ment, and the county is carrying most of the fiscal burden, and the taxpayers are annoyed.

I just thought if we had some priests and nuns there in addition to the fine work they are doing in directing these people and helping to find themselves that I would like to see what the AMA would do if you had some doctors priests there that were on the case taking care of these people.

Monsignor WALSH. I am sure it would be interesting, but the impact of a few like that, there are so few of us to begin with, would be so little on the health delivery system that I don't believe it would be of significant benefit.

Mr. RANGEL. We may have to discuss why the numbers are growing smaller.

Monsignor WALSH. That is another question, but there is a serious question right now which I referred to in my testimony, that, for example, if I go out and establish a proprietary nursing home, I am going to receive more money reimbursement from the Federal programs than if I have a nonprofit nursing home. I think that requires some study. Incentives are not there. I think incentives for the development of nonprofit under any auspices is something that needs to be looked at.

Mr. RANGEL. I agree with you and I want to thank you on behalf of the committee and Senator Pepper and other witnesses that have testified, that in the final analysis the Catholic Service may be the only hope that some of these human beings have in getting help.

Monsignor WALSH. That is why I am here as an advocate. The powerless people need advocates and that is why we are here today. Mr. RANGEL. We will now. We won't get into the power of the church but I do believe that we are reaching a point in our national history that the power of organized religion may be the only thing that will be left to bring some balance to the power of the vested interests and I am very serious about that.

Monsignor WALSH. I am serious about that. I agree with you there, and we are willing to do our share.

Mr. RANGEL. You certainly have in welfare reform and programs in hospital cost containment. There has been disagreement but on these moral issues I think Members of Congress that have to go back home just to listen to one side of very complex and sensitive issues, that somehow there has to be some help given on behalf of the powerless even to the point of getting involved politically, that is, saying that you can't get hurt on this issue because it is moral and right and just and we will be talking about it in the synogogue and in the churches, no matter which way the flack falls.

That is because of the computer system. But Members of Congress have to tolerate that back home and it is becoming a very serious problem.

Monsignor WALSH. I fully agree with you and I am sure that Senator Pepper would assure you that in our area down here in south Florida we do try to do what we can in that area.

Mr. RANGEL. Thank you.

Mr. HEFTEL. I have just one short observation, that it may be unfortunate that there is a very organized campaign in the country to

judge all candidates for public office on one issue, prolife. I wonder if we are serving the people well when we disregard all of the other qualities and characteristics and issues that have to be faced and simply judge the candidate or the officeholder only on that one issue and decide to make a judgment not on all of the areas and responsibilities and expertise that are needed but just the one question.

I really am not asking for comments from you, Father, but just observing that we should be aware that that single issue concept by which we could decide who is entitled to hold office is not serving the people of the Nation well and most particularly not the poor.

Monsignor WALSH. I could comment on that, that I am in agreement with you in that regard and I know the National Council of Catholic Charities of which I am a board member, that on any subject, a one issue judgment is weak and improper and does not serve the best

interests.

Mr. RANGEL. I am delighted to hear you say that.

Monsignor WALSH. We feel very strongly that there has to be a broad range of issues. We have deep moral concerns but at the same time we feel that we have to be very strong advocates in other areas as well.

Mr. RANGEL. Thank you.

Thank you, monsignor, for the outstanding job you are doing here and our Government won't desert you in that fine work.

The next witness is Melvin Levitt, National Retired Teachers Association and American Association of Retired Persons.

STATEMENT OF MELVIN L. LEVITT, REPRESENTING THE NATIONAL RETIRED TEACHERS ASSOCIATION AND THE AMERICAN ASSOCIATION OF RETIRED PERSONS IN THE STATE OF FLORIDA

Mr. LEVITT. I am Melvin L. Levitt and I am here today representing 1 million members of the National Retired Teachers Association/ American Association of Retired Persons in the State of Florida. Our associations appreciate having this opportunity to address the subcommittee on a subject of great concern to our Nation's elderly citizensnational health insurance. We commend the subcommittee for holding this regional hearing and thereby encouraging a continuing and active dialog on this public policy issue of great importance.

