committee and we are now trying to bring some order into a way of reviewing hospital costs.

The next item is something that really has to be done at the Federal level. I think it would be the largest single way of saving on physician costs; that is, the Social Security Act says that physicians may be paid either by taking an assignment of the benefit or ask for reimbursement. In reimbursement, the patient pays first and he sends it back and gets his money back 4 or 5 months later. On assignment, the physician takes the assignment of the patient's claim.

I think you ought to eliminate the option of reimbursement. I think it ought to be all assignment, because that is the only way that you are going to control the amount that the physician gets.

There are plenty of senior citizen leaders here, and people in Miami know that when a person goes to a physician and pays $40 and sends off a reimbursement claim, he winds up with $20 or $15 and has to pay the difference. So, we really need to do something about that.

I think that the simplest way would be to just eliminate that option and maybe make the copayment a flat amount.

The next item that I want to talk about a little bit is the question of provider and consumer awareness of the cost of care.

We think if a patient gets an itemized bill from his hospital and the doctor gets a copy of the bill, the doctors will take a look at how much of that was necessary. Patients would get a chance to simply examine their bill and see if, in fact, they got all of the items that were there. The next item is when persons take tests after which the doctor says, "You need to go to the hospital tomorrow." Almost invariably the hospital will repeat those same tests, and there is no particular reason for that to be done twice; but we are going to pay for them in both places.

Where the hospital can recognize the validity of the outside test, they ought to be able to do it.

Another area that I think is crucial to holding down hospital costs is particularly in the area of surgery, but would also apply to pathology and radiology. This is a suggestion that came when we had Dr. George Crile, chairman emeritus of the Cleveland Clinic. I am sure he has testified once or twice before your committee. He is one of the best known surgeons in the country, and he said he would never permit a situation where surgeons are on a fee-for-service basis; and he follows George Bernard Shaw in that there is no chance of giving the surgeon the decision to operate and make $1,000 or not operate and make nothing. That doesn't make any sense to him at all, and we ought to have some kind of incentive built in, maybe in terms of greater hospital reimbursement to hospitals that have only salaried surgical staffs and pathology and radiology staffs, because that would do two things: It would hold down the cost, and second, it would eliminate a significant amount of unnecessary surgery.

I am sure that you are aware of the fact that we have twice as many surgeons per capita than the British and we have twice as many surgical procedures per capita. I don't think that that is just an unrelated coincidence.

The next item is the question of health education, and this might not necessarily come into health insurance, but it ought to come into

Federal support for public health, for the training of public health workers, rather than cutting down programs on assistance to medical schools. I think that adding assistance to public health programs would be extremely important, and to support various kinds of programs for getting people to change their lifestyle in a better way.

We are doing that in some urban settings as well as rural ones, and that is the kind of thing that in private insurance or insurance where there are, say, active stop-smoking seminars and that sort of thing in industrial workplaces, those are the things which need to be encouraged because it is very inexpensive compared certainly to the long-term benefit.

We have tried to get major businesses and industry throughout Florida to group together to shop for the best health insurance. We are not a big industrial State, so our experience is a lot different than, say, in the Northeast or your situation in Hawaii, where everybody pretty much is in one or two systems.

We have very diverse employment, small employers, and so the large group insurance approach is not too workable here. We have to try to get people to go to buy their health care as a group.

In addition to corporate purchasers of care, individual consumers should be able to shop around for the best prices in the medical market through provider advertisement of rates and charges and the provision of multiple health insurance options.

The Surgeon General's 1979 Report on Health Promotion and Disease Prevention is to be commended for setting policy guidance and setting national priorities in the area of health education and selfresponsibility for health. Many of their recommendations would be useful prevention incentives for a national health insurance program and would greatly reduce medical expenditures for chronic disease.

I think, just to summarize, that we need to, first of all, have a program in health insurance that has incentives to use the least costly alternative setting for health care and still maintain quality care, but remove barriers in Federal policies to reimburse mainly for institutional care.

We have to break out of this business that the only place to pay for care is in a hospital and that the only people that we can pay are feefor-service physicians.

We have to have competition within the medical market between fee-for-service forms of health service, which is what public health clinics are, and from HMO's, which are health worker cooperatives. We have to be able to make a choice, and we have to be advertised, so we can make some kind of an informed choice.

We need to in our ratesetting develop reimbursements based upon actual cost of care rather than charges.

We have to have greater control over how hospitals are operated and how efficiently they operate and how efficiently the physicians are calling for those kinds of services.

