to recognize regulation's potential for caprice and willful instability. It is necessary to aim for responsible due process, uniformly applied, quite apart from the substantive results that we seek.

With respect to reimbursement for physician services, I am persuaded of two points. The prevailing method of payment under Medicare of customary and usual fees, subject to a prevailing cutoff, is inflationary per se. And permitting the nonacceptance of assignment of fees by the provider is both inflationary and conducive to a dual standard of care. Perhaps its is permissible to have two or three levels of practitioners with corresponding levels of fees; I do not know. It is certainly necessary to protect the patient fully against extra out-ofpocket costs and against provider discrimination, whether real or perceived.

EASE OF COMPLIANCE

A fifth criterion for appraising national health insurance plans is ease of compliance by the consumer. After all, it does not matter that the expert can read statutes and regulations only by working at it. The provider can pass on the extra expense of an expanded administrative staff. The bureaucracy always gets paid, but the patient does what ever he must do on his own time, at his own cost. It is important that he receive all the health insurance benefits that he is entitled to, that he be enabled to rely on continuing to receive them, and that he fully understand the consequences of his own misdeeds and those of others.

Health services are delivered locally. The choice of providers available to the consumer may be limited. Changing providers is a drastic remedy, perhaps too drastic to be applied routinely. Employing an independent, impartial ombudsman may be worthwhile.

Recently a health card has been proposed for every enrollee in the national health insurance plan. Under the plan no cash would flow between the patient and the participating provider. The health card plan would pay the provider both the insurance benefit and the amount of cost sharing-all the time having kept track of the status of the patient's deductible. The patient would reimburse the health card plan, being allowed to pay out his obligation in installments. The idea is appealingly simple. What we do not know is how well it would work, especially for people not accustomed to the use of credit cards. Nor is it clear what would be the consequences of failure to meet the payments due. It is important to acquire some experience in the use of a health card by diverse population groups and to ascertain the features that work and the features that are likely to prove troublesome.

THE HMO OPTION

No discussion of national health policy can pass muster today without some reference to the HMO (Health Maintenance Organization). At the outset, it must be said that some of the discriminatory practices formerly employed against prepaid group practice organizations have no basis in objective fact, do not serve the public interest, and should cease throughout the land. To provide an HMO option, where practicable, under national health insurance is only fair play and in accord with the notion that free choice is a basic value in our society.

Some students of the health services would go further and favor the promotion of the HMO on the grounds that it would yield appreciable savings, particularly in hospital use, and that by virtue of its pro-competitive characteristics the HMO would serve to reduce the purview of public intervention through planning and regulation. Their central assumption is that the consumer can learn enough about the quality of medical care to recognize it and to choose gradations in quality on the basis of price. Indeed, it is argued, if the consumer could and would act on such information, his interests would be identical with those of the provider and of the prepayment plan.

Elsewhere I have raised a number of questions about these assumptions concerning the HMO and the expectations they raise. The fact is that information about quality of care, particularly in the ambulatory setting, is not available. The reported savings in hospital use by subscribers to one form of the HMO, prepaid group practice, are confounded by the presence of a tight or inaccessible bed supply. Prepaid group practice has not manifested extra productivity in the use of personnel.

It may well be that its proponents have oversold the HMO and thereby done it an injustice. Under voluntary health insurance a package of benefits that is too broad cannot be marketed. It does not do the HMO any good to have a broad package prescribed for it. It does not do the HMO any good to be subjected to quality controls that apply to nobody else. There is no known way today to standardize HMO and other populations with respect to medical care premiums. Laws requiring certificates of need may be in conflict with the unique local requirements of the HMO. The principal point here is that the problems of the HMO are sufficiently specialized to warrant separate attention. For the purposes of a national health insurance plan, it suffices to offer the HMO option without favor and without prejudice.

SUMMARY

Let me summarize. I have essayed to draw on our record of experience under prepayment, and this record reflects many accomplishments as well as failures. I emphasize conserving the financial mechanism for those purposes that it is best designed to serve. I avoid taking a strong stand on issues on which sound evidence is lacking. Accordingly, at this time, I propose the following five criteria for assessing a national health insurance plan: (1) universal enrollment; (2) a uniform package of benefits, both broad and deep, for all; (3) furtherance of the goal of a single system of medical care for all (or at least not promoting any incentives toward the opposite direction); (4) effective provision for provider reimbursement, with a responsible and responsive exercise of regulatory authority rooted in a free flow of information; and (5) ease of compliance by consumers, with attention to the validation of their expectations from the insurance plan. I believe that this modest list of criteria is both moderate and attainable.