The availability, affordability, and accessibility of quality health care services is especially important to older Americans, who, while accounting for only 11.2 percent of our population, represent 29 percent of our Nation's total health care expenditures.

Our associations believe that there are two primary obstacles to promoting improvements in the health status of our Nation. First is the belief that all needed levels of care can be supplied through the present medical system. Second is rapidly escalating medical care costs and our country's limited resources. For the elderly, health services presently available are often overlapping, confusing, fragmented, and unevenly distributed.

In comparison, the costs of health care are sharply increasing, adding to the general rate of inflation and threatening the very stability of Government budgets. With this administration and this Congress

seeking to restore some semblance of fiscal responsibility to Federal Government and reduce our Nation's presently intolerable rate of inflation, the need to restrain the rate of increase in health care costs stands in clear relief. For without immediate and effective measures on the part of Congress in addressing this problem, the cost of such programs as medicare and medicaid will continue to spiral upward, out of control, and benefits will continue to be diminished. In such an atmosphere, prospects for national health insurance would be bleak indeed.

While medicare picks up approximately 38 percent of the per capita health bill for persons over the age of 62-when beneficiary deductibles and cost sharing are considered the elderly are in a relatively worse position because of the extraordinary rise in health care costs not covered by medicare. Clearly, increases in health costs and diminishing benefits are financially constricting the elderly's access to needed health services.

Our associations are very troubled by the bias of the medicare system toward acute, episodic and institutional-hospital-based health care; often at the expense of effective programs of health prevention and maintenance as well as ambulatory services. Catastrophic-only type health plans merely serve to reinforce this bias while perpetuating and broadening the impact of current problems in the medicare system. We do not feel that it is advisable public policy to only provide protection against catastrophic hospital expenses and thereby create additional demand for these services.

To the contrary, the premise we work from is that medicare is far from a model or exemplary public health care program and in fact it may be preferable to work initially toward improving and restructuring the health care financing and delivery system on a widespread basis.

The most serious benefit gap within the catastrophic health care proposals as well as the more universal and comprehensive NHI plans is the limited coverage of skilled nursing home care. The noncoverage of long-term care services makes these so-called catastrophic plans somewhat of a mirage for a large number of elderly Americans since long-term care is the primary cause of catastrophic health expenses for the elderly. The lack of a well-designed, long-term care system encompassing both health and social services in nursing facilities, the community as well as the home is without question the greatest deficiency in the present health care delivery structure. Catastrophic health insurance proposals would only serve to perpetuate this deficiency.

This rapid growth of the health care industry has been fueled by the expansion of the third-party, cost-plus reimbursement system and by Government subsidizing both the demand and supply sides of this growth. Government subsidies to increase the supply of medical facilities and services were expected to moderate costs for health care. However, the third-party payment system has made the patient, and more importantly the provider, indifferent to cost.

Consequently, there is little restraint on the rate of increase in the costs they incur. Third-party payers reimburse hospitals for virtually all costs incurred and cover much of the fees charged by physicians

and other professionals. Moreover, doctors tend to overutilize hospitals, the most expensive component of the medical care system. This overutilization is promoted by a reimbursement system which tends to cover hospital services but not less costly, ambulatory services.

As a short-term means of promoting competition in the health care marketplace our associations support efforts to combine elimination of special tax treatment for employer health plans with strong cost containment measures and minimum Federal standards of coverage for all Americans. There is definitely a pressing need to inject a much greater degree of consumer and provider cost consciousness.

However, copayments or deductibles on the order of 15-20 percent of annual family income are highly inequitable for the elderly who already pay a disproportionate share of their disposable incomes for out-of-pocket health care services. Contrary to what the proponents of various procompetition, consumer incentive plans would have us believe, purchasing health care is most unlike purchasing any other commodity since the consumer is seldom involved in deciding on either the form or the duration of the purchased service. It is the physician who makes over 80 percent of all cost decisions while third-party reimbursement system protects both he and his patient from most of the normal supply, demand and cost decisions.

