material through every stage of processing, is gouging everyone. Certainly, it is gouging the elderly, the widows who are living on fixed incomes and the poor who cannot vote themselves, as Congressmen have done, income which is protected from the escalation in inflation. The plunder through the Congress and Bureaucracy is scandalous and must stop.

The proposed Kennedy-Corman bill will drive this country into bankruptcy. The HEW bureaucrats who are for complete politicalized medicine for everyone in this country say that it will cost $129 billion. If we apply the understatement of the bureaucrats who promoted Medicare and Medicaid to this bureaucratic estimate of the cost of the Kennedy-Corman bill, it would probably cost the first year not $129 billion but $388 billion. This should be compared with the fact that during the current calendar year total federal expenditure for all purposes are only $209 billion. If the estimates of the bureaucrats for the 10th year for the Kennedy-Corman bill turn out the same as they did for Medicare, then the 10th year would cost $829 billion. These figures are so incomprehensible that they need to be translated. This is what you need to know and this is what your constituents should know-and to the extent that this information can be communicated accurately to the electorate, it will be done.

The present cost per family of four for all the expenditures now by local, state and federal governments and for private medical care, is $1,938 per year." The HEW estimate of the Kennedy-Corman bill would raise that the $2,400 per year. But if allowance is made for the understatement of the bureaucrats, on the same basis that they understated the cost of Medicare, then the first year of KennedyCorman would cost a family of four $7,136. Compare this with the average annual earnings of workers as of April, 1975-only $8,031. This is brankruptcy. John Maynard Keynes, a Fabian-Socialist economist whose disciples have misled the free world into destructive deficit government spending that has caused inflation to rage in Great Britain and threatens to destroy responsible selfgovernment in the United States, recognized, however, that inflation was a deadly trap. In his book, written soon after World War I, The Economic Consequences of the Peace, beginning on Page 235, he said:

"Lenin is saidto have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens."

Then, he goes on to say:

"Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."

10

According to the Budget of the United States, the public debt of the United States at the end of the fiscal year is expected to reach an incredible $596 billion. Incredible as that is, you should realize that since the Department of Health, Education and Welfare was organized as such in 1958, its expenditures have totalled a mind-boggling $682 billion." It is instructive in the light of Lenin's drive for state monopoly capitalism that the Department of Health, Education and Welfare publishes from time to time charts showing the expansion of public spending and the complimentary contraction of private spending for health care. They point out clearly the inexorable direction in which more government spending and control is leading us.

If anyone doubts that this course will bankrupt us, then I suggest he study the evidence very carefully because it is abundantly clear that government plunder 12 through medicine and other devices must stop if we are not to destroy liberty in this country.

There are those who scoff at the possibility of the United States government going bankrupt. Past apologists for the bureaucratic excesses of New York City scoffed at it going bankrupt, but it is.

Government after government is beginning to realize that government spending must be controlled. The budget deficit which this country now faces of $60 billion for this year alone is an outrage. Stoking the fires of inflation by bureaucrats and then passing laws to insulate the bureaucracy and the Congress from the direct effect of the inflation by an automatic cost of living escalator, could be the spark

H.E.W. Testimony, July, 1974.

Survey of Current Business. April, 1975.

10 U.S. Statistical Abstract, 1974.

11 Ibid. No. 10; Library of Congress, U.S. Budget, fiscal year 1976

12 The Law by Bastiat.

that burns the pants off all politicians disguised as Santa Claus and expose them for what they are-thieves in the garb of benefactors. This great ripoff is not going unnoticed, and if the ripoff of denying patients the right to their own earnings and to willingly choose the doctor and hospital they desire is exposed to the electorate, it just may be that enough citizens will become so infuriated they will start spending more of their waking hours out in the precincts doing the kind of job that should be done to put in power a responsible set of legislators instead of a group dedicated to plunder 1 without regard to its disastrous effect.

12

II. PREPARED PER CAPITA GROUP PRACTICE

Evidence abounds that the frenetic campaign to sell HMOs to the American people is doomed to failure. Why? Because it's a concept that doesn't fit the average American's idea of how he wants to obtain medical care. Most people want the kind of personal relationship-a relationship of trust and confidence— that can only grow over a period of time under treatment by the same doctor. They want the right and the privilege of choosing their own doctor.

