biggest mortgage servicers to do better by working out half a million troubled loans by november. >> suzanne: reforming health care and funding medicare will go hand in hand on capitol hill. tonight, we talk medicare and health reform with the kaiser family foundation's tricia neuman. >> paul: i.b.m.'s doing it. sprint and amazon too. but does the recent jump in deals mean m&a is back on wall street? yes, and no. >> suzanne: then, we head to china where motorola's taking its cues directly from the consumer and trying to boost its share of the cell phone market. >> paul: i'm paul kangas. >> suzanne: and i'm suzanne pratt. susie gharib is off tonight. this is "nightly business report" for tuesday, july 28. "nightly business report" is made possible by:

this program was made possible by contributions to your pbs station from viewers like you. thank you. >> suzanne: good evening, everyone. the beaten down u.s. housing market may be showing signs of stabilization. the s&p-case shiller index of home prices rose half a percentage point in may from april. that's its first monthly increase since the summer of 2007. still, home prices were down 17% from a year ago. while a stabilization in home prices could help stem the foreclosure crisis, the white house says not enough borrowers are being helped by its $50 billion foreclosure prevention program. today, it called executives from 25 mortgage servicing firms to washington to find out why. as stephanie dhue reports, those servicers have now agreed to get

busy modifying half a million loans in the next four months. >> reporter: the administration's foreclosure prevention plan is off to a slow start. in the last three months, 200,000 mortgages have been modified, while there have been twice as many foreclosures. scott talbott of the financial services roundtable says kinks are still being worked out. >> what we'd like to see is having a common set of documents. there's different forms you have to fill out, depending on which program you're going into and there isn't a clear definition of all key relevant terms. >> reporter: one of the most confusing terms is imminent default. what's unclear is just when borrowers are at risk, if they are still current with their payment. keith ernst of the center for responsible lending says borrowers are getting mixed signals. >> there's a lot going on in this program, servicers are largely overwhelmed and it's easy for misinformation to get into the system. borrowers should have a chance to correct that before their home is taken away. >> reporter: a stabilization in home prices may give lenders more leeway to work out a loan

for a borrower who could still default down the road. but analyst andy laperriere says many mortgages made during the boom can't be worked out. >> one of the big problems is that a lot of people had loans they could not even come close to affording and so just the economics just don't work, even if you get some support from the government in terms of subsidizing the lender for lowering the payments, the person's debt to income is so high, it just doesn't make any sense, it makes more sense to foreclose. >> reporter: 13 million foreclosures are expected over the next five years, keeping the pressure on lenders to work out troubled mortgages. the administration will also keep the heat on lenders, with plans to make public how many loan modifications each of the 25 companies in the program have done. stephanie dhue, "nightly business report," washington. >> suzanne: u.s. and chinese leaders say the action's they have taken have helped pull the world's financial system back from the edge. as they wrapped up two days of high level talks in washington, both countries are promising to continue making progress on financial and economic reforms. china says it will continue to

boost demand at home in order to reduce reliance on exports to the united states. the u.s. is promising to rein in our budget deficit and tighten financial regulations. >> paul: wall street got off to a slow and lower start amid some corporate earnings that, unlike the recent trend, were not better than expected. u.s. steel, office depot and crane company were among the examples. additional selling was triggered by a bigger than expected decline in july consumer confidence. at noon, the dow was down 81 points with the nasdaq off 16. stocks spent the afternoon consolidating recent gains and ended narrowly mixed. the dow fell 11.79 points to 9,096.72. but the nasdaq composite rose 7.62 points to 1,975.51. the s&p 500 index slipped 2.56 points to 979.62. in the bond market, the 10 year note rose 10/32 to 95-13/32

putting the yield at 3.69% >> suzanne: president obama said today medicare benefits could be at risk without healthcare reform. the president said the medicare trust fund will be out of money within a decade unless lawmakers overhaul the system. joining me now with a discussion of the nation's medicare program is guest tricia neuman, director of the kaiser family foundation's medicare policy project. tricia, welcome. >> thank you very much. >> suzanne: well, medicare as you know turns 44 this week and i guess birthdays are always a good time to take stock so i want to ask you, let's begin with, do you think the medicare program is successful? >> i think medicare has been enormously successful. if you think about the start of

the program, at that time, less than half of all seniors had health insurance. so today, all seniors have health insurance. they can get coverage without regard to any health problems or without regard to their income and by and large, seniors are very satisfied with the program. it's a very popular program, so, yes, i do think it's been quite successful. >> suzanne: clearly, funding is one of the major challenges facing the program. what are some of the other challenges, though, that they're going to be dealing with? >> well, actually benefits are a real problem. medicare is actually less generous than most large employer plans. so one of the issues is finding a way to improve benefits so that seniors get the benefits that they need and a great example of that is the drug benefit that has a coverage gap or a doughnut hole. >> suzanne: so how does medicare fit into the whole debate of health care reform? how is it possible or possibly going to be addressed with health care reform? >> well, medicare fits in in a

