Two: Payment to doctors and hospitals are made on a fee-for-service basis. Under this payment mechanism, neither has an incentive to economize; the incentive, instead, is to increase the number of services to increase income.

Three: The reimbursement formulae based on costs to hospitals mean that the higher the cost, the higher the reimbursement. The answer to hospital budgetary problems, therefore, is not to minimize costs, but to maximize reimbursements.

Is it any wonder, then, that when patients want the best available services and this appears to be the dynamics of the request for care -hospitals will offer the highest range of services with the most modern technology and doctors, trained to practice medicine with the best technical quality, will offer care without regard to cost.

Third-party payers, with no countervailing force against hospitals or doctors, can simply take care of the problem by increasing premiums.

Thus, no one in the system, except the population, loses from expansion of the system. No one wishes to change the status quo. Why change when it works well for those in the system.

Thus, any discussion of health care and the enactment of a national health insurance plan must take into consideration the structural reordering of health care. Alternatives to the present reimbursement formulae, the costly fee-for-service concept, the cost-generating financing method can be found in a few successful prepaid group practice plans-incidentally, I understand that prepaid closed panel plans cost from 20 to 30 percent less than an open panel fee-for-service program-and you can also find them in various parts of our country and to fairly widespread success in a number of foreign countries. Of course, the nearest neighbors to us is Canada, where they have some very stringent budgetary control; lump sum allocations for certain kinds of things, certain kinds of incentives placed on general practitioning rather than on specialization.

Thus, it would appear that short of a substantive change in government policy that encompasses major structural reform, we shall continue to exchange one crisis for another in health care and to be seduced by short-range exotic cures.

Mr. HEFTEL. Thank you very much, Ah Quon.

Perhaps we'll have the testimony presented by Henry and Celia and then we'll participate in the questions when we have the range of all of your observations.

Mr. EPSTEIN. Thank you, Mr. Congressman. I don't have a prepared statement

Mr. HEFTEL. That's all right

Mr. EPSTEIN [Continuing]. But I would like to make a statement. Mr. HEFTEL [continuing]. You can subsequently place a written statement in the record, and what you share with us today will be duly noted and recorded for us, so go ahead.

STATEMENT OF HENRY EPSTEIN, ON BEHALF OF THE AMERICAN FEDERATION OF STATE, COUNTY, AND MUNICIPAL EMPLOYEES AND THE UNITED PUBLIC WORKERS

Mr. EPSTEIN. Thank you. Our international union, the American Federation of State, County, and Municipal Employees is on record

in favor of a national health insurance plan. Our own local, the UPW, has discussed this and gone on record.

I think a number of witnesses have talked about the general level of medical care in Hawaij and I think we are fortunate, compared to many mainland places. My understanding is that there are 23 million Americans who have no medical coverage at all; and reading our union newspaper, there is a lot of difficulty about public general hospitals. In many cities, these are the places that the poor have to go to; and as the cities are facing financial problems, they are closing down these hospitals and taking away the only place that the poor in the city can go.

I think we are more fortunate than that in Hawaii. We do have relatively good health care, but I think the thing we have to realize is that it is very expensive.

A good medical plan for a family in Hawaii now is pushing $100 a month and it is going up rapidly; and our members in the State and county governments are paying more than 50 percent of that premium.

There is a debate going on in the legislature now as to whether the legislature should increase the employer's contribution to 50 percent, but at the present time it is less than 50 percent; and when you are paying $50, $55, $60 for medical coverage, this is beginning to be very expensive for some low-income people. It can get to be almost 10 per

cent of their net income.

I think we do have a number of people, even in Hawaii, who are not enjoying good medical care: the unemployed; people who had good medical coverage when they were working and it doesn't go with them when they are unemployed; or retirees-most group plans stop when you leave the company and not everybody retires when they are eligible for medicare; the self-employed, who are not covered by our prepaid health law here; so there are many people who are not covered, who are not getting these benefits that you have been hearing about; and there are also many situations where people are not getting a good coverage.

From my own experience, members of ours, where they have had long cancer cases, a terminal cancer case which drags out for 2 or 3 years can bankrupt a family and put them in very, very difficult situations.