We have to do a lot more in health education, because primarily that is the way we are going to save money, and that is the way people are going to be better off.

I hope you would look particularly at this question of the mandatory assignment of medicare benefits, because that would be, I think, the

largest single way to hold down physician cost, and when you hold down physician cost, you are going to hold down hospital costs as well, because they are going to be less likely to be hospitalized.

I appreciate the opportunity to be here today, and I hope that your hearing will be productive and give you time to enjoy some of our sunshine.

[The prepared statement follows:]

STATEMENT OF JACK D. GORDON, CHAIRMAN, FLORIDA STATE LEGISLATURE COMMITTEE ON WAYS AND MEANS

I am pleased to be able to speak to you today on issues which are of great concern to the citizens and governments of the State of Florida.

Our State Legislature has been a significant arena for those seeking change in Florida's human service systems over the past several years. Consequently, we have studied and debated many of the questions you are currently deliberating. We are aware of and concerned about potential effects of a national health insurance program, particularly regarding benefits to the elderly and the poor. Nationally, Florida has the highest percentage of residents age 65 and over; a substantial number of these elderly are also poor. Medicare and Medicaid expenditures for health care for the elderly and the poor have been rising at significant rates over the past decade and a large percentage of these expenditures go to costly institutional care.

Much of the increases in these expenditures can be attributed to the lack of incentives for noninstitutional care in Medicare/Medicaid programs as well as reimbursement systems based on charges rather than costs.

Florida has tried for the past five years to initiate a program of Medicaid reimbursement for health maintenance organization (HMO) services either through federally certified HMOs or primary care public health clinics. All state statutory barriers to this innovative program have been removed by the legislature and funding has been earmarked for this purpose. We have, however, been unable to secure the necessary waivers of federal requirements to demonstrate the potential for this type of program. We are convinced that HMOS offer one of the best hopes for improving quality of care and containing the cost of health care. I highly recommend that incentives for this type of program be included in your deliberations.

In addition, you may wish to consider some other cost containment measures passed least year by the Florida Legislature:

(1) An appropriation for a financial incentive for state employees who join a prepaid health care plan;

(2) Medicaid reimbursement to nurse practitioners and nurse midwives; (3) And a hospital care cost containment act which provides for public review of rates charged by hospitals.

Your committee might also wish to consider mandatory "assignment" of benefits, which means the physician agrees to accept the reasonable charge established for that service as total payment. This is currently being done on a voluntary basis under Medicare, but only about 50% of the participating physicians accept "assignment" nationwide. This percentage is much lower in Florida.

Provider and consumer awareness of the cost of care is another concept of cost containment which needs more attention. If both patient and physician receive an itemized bill immediately after a patient is discharged from costly hospital care, it's possible unnecessary tests and lengths of stay could be eliminated. Additionally, medical schools, schools of hospital administration and other health provider education programs should have required courses in cost containment

measures.

Another approach would be to require that whenever a service obtained in a hospital could have been purchased cheaper outside of the hospital, reimbursement for that service would be limited to the cost of the service outside the hospital. Additionally, an incentive should be created for hospitals which give hospital privileges only to physicians who accept hospital salary payment rather than billing a patient separately on a fee-for-service basis, particularly in the areas of pathology, radiology and surgery.

I would urge you to give positive support to Congressman Pepper's proposal of Medicaid reimbursement for programs which keep the elderly out of long

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term care institutions to the extent possible. This has been recently introduced as the "Medicaid Community Care Act of 1980." The proposal includes requirements for pre-admission screening and reimbursement of noninstitutional care up to 75% of the cost of nursing home care. These programs have been effectively demonstrated in Virginia and New York respectively.

No health care program, including programs for the elderly, can be complete without a planned program of health education for life style change and risk reduction through self health maintenance efforts such as screening, counseling, good nutrition, exercise, stress management and nonsmoking. Such programs have a great potential for keeping people well, lowering health care costs and reducing work days lost through illness.

In 1978, the Florida Legislature passed legislation and funding for demonstration projects in health education, risk factor detection and intervention, nutrition counseling, and coordination of community health education efforts. Currently, four such projects are funded throughout the state including one for state employees which will demonstrate the effectiveness of such a program in the work setting.

To quote from the March issue of Health Care Education:

"These rural clinics have become the focus of medical care in LaFayette, Dixie and Gilchrist counties. It started with a single clinic, and now there are three. If you discount the part-time efforts of a single physician, the three clinics are the sole source of medical care for the surrounding area.