[Whereupon, at 3:20 p.m., the subcommittee adjourned, to reconvene at the call of the Chair.]

NATIONAL HEALTH INSURANCE

FRIDAY, SEPTEMBER 12, 1975

U.S. HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON HEALTH, COMMITTEE ON WAYS AND MEANS, Washington, D.C.

The subcommittee met at 9 a.m., pursuant to notice, in the committee hearing room, Longworth House Office Building, Hon. Dan Rostenkowski (chairman of the subcommittee) presiding.

Mr. ROSTENKOWSKI. Good morning. Would our witnesses for this first panel discussion please take the appropriate places here at the witness table: Dr. Gammon, Mr. Lejeune, Dr. Murley, Dr. Lofstead, and Dr. Stephenson.

I would like to welcome you on behalf of the Subcommittee on Health of the Ways and Means Committee. Today we are hearing from two panels of expert witnesses selected this morning by the minority members of the Health Subcommittee.

I would for the purpose of luncheon schedules, like to announce that it is the committee's intention to start this morning and, if necessary, work right through lunch. We will conclude the exchange of ideas between this panel and the membership on the committee and then go immediately into the second panel.

Our format here is that we allow whatever time is necessary for your presentation individually. Then we will have a comment and exchange of ideas between the panel. Finally, we will open it to questions and colloquy between members of the subcommittee and the panel.

If you would be kind enough to, beginning with Dr. Gammon, introduce yourself, and go immediately then into your statements. I would like at this time to yield to my good friend, Mr. Duncan, the ranking minority member of the Subcommittee on Health.

Mr. DUNCAN. Thank you, Mr. Chairman.

Mr. Chairman, I want to express my thanks to you and your staff for cooperating and assisting in setting up this hearing.

Since 1971, the full committee and now the subcommittee have held three sets of hearings on national health insurance. In this set, we have heard testimony from panels of experts, and later in the fall we will begin receiving the views of public witnesses. All of the testimony presented has been valuable, and I believe this overview presented by the panelists who testified earlier has given us a solid basis for focusing on the more specific issues in national health insurance. It is our belief that a necessary part of this overview should include the thoughts of some of those who, in the event of enactment of a national health insurance program, will be responsible for providing

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the care. We think the testimony from those who are now and will continue to be on the firing line of medical care is critical. For that reason, we have asked several practicing physicians to come here today to share with us their thoughts on national health insurance. We hope they will be able to provide us with some insight on the issues involved based on their own professional experiences.

As the subcommittee is aware, there has been considerable comment in all the discussions of national health insurance about some of the foreign national health programs and their relevance to our own situation. If we are truly interested in profiting from the experiences of others--both good and bad- -we must be aware of them. As a result, we have asked some individuals, who have knowledge about and experience with the English, Canadian, and Swedish programs, to testify. Again, we believe they will provide us with a sound overview of these programs. Should we determine there is need for further explanation or inquiry in this connection, the subcommittee can pursue other means of obtaining it.

Mr. Chairman, this is our purpose in asking for this hearing. We want to work with you toward the common goals in which we are all interested and look forward to the coming hearings on national health insurance.

I also would like to welcome all of you to the panel. I know you have gone to great effort to come to visit with us, and I know that you will be quite helpful. I have read part of your statements, and I do thank you very much for being here.

A PANEL CONSISTING OF MAX GAMMON, M.D., LONDON, ENGLAND; ANTHONY LEJEUNE, MIDDLESEX, ENGLAND; SIGMUND J. LOFSTEAD, M.D., CHICAGO, ILL.; REGINALD S. MURLEY, M.D., LONDON, ENGLAND; AND BETTE STEPHENSON, M.D., TORONTO, ONTARIO, CANADA

Mr. ROSTENKOWSKI. Dr. Gammon.

STATEMENT OF MAX GAMMON, M.D.

Dr. GAMMON. Mr. Chairman and members of the committee, first of all I would like to thank you for doing me the honor of inviting me to testify before these hearings and thus to take part in what I believe to be an historic debate.

I am the most junior member of the British medical delegation by quite a long way. I qualified in medicine at University College Hospital in London in 1966 and worked for 5 years in British NHS hospitals as a hospital doctor. NHS stands for National Health Service. Four years ago I left the NHS in order to develop a teaching hospital in London independent of the state.

I must point out that I am using the word "state" throughout this paper to denote the supreme civil power and Government vested in a Nation as distinct from the more territorial usage. You have already heard from my senior colleagues something of the nature of the conditions within the British State-run service. It was my personal daily experience of those conditions which convinced me that an independent alternative system must be developed in Great Britain and led me to take my own personally decisive step. That step being