A mental illness, I think, is not being adequately taken care of in Hawaii, partly because of limitations in plans, partly because the government itself keeps changing its emphasis, and just about the time that one fad is being followed they switch to another one; and in the process some patients are not getting care or not getting decent care because the system keeps changing.

People with language difficulties, people who don't speak good English, don't get the same treatment when they go to the doctor, who can't understand what they are saying. Recent immigrants, think, do not really get good medical care.

There are some problems aimed to help the immigrants and help people with language problems, but all are those programs federally funded, and I'm afraid of the kind of programs that may be going out the window if the Federal Government begins cutting back on social programs because it took that Federal subsidy to have a program for recent Vietnamese immigrants and recent Filipino immigrants and

the others who otherwise would not really be able to get decent medical care.

So, even though I think we have, relatively speaking a good system in Hawaii, there is room for improvement and I think some national program that fits into this is going to be needed.

Thank you.

Mr. HEFTEL. Thank you very much.

Celia ?

Ms. HAILPERIN. I appreciate sitting with my union friends here. I'm representing, for the purposes of this hearing, Health and Community Services Council, which is an organization of community agencies, and I have the pleasure of being chairman of their long-term health care task force.

This group worked 2 years in providing a study on long-term care and its needs in Hawaii and I would like to submit this report as part of my testimony.

Mr. HEFTEL. It will be so ordered that that be placed in the record. STATEMENT OF CELIA M. HAILPERIN, ON BEHALF OF THE HEALTH AND COMMUNITY SERVICES COUNCIL OF HAWAII

Ms. HAILPERIN. I will read my testimony as representative of Health and Community Services Council.

The Health and Community Services Council of Hawaii, long-term task force, was organized in 1978 in response to a community request to look closely at long-term care issues in Hawaii.

The task force collected a body of information for analysis concerning the plight of people with chronic impairment, in need of health and social services, or those who are at risk of needing this kind of care in the future.

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After nearly 2 years of careful collaborative study by this group volunteers, the report on long-term care was published which points out the serious lack of choices for those in need of long-term care in Hawaii.

People do not always receive the most appropriate care, in part because the full range of services, particularly community and homebased services, is not available nor affordable.

In addition, patients and their families may not know what is available or how to gain access to alternative services that are, perhaps, more appropriate for them.

This morning, when Andy Chang made a plea for the possibility of using medicare and medicaid funding for alternative services to those of institutional care, I think we could all applaud him for that suggestion.

We have not yet made a sufficient study, but I venture to say that with the high cost of institutional care, the alternative services would certainly not equal that high cost which continues to mount astronomically.

In general, the report recommends a consortium of groups, including business, labor, private and public agencies working together to coordinate, implement, and finance a comprehensive system of community support services directed toward the prevention of institution

alization and the enhancement of maximum functional capacity of Hawaii's citizens.

Long-term care services should be established as a working continum of care, encompassing a spectrum of comprehensive, social, and psychological as well as medical services.

One of the principal problems in developing a community-based care management system is the present reimbursement mechanism which favors this institutionalization.

Statutory and administrative changes to medicare and medicaid could help remove this bias, eliminating durational limits and prior hospitalization for the medicare program and adoption of eligibility standards which do not disadvantage the choice of home-based care over institutionalization in the medicaid program, would help remedy some of these reimbursement problems.

At the national level, a well coordinated, comprehensive and humane long-term care services policy and plan must be developed; resources must also be developed and quality assurance mechanisms designed. In spite of the overwhelming nature of the long-term care problem in this country and the limitation of available resources, a system of national health insurance must be planned to include long-term care as an integral feature.

Some difference from other health services may suggest administrative and financing variations, but we must not allow these programs to get lost in a national health insurance debate.

We believe that health care is a right of every citizen, including care that is provided over a period of time. Presently too many people are being left out, forced to make choices simply to survive.

The threat of chronic and catastrophic illness must be reduced not only by innovative programs that aim at prevention of illness, but also by an equitable system of reimbursement in the event that longterm care is needed.

Thank you very much for providing this opportunity to speak about these important issues.

[An attachment to the statement follows:]