HMOs, once known as prepaid or closed-panel group practice until someone tagged them with the fraudulent name of Health Maintenance Organizations, have not been what you would call a smashing success in this country. In fact, the only significant dent they have made on the medical scene has been in those cases where the clientele has been chiefly captive members of labor unions.

The ill-advised and irresponsible program of the Congress to force HMOs on the people by the use of their tax money for massive HMO subsidies is an acknowledged failure. And still, the push goes on for bigger subsidies and for more concessions in a desperate and reckless hope that this idea will catch fire with the American people.

It's obvious they aren't buying it. Don't you get the feeling that there is a motive here other than a genuine desire to improve the nation's health care? Or to save money?

In the first place, there is not a shred of provable evidence that prepaid group practice costs less than fee-for-service, private practice medical care for the same service or that patients of these groups are healthier and live longer than the rest of the comparable population.

There is sobering evidence, on the other hand, that elimination of fee for service, in fact, disrupts medical care to the detriment of the truly sick. Dr. Sidney R. Garfield, considered the father of the Kaiser-Permanente program, explained it this way in a 1970 article in "Scientific American:" "Only after years of costly experience did we discover that elimination of the fee is practically as much a barrier to early sick care as the fee itself. The reason is that when we remove the fee we remove the regulator of flow into the system . . . The result is an uncontrolled flood of well, worried-well, early-sick and sick people into our point of entry-the doctor's appointment-on a first-come, first-served basis that has little relation to the priority of need... The impact of this demand overloads the system and, since the well and worried-well are a considerable proportion (of patients), the usurping of available doctors' time by healthy people actually interferes with the care of the sick."

It will be well to keep in mind, also, that with an HMO type setup there is a built-in incentive to deny medical care to patients. That's because under a system in which money is paid in advance for prospective services, the patient who actually receives the service is a liability; the patient who can be kept away or does not of his own accord show up is an asset.

Now, set that fact in the context of a network of HMOs across the nation controlled by a coterie of HEW bureaucrats who are charged with the responsibility of controlling costs.

HMO enrollees will pound the HMO doors for treatment of every tiny complaint. After all, haven't they been told by a chorus of voices from the left that health care is a right? As the flood of well and worried-well that Dr. Garfield spoke about rises, costs soar and soar and soar. How will the bureaucrats react? They can't blame unconscionable doctors' fees (one of the current knee-jerk reactions) because doctors will be on salary and under control of bureaucrats or will be on contract. So, HEW employees will have to decide that health care isn't a right after all, and they will do what they have to do-convert patient liabilities into patient assets by denying demands for medical care or establishing long waiting lines like they have in Britain.

Care will have to be rationed for those patients unfortunate enough to have abandoned freedom of choice for the false lure of the HMOS in the belief that

all their medical needs and demands would be satisfied for a fixed fee paid in advance.

What I and a lot of other people would like to know is why members of Congress, the elected representatives of the people, continue to insist on picking the taxpayers' pockets to pour more money into a program that the people have convincingly demonstrated they don't want. Is the motive a passion to give government another weapon in the continuing campaign to control doctors and obliterate the practice of private medicine in America?

The promotors of the HMO scheme cannot be ignorant of the facts.

Last February, the "Wall Street Journal" surveyed the HMO scene across the nation and found that numerous insurance companies and other organizations had abandoned plans to start HMOs simply because too many that had been started had failed. The reason? In these cases, the people just were not interested. But the failures of HMOs are not based solely on lack of interest by prospective patients.

For example, the story of government-subsidized HMOs in California (called Prepaid Health Plans) should be enough to dampen anyone's enthusiasm for the scheme. It's a story of fraudulent sales practices, denial of promised services, waste, excessive costs, and bureaucratic bungling. The Legislative Audit Committee of the California Legislature also discovered that not only were the state's indigent being shortchanged on service, the taxpayers were being shortchanged on cost. The committee found that the 15 PHP contractors were pocketing 52 percent of the money paid them by the Department of Health to provide health care for the poor.

The continued campaign to pick the taxpayers' pockets to force on the American people the HMO scheme they clearly don't want can hardly be described as responsible legislative action. I view it as more than that-I view it as another aspect of the relentless drive to subjugate physicians and the public to the control of government bureaucrats.

This unconscionable disposition on the part of some congressmen to try to buy votes by promising free medical care to everyone on the pretext of helping improve medical care while reducing its cost is patently a political fraud. If you want to debase the quality of medical care and drive up its cost, and degrade the people in the process, turn the nation's health care over to government bureaucrats.