number of ways. probably a major way would be that medicare is helping to fund some of the improvements in the health reform package. there are significant medicare savings, many of which are in areas that are sort of right for cuts. a great example of that is cuts in payments to medicare advantage plans for which there have been overpayments over the past several years. these savings are going to be used to help fund coverage expansions for other people. medicare is also a driver of health systems reform, and i know that people on the hill and in the administration hope to use medicare to improve the delivery system to help make quality of care better and to manage care better for people with chronic conditions, both on medicare and more generally in the health care system. >> suzanne: what about the funding challenge though? how is the health care reform likely to address the problem of

funding medicare? >> right, the funding challenges are very real, but actually, the health reform plan that is moving through the house would significantly improve medicare's fiscal status adding five years of life to then medicare trust fund which is currently scheduled to be insolvent by 2017. so actually, medicare could be the self-winner of health reform because it could contribute to medicare's fiscal strength over a period of time. and that would be a great thing. >> suzanne: now, we can't talk about medicare without talking about part d which is the prescription drug portion of medicare. now, will health care reform and the types of reforms that we're talking about address the problems of part d? >> well, um, it's a possibility. it's too early to know. the drug benefit as you know has been in effect for a little bit more than three years and one of the issues that is just real problem is the coverage gap. the bill that is moving through the house does try to close this coverage gap which would provide

real relief to seniors when they get to that point when their drug benefit doesn't pay any of their prescription drug costs and they have to pay full freight. so if that provision stays in the package and if the health reform plan passes, then that could provide real help to seniors in the near term. >> suzanne: uh-huh. we only have a few seconds left. let me sort of conclude by scug, generally, would you say that medicare is an efficient program? is it something we can use as a model when talking about health care reform? >> medicare itself is quite efficient. when you look at administrative expenses, medicare's administrative costs are about 2% of the total. you'd be hard-pressed to find a private insurance plan with such low overhead. one way medicare really is a model is in the way of operating fairly efficiently in terms of low overhead and that coul could -- that model and that level of efficiency could bring great savings into the overall system. >> suzanne: thank you. i think we have to leave it

there. thank you for educating me tonight. >> you're quite welcome. >> suzanne: my guest this evening, tricia neuman of the kaiser family foundation. >> paul: big blue is getting a little bigger. i.b.m. today said it's paying just over a billion dollars for business analytics software maker s.p.s.s. software. the $50 a share all-cash deal has many on wall street hoping for a return to the boom days in the m&a market. but as scott gurvey reports, the jump in deals may be just a case of opportunity knocking. >> reporter: i.b.m. gobbles up s.p.s.s. sprint swallows virgin mobile.

agilent gulps down varian, and that's just two days of headline m&a activity. from amazon and zappos-- to bristol-myers squibb and medarex-- mergers and acquisitions seem to be breaking out all over wall street. thomas burnett of wall street access says that's a sign of a change in outlook >> corporate board rooms are beginning to see that we're through the worst of the overall economic recession and that going forward it looks like we can envision growth. it may not be this quarter, next quarter or early in 2010, but going forward we're through the worst and things are going to start to get better. >> reporter: but if confidence is returning, it's cautionary at best. the value of the deals year to date is only 35% of end of july last year. rich peterson of s&p says if you are looking for a return to a trillion-bucks-a-year m&a pace, don't hold your breath. >> that's not to say there's a buyer's strike. there's deals that are going on.

but in terms of the large mega- deals that we saw back in 2006, 2007, in the hey-day of private equity, those are not on the horizon any time near. >> reporter: one reason current deals are relatively small is that private equity money, which used to fund about half the m&a activity, has almost completely dried up. that won't change until the credit markets improve. for investors looking to buy into companies that could be takeover targets. burnett says smaller energy companies will be attractive if the price of oil continues to rise. and smaller health care providers may be bought by larger firms seeking economies of scale as they adapt to new health care reforms. >> it's going to get more competitive. you're going to perhaps be competing with the federal government on one hand. you're going to be tapping into all these uninsured people, whatever the number is. and to get there, it's going to be difficult for the smaller companies. so we're expecting probably two

or three deals maybe as many as half a dozen deals in the h.m.o. space. >> reporter: burnett says he's not looking for health care deals until and unless a reform package is signed into law and the details are known. scott gurvey, "nightly business report," new york. >> suzanne: regulators want to turn up the heat on the energy market. the head of the commodities futures trading commission says his agency must seriously consider tough limits on speculative energy trading. gary gensler says the idea is to curb excessive trading, not eliminate speculation all together. the agency thinks too much paul, as you know, last year that same agency said supply and demand not speculators drove prices higher. >> paul: suzanne, the chicago mercantile exchange is also in favor of limiting energy contracts. now let's take a look at our stocks in the news tonight.

