5 billion, 33 billion or 60 billion cut out of discretionary spending as part of the ongoing debate. That's important so that people don't feel that it's only Medicare and Medicaid that is being subject to reductions.

REHMRon Pollack.

POLLACKYou know, if you extend the tax breaks that were received in the Bush administration for the wealthiest 2 percent -- and that costs an extraordinary amount of money and that deprives the government of revenues, Alice was right, this is an extraordinarily imbalanced proposal -- then you're forced to cut things like Medicare and Medicaid. And by the way, you asked a question before, I think, about what's the difference between the federal employee health benefits system and Medicare having a voucher-type program like a premium support system.

POLLACKAnd the key difference is that the constituency for the federal employee health benefits system are both healthier and wealthier. They receive considerably more money than seniors receive in terms of their retirement income, and they're considerably healthier because they are part of the workforce.

REHMAll right. To Niles, Mich. Good morning, Krista.

KRISTAGood morning. My comment ties in to something that was said earlier in the show about reining in the costs of what providers bill, similar to what the gentleman from Miami was saying. Why is there not a focus on limiting the amount that they are able to bill for service? And it ties in to, perhaps, you know, there might be a fear that the providers would fail to accept the Medicaid patient because they're not able to bill appropriately. But for my perspective, as a caseworker in Michigan who deals with Medicaid on a regular basis, many of the people are not even able to achieve Medicaid eligibility because their deductibles are so high.

KRISTATherefore, these providers are stuck with these bills, whether they're -- whether they write them off, or they're just stockholding the bill because the patients are not even able to meet their deductible for Medicaid to kick in.

REHMTom Daschle.

DASCHLEWell, Diane, I think the caller is right, first of all, in that we do see the cost shift that we've been talking about over the entire hour as these underpayments continue to be felt. But I think -- to a earlier question, why don't we try to do more to limit payments to providers, well, we've been trying to do that for the last 15 years through something called the sustainable growth rate. And Congress has failed to do it all, but I think one year over the last 15 years. It has not been a success, in part because of the tremendous political pressures that Congress is under today, from all the stakeholders, with regard to ensuring that they get their adequate slice of the pie.

DASCHLEAnd that's why we see this terrific proliferation of costs. We haven't been able to show the political muscle necessary to rein in these costs. And that's why it's so critical to come up with a new infrastructure to make that happen.

REHMCongressman Ryan's announcement began a little late. His -- he has said, however, we believe there ought to be a social safety net, but the problem is our social safety net is fraying, it seems. Let's go to Hanover, N.H. Good morning, Jeanine, and you're listening to "The Diane Rehm Show."

JEANINEI've been very interested in this conversation. One of my comments is that when I see a full page ad for a drug in The New York Times and then they talk about the cost of health care, part of it is the cost of drugs. That's one comment. The other one is the taxes for the rich, of course, and the lower budget, the amount of money spent on the lower would certainly be -- help all of us. We could all have medical care and education and transportation, et cetera.

REHMThanks for calling, Jeanine. Do you wanna comment on drugs, Gail?

WILENSKYLet me make a comment there and then one comment about the tax...

REHMSure.

WILENSKY...and extensions for...

REHMSure.

WILENSKY...the tax cuts. First is, yes, we need to make sure that we are getting our value for the money we spend on drugs. It's important to put it in perspective, however, which is about 10 percent of our health care dollar goes for drugs. We need to make sure we get the best pricing for that. One of the things that's been very positive out of the Part D Medicare, that new coverage for outpatient prescription drugs, is that it's been structured in a way where the spending has grown much lower than anyone predicted. It can happen. It takes a lot of competitive pressure to make sure you don't get too many opportunities to just spinoff very expensive drugs that don't do very much and yet pass those class in.

WILENSKYRon Pollack had mentioned something about the extension of the tax cuts. We'll have that debate again. People need to understand 75 to 80 percent of the cost to the extension went to the under 250,000. Whether or not we extend these cuts further out and can still get a balanced budget will be a big fight. Again, we need to put in perspective what these numbers are.

REHMThat compromise is gonna haunt President Obama, I think, for quite a long while, could not get that continuation without including the upper-income people, Alice?

RIVLINI think we need to tax upper-income people more because they are the ones who have made out best in this economy for quite a long time. But the thing that's important about this budget debate is in the end, it's got to be a compromise of people who want to tax more, people who want to spend less, but we have to recognize it is a big problem. The current situation is not sustainable and even the health care programs are not in their present form sustainable because they are growing too fast. We got to cut that.

REHMAnd, I gather, Social Security for another time, Tom Daschle?

DASCHLEWell, I don't think we should ever put things off. I do think we do have a little more breathing room with regard to Social Security. We've got about 25 years of viability before we even have to begin to seriously question. But that doesn't mean we shouldn't be looking at long-term entitlement reform and I believe as we look at ways of which to address Social Security in some ways from a resolution point of view, it may be the easiest, not politically, but certainly from an actuarial point of view, it's a lot easier than looking at health care.

REHMTom Daschle, Alice Rivlin, Ron Pollack, Gail Wilensky, thank you all so much.

DASCHLEThanks for inviting us.

RIVLINThank you, Diane.

POLLACKThanks for having us.

REHMAnd thanks for listening all. I'm Diane Rehm.

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