III. DEVICES FOR GOVERNMENT DICTATION AND CONTROL

The third major point, namely, controls through so-called Utilization Review and subsidization through PSRO, is particularly objectionable and unacceptable to any person who believes in individual liberty, particularly, if he is sufficiently wise to know that government controls to justify subsidies is the baited trap of tyrants An old con man once told me that the first step in taking a sucker is to put thievery in his heart. The bureaucracy and its partners are doing just that in utilization review and PSRO as well as HMOs.

As I said earlier, utilization review and PSRO are the devices of bureaucracy to blame physicians and hospitals for the skyrocketing costs of government intervention in medicine. The primary cause is political promises which cannot be fulfilled. My comments on costs cover that point.

Politicians justify the interference on the premise that the federal government is subsidizing health care and government can properly control anything it subsidizes (Wickard vs. Filburn in 1942, 317 U.S., p. 131).

The excuse for imposing controls is that: "The costs of the Medicare and Medicaid programs have skyrocketed far beyond the early estimates (government estimates). In this fiscal year alone, Medicare and Medicaid will cost the federal and state governments some $19 billions."

The legislative and executive branches of the federal government are blaming physicians for these skyrocketing costs, e.g., the Senate Committee Report on this legislation said:

"The rapidly increased costs of these programs (Medicare and Medicaid) are attributable to two factors. One of these is an increase in the unit cost of services, such as physicians' visit, surgical procedures and hospital days. The second factor. . . is an increase in the number of services provided to beneficiaries. Witnesses (not identified) testified that a significant proportion of the health services provided . . . are probably not medically necessary. Unnecessary hospitalization and unnecessary surgery are not consistent with proper health care."

Through the PSRO Sections of this law, politicians are making it appear that "practicing physicians" are being given "full responsibility and authority" to keep costs from skyrocketing.

This is a double-barrelled deception.

First-political promises and excessive government spending are the primary causes of increasing costs, not the actions of physicians. Physicians are caught in the upward spiral of inflation along with everyone else.

Second-Physicians are not being given responsibility and authority to control costs through PSROS because such authority as this law provides is strictly in the iron-handed control of the Secretary of HEW and his employees. But, even more important, neither he nor his employees have power to control costs effectively.

Costs of health care items, along with the costs of everything else, are being pushed up by inflation and demands for care beyond the supply, which, in turn, is caused by excessive government spending.

Therefore, it is ridiculous for physicians to feel guilty about increasing costs for which politicians are responsible. Likewise, it is ridiculous for physicians or physicians' organizations to accept responsibility for holdng down costs, which they cannot do. Costs will continue to skyrocket regardless of whether physicians do or do not collaborate in this PSRO scheme.

However, physicians' organizations which do collaborate will betray physicians because as costs continue to inflate, and every reasonable person knows they will, politicians will keep shifting the blame from themselves by saying: "We gave the physicians and organized medicine the responsibility to hold down spending and they failed-therefore, we must force them into complete nationalized medicine." This they are clearly planning to do. (See "PSRO: Organization for Regional Peer Review" by Decker and Bonner.)

With all the restrictive laws Congress has passed affecting medical care and all the oppressive regulations imposed by HEW as a result and all the additional restraints on medicine contemplated by legislators, the government is rapidly becoming the biggest barrier to quality health care in America.

This Committee should know that the Association of American Physicians and Surgeons filed suit in June, 1973 against the Secretary of HEW to have declared unconstitutional the law passed by Congress in 1972 which provides for imposing federal standards and limitations on the manner in which private physicians diagnose, treat and care for patients who are beneficiaries under the Medicare and Medicaid program. The PSRO law gives the Secretary authority to impose a system of pre-set regional "norms" describing what is to be considered "appropriate" diagnosis and treatment of particular illnesses and health conditions to determine whether the services rendered by a physician (or hospital) are medically necessary and carried out in a most economic facility.

The legislation in question signals the first extension of federal authority to the control of the substantive aspects of medical practice through the imposition of prior and concurrent restraints upon physicians' professional medical judgments and practices in treating their patients.

This suit is now on appeal to the Supreme Court of the United States. Members of Congress and the HEW bureaucracy must recognize that this suit challenging the constitutionality of the PSRO law reflects the determination of the membership of that Association to take whatever legal action is warranted to protect patients and physicians from government interference.