Understandably, very few patients, especially older patients, feel qualified to challenge the physician's decision-especially in cases of major, costly illness. We, therefore, question whether proposals such as Chairman Ullman's or Representative Martin's will actually expand consumer choice given the rather limited ability of most consumers to adequately judge the appropriateness and cost effectiveness of competing plans.

Reliance on market forces to distribute health services could also further encourage the development of dual systems of health care and exacerbate the already serious problem of maldistribution of physicians and other health care professionals. It is our belief that tax exclusions, deductions, and exemptions need to be held out as "quid pro quo" of sorts to encourage not only protection against catastrophic illness but also more cost-effective and comprehensive coverage of preventive, health maintenance and ambulatory health services.

Right or wrong, the nearly universal perception then is a need for insurance-protection-before one becomes poor and not after. At first glance, prerequisites for tax deductible treatment and increased medicare benefits is most attractive. However, in the long run this will not alter retrospective, cost-based reimbursement system which is the crux of the problem and which is in need of radical reform. It will instead only add momentum to the institutional, acute-care hospital setting as the primary health care provider with its attendant cost-escalating implications.

In order to move toward national health insurance strong costcontainment measures must be adopted. The NHI program we seek should contain these essential elements:

One. A shift in emphasis and resources away from institutionalization and acute-care services to preventive medicine, health maintenance services and home health care.

Two. Standards for increasing the quality and efficiency of the health care delivery system.

Three. Immediate system reforms and prospective rate—or fee— setting for institutional care and physicians' services.

Four. Comprehensive benefits with universal and mandatory coverage.

Five. Competition among providers with profit incentives to lower costs.

Six. Financing by a combination of progressive employer-employee payroll taxes and general revenues.

Seven. A patient-oriented health care system with majority representation of consumers on policymaking and administrative boards. Eight. Maximum concentration of program administration at the local level.

Part of the effort to contain costs must include Government legislative and regulatory initiatives to reverse the perverse economic incentives which have caused an uncontrolled expansion in the supply of medical facilities and number of physicians. At the very least, capitation grant programs to medical schools should be restricted to students agreeing to practice in medically underserved areas and to schools requiring course work in such areas as geriatrics, nutrition, prevention, rehabilitation, and toxicology.

In developing a national health insurance program then, Government should establish a limit on the resources it will commit to medical care and assume responsibility for allocating those resources. The current system, for the most part, allows hospitals and physicians to set their own revenue targets and incomes. This should be replaced by a system in which providers and Government negotiate acceptable levels of payment for services rendered. In this respect, payment and regulatory policy must apply equally to all purchasers of medical care, private as well as public.

I might add that the State of Florida has recently adopted legislation-which our associations support-which may serve as a model for future national programs. Florida's Health Care Cost Containment Act of 1979 establishes a hospital cost containment board and requires uniform cost reporting by all hospitals.

While the board does not have the authority to set rates, in reviewing hospital budgets and rates it is empowered to publicize its findings in the newspapers of largest circulation in the county in which the hospital is located. Effectively implemented, this approach can substantially enhance competition in the delivery of hospital services.

A more indirect approach toward containing or avoiding-health care costs is the State of Florida's Community Care for the Elderly Act. This is intended to provide alternatives to institutional long-term care. Services provided include: Health screening; assessment and diagnosis; day care; homemaker chore, home health services; and 24hour respite care. Under the community care for the elderly-CCEprogram, estimates are that the rate of entry into nursing homes for clients in the program is less than half that for the general elderly— population-despite the fact that the client group tends to be highly impaired. A total of $13.2 million has been appropriated by the State of Florida for this program in 1980.

Second opinion programs should be continued and intensified for elective surgical procedures as a means of reducing or containing health costs.