"The Federal Government is wild to shift health care emphasis from treatment to prevention, and they are equally anxious to view the entire health care apparatus as a single organism. Hence, a look at rural Florida might prove instructive; both things already have happened there in miniature. Consolidation of purpose and activity is almost complete at three clinics. And for the past two years there have been limited efforts at education aimed at preventing disease.” Major businesses and industry throughout Florida have taken an interest in grouping together to shop for the best health insurance plan, prepaid health care options and incentives for their employees which encourage good head maintenance practices. The governor is strongly involved in a project of this type in Miami, which you will hear about today. There are similar projects in the Tampa/St. Petersburg area as well as at Disneyworld in Orlando.

In addition to corporate purchasers of care, individual consumers should be able to shop around for the best prices in the medical market through provider advertisement of rates and charges and the provision of multiple health insurance options.

The Surgeon General's 1979 Report on Health Promotion and Disease Prevention is to be commended for setting policy guidance and setting national priorities in the area of health education and self responsibility for health. Many of their recommendations would be useful prevention incentives for a national health insurance program and would greatly reduce medical expenditures for chronic diseases.

In closing, I would just like to summarize some of the major components of a national health insurance program relevant to cost containment and prevention to which I have alluded throughout my remarks:

1. The program should contain incentives to use the least costly alternative setting for health care which would still maintain quality care, but would remove such barriers as federal policies to reimburse mainly for institutional care.

2. The program should provide for the creation of competition within the medical market, so consumers and major purchasers of health care can shop for the best options.

3. A system of uniform reimbursement levels should be developed based on actual cost of care (rather than charges) in diagnostic related groups similar to what they are doing in hospital rate setting programs based on uniform reporting systems which prevent cross subsidization.

4. Provider and consumer awareness of good health practices, health maintenance and cost containment measures should be required of all participants. This should include financial incentives for life style changes which would reduce risks related to the major killers.

5. Mandatory "assignment," promotion of HMOs, encouragement to Health Departments to provide direct primary care, requiring surgeons to be salaried, and appropriate utilization of physician extenders are other major cost containment components which should be included.

L

I appreciate the opportunity to be here today and share some of my ideas and some of the major actions taken by the Florida Legislature relevant to health insurance and proposals to restructure incentives in the private health care sector. I'm sure you have thought of these and many more and I wish you well in your deliberations of these complex issues.

Mr. RANGEL. Thank you for your well thought out testimony, and sharing your State experiences with us.

Senator Pepper?

Mr. PEPPER. Thank you, Mr. Chairman.

I join the chairman in commending Senator Gordon on the obviously thorough and long study he has given to this subject, and the many valuable recommendations that he has made.

One of them is really very pertinent right now, and that relates to doctors' taking assignment of claims rather than the patient's being reimbursed.

We have a case right now that my office is handling with regard to Mount Sinai Hospital, where the radiologist at that hospital had been taking cases on assignment. All of their payment has been by assignment, but it has been almost a year since some of their claims have been paid. These doctors tell me that they have had to go to the bank and borrow money to pay their employees due to the long time it has taken to get payment from medicare.

My committee, the Select Committee on Aging, is going to have a hearing down here sometime pretty soon, and we are going into the whole question of this complaint, the tardiness of the agencies in paying the bills. These doctors say they are going to quit taking assignment and from now on they will just let the patients wait, rather than their waiting.

Well, we want to encourage more assignment. I agree with what you say. I would like to see all of it on an assignment basis, because the doctor is better able to wait than most of the patients are. So this committee, Mr. Chairman, would render a valuable service if you would look into the promptness and also the methods employed by medicare in paying claims.

Now, they tell me that they are overexacting in details that the doctors are required to submit. I think at the time when we are approaching more doctors to take assignment, we want to insure that the doctors are not prejudiced against the program because of expensive paperwork.

I think, then, that we should look at the tardiness with which medicare is paying these bills and whether it is demanding unnecessary showing.

Mr. RANGEL. The staff will look into that and share the information with your office.

Mr. GORDON. If I could make a suggestion, I have heard that complaint, and I agree with the Congressman that the doctors really have more resources to wait than someone on social security; but there is no reason why you couldn't authorize an immediate payment of 80 percent. The doctors aren't going to get away if they got a check in a week for 80 percent and if you are going to take 3 months to figure out whether you are going to give them the other 20 percent, they wouldn't mind.