In this lawsuit, the Association is asking the courts to determine whether (and I quote from the AAPS brief) "continuous national administrative direction, regulation and control of a physician's judgments concerning the diagnosis, treatment and care of his patients unduly interferes with the constitutionally protected rights of both physicians and patients" (end of quote). The brief points out that the Supreme Court in other cases has recognized there is a constitutionally protected right in the physician-patient relationship.

That is the basic question involved in this lawsuit, and AAPS is charging in its appeal to the Supreme Court that the District Court was grievously in error in its interpretation of the clear provisions of the PSRO law.

The district court's conclusion that appellants' complaint failed to state any claim for relief is based principally on the profoundly misconceived notion that the legislation in question was enacted merely to provide "standards for the dispensation of Federal funds" to physicians (App. B. pp. 11a, 15a-16a), the strictures of which they are free to endure or not as they see fit, and that, consequently, any question as to its constitutionality is laid to rest merely by a

determination that the law is reasonable in relation to its subject matter and does not create discriminations that are patently arbitrary or totally lacking in rational justification. (App. B, p. 11a.)

It is important to note at the outset that the district court has misunderstood the role of physicians in the Medicare-Medicaid programs. Physicians do not receive payment under these programs as public contractors or employees, and their participation in the programs does not constitute a submission to any of the regulatory authority commonly incident to such contractual arrangements. Benefits under the Social Security Act are payable to, or on behalf of, the persons eligible for them. (42 USC 1395d, 1395k.) It also is important to realize that physicians will not be able, in any meaningful sense, to avoid the impact of the law by refusing to treat Medicare-Medicaid beneficiaries, as the district court appeared to believe.

Members of the Congress should note that AAPS also alleges that the Congressional decision to enact PSRO was not warranted by any compelling public interest.

Members of the AAPS adhere to the principle-and hopefully the Supreme Court will agree in this case as it has in others-that a physician has a right to practice his profession free from arbitrary government interference. And arbitrary, unwarranted government interference is the essence of PSRO.

The lawsuit of the AMA to enjoin the Secretary of HEW from imposing utilization review regulations issued on November 29, 1974 involved the same arguments as the AAPS in its PSRO lawsuit.

Utilization Review interferes with the best professional judgment of the attending physician in the same manner as PSRO. The UR regulations of the Secretary of HEW of November 29, 1974, which was enjoined by a Federal District Court and upheld by a Federal Court of Appeals, in fact asserted that: "In developing final regulations to use the authority of and to implement section Public Law 92-603, care has been taken to assure that these regulations (UR) are supportive of the implementation of the PSRO program and consistent with approaches to be employed for PSRO review of hospital and skilled nursing facility care. Accordingly, these amendments provide that utilization review in hospitals shall employ a system of concurrent review. . ."

SUMMARY OF COMMENTS

Compulsory politicalized medicine, misleadingly termed National Health Insurance, cannot be instituted for all citizens without destroying the free-choice, willing exchange system upon which the success of America is based. Congress should exercise restraint and not plunge further into the morass of more subsidy and more control which is compulsory politicalized medicine. The principle which should be honored is that such government intervention as is necessary in medicine should only be performed by state and local government. And the unsound argument that some people are being denied adequate medical care because federal funds are not available to buy everyone's medical care should not be used as an excuse to destroy our system. The whole concept of the necessity of central government to pay for preventive care, well baby care, examinations, immunizations and inoculations, out-patient psychiatric care, X-ray and laboratory work is absurd on its face. Local government can do what is necessary where individuals are incapable of handling their own problems in these regards. The whole trap of equality of benefits for the employed and unemployed should be avoided. There should be no national requirement that employers provide any particular type of coverage for their employees. States are fully capable of handling such problems. It is inconsistent to endorse voluntarism and then subscribe to an elaborate detailed mechanism of compulsion. Compulsory politicalized medicine is too expensive in dollars and in bureaucratic inroads against individual liberty.

Prepaid per capita group practice, misleadingly termed Health Maintenance Organizations, is merely a part of the drive for compulsory politicalized medicine and should not be subsidized and controlled by the federal government.

Government intervention creates distortions and adverse consequences far beyond the average person's capacity to comprehend at the time the law is initiated. One of the consequences that is only dimly perceived now but which is coming into sharper focus in countries where politicalized medicine exists is that the doctor-patient relationship is seriously impaired. For the physician to care for a patient to the maximum of his ability, he needs the trust and con