>> suzanne: as we mentioned earlier, china said today it will expand demand to help revive its economy. it must get chinese consumers buying again, and that's a challenge for telecom company motorola. the company's marketshare there has tanked over the last few years. so motorola is working to turn things around. as shannon van sant reports, the company's focusing on consumers: the key to a much-needed turnaround. >> reporter: for more than a decade, motorola dominated handset sales in china. duncan clark, chairman of b.d.a., a telecom advisory firm in beijing, says motorola was once an icon for u.s. investment in china. but in recent years motorolas sales have fallen rapidly. >> we've seen a tremendous fall from grace for this company. the speed of motorola's decline in china has surprised many, including many of its chinese employees. >> reporter: according to b.d.a. and the chinese market research firm c.c.i.d., motorola's market share for mobile devices in

china has fallen from 22% at the beginning of 2007 to just over 6% this year. part of the company's problem has been under investment in research and development. nokia and samsung are bringing new models into the market quickly, and motorola has had trouble following up its success with the razr phone, launched in 2004. one of the biggest challenges here for motorola is keeping pace with demand. in china, mobile phones are a status symbol and people change their phones frequently. clark says motorola has been late to the market with technology chinese consumers look for. >> chinese consumers are keen to be seen to carry the most advanced technology. it's a projection of who they are. it's a brand. it's very important to them so if they're seen to have something with slightly lower features or slightly older, they're losing face. >> reporter: ruey bin kao, chairman of motorola china electronics, says motorola will continue its investment in research to combat the company's declining sales. 3,000 engineers work at the

company's research and development center in beijing, where phones are tested for sound quality and network reliability. kao says motorola's research will eventually pay off with more products like motorola's ming series. >> one of the innovations we have in china is the p.d.s. series, ming series, in china which is very popular here. and so far we have sold eight million of the phones. >> reporter: the launch of china's third generation mobile phone service may present more opportunities for the company. motorola recently secured a $310 million contract with china mobile which includes infrastructure for the transition from second to third generation networks. it's not only china's mobile carriers that motorola needs to win over. kao says the company is focused on connecting with mobile phone consumers as well. >> we're going to be more focused, understanding the needs of those customers and providing the solutions to meet their needs. >> reporter: meeting customers needs is important for motorola to make a comeback. with 670 million mobile phone

subscribers, consumers in china may play a crucial role in reversing motorola's worldwide decline in sales. shannon van sant, "nightly business report," beijing. >> paul: tomorrow, street critique guest hilary kramer has stocks for the recovery. she's chief market strategist at greentech research. >> suzanne: the federal reserve may need to spruce up its public image. a new poll ranks the fed dead last when it comes to americans' perceptions on how government agencies are doing. only 30% of respondents rated the fed's performance as either "good" or "excellent." that puts it behind homeland security and the i.r.s. the centers for disease control and prevention ranked number one. >> paul: another government agency is in trouble. the u.s. postal service is now on the government accountability office's "high-risk" list. that list includes agencies and programs that cost tax payers billions in waste or mismanagment. the g.a.o. says the postal service needs to cut costs

immediately to deal with a rapid decline in mail volume. the agency agrees and wants to cut back mail delivery to just five days a week. >> suzanne: here's a look at what's happening tomorrow. we'll see june orders for durable goods, the fed's beige

book and the weekly report on crude oil and gasoline inventories. tonight's commentator says the health care reform debate shows why we need more primary care physicians. he's steven george ullmann director of the health sector management and policy program at the university of miami. >> nearly 20 years ago, lee iacocca, former chrysler c.e.o. stated, and i quote, "health care costs are bleeding us white. we have now cracked the $1,000 per unit level. that's nearly three times what some of our competitors have to pay! so how can we be competitive?" today, mr. iacocca's dire warnings have come to fruition as businesses fail and services move off shore. we made an attempt at health care reform sixteen years ago, but that plan failed. and so here we are again. the elements of the health care reform we ultimately adopt-- if we do adopt-- may well dictate what happens in terms of our ability to compete and the nature of our economic recovery. congress appears focused on access, appropriately developing a way to allow 47 million

uninsured to obtain health insurance. debate centers around a government health insurance alternative. this debate is a bit off-base as health care has a long history of simultaneous provision of service by for-profit, non- profit and government providers. congress should focus on developing a network of primary care physicians and nurses to meet the needs of 47 million additional people. the government predicts a future nursing shortage of 800,000 and only 17% of medical school graduates express an interest in primary care. unless we address primary care, the law of supply and demand will dictate rising prices for health care, rising costs and employers will be affected significantly. economic recovery and global competition will be impacted by the nature of this reform. let's hope we get it right. mr. iacocca is watching. i am steve ullmann. >> paul: recapping today's market action: a split decision for stocks. the dow lost 11 points, while the nasdaq gained seven points. to learn more about the stories

in tonight's broadcast, to watch our streaming video and to take part in our daily blog, go to "nightly business report" on pbs.org. you can also email us at nbr@pbs.org. >> suzanne: that's "nightly business report" for tuesday, july 28. i'm suzanne pratt goodnight everyone and good night to you too paul. >> paul: and you as well suzanne. i'm paul kangas wishing all of you the best of good buys. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt

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