The CHAIRMAN. In other words, we are not spending our money wisely, and we are not very efficient in providing the care that is necessary at the least cost.

Secretary SULLIVAN. Yes. Those are the kinds of changes-

The CHAIRMAN. With that, I agree. But to project decreases over a period of 5 years before a plan is even formulated, I think is not the right way to go.

I yield now to Mr. Wyden.

Mr. WYDEN. Thank you, Mr. Chairman.

Just one question. Throughout this Congress, Dr. Sullivan, a bipartisan group of legislators have been trying to pass legislation to provide home care for the frail elderly. What this would do would be to give the States the option to use Medicaid dollars that have been earmarked for institutional care, to be able to use them for home care programs and the like, and do it without going through this cumbersome waiver process that they have to apply for.

Can you support that legislation at this point as something consistent with your philosophy for serving the frail elderly?

Secretary SULLIVAN. Well, Congressman Wyden, on the specific legislation, I would first want to review that in its entirety, which I will do and get back a response to you in writing.

[At the time this publication went to press, no follow-up data had been received from Secretary Sullivan]

Secretary SULLIVAN. But having said that, let me say this: Certainly the intent of that legislation, as you describe it, is certainly something that I believe is meritorious, and we would certainly want to work to support that. But on the specific bill, I would need to analyze that and get a response back to you, which I would be pleased to do.

Mr. WYDEN. Well, that would be helpful, Mr. Secretary.

This bill has been in for 2 years. It passed the House last time, but the administration objected. If you could let us know as quickly as possible, I would appreciate it.

Thank you, Mr. Chairman.

The CHAIRMAN. Dr. Sullivan, each Member seems to have one quick question.

Secretary SULLIVAN. Sure.

The CHAIRMAN. And if it will be quick, I hope you can remain for another minute or so.

Mr. VENTO. Just a statement representing a little frustration.

I am sure that Dr. Sullivan may understand this, but, you know, we have increased copayments to try to drive efficiency out of the system; that is in essence what has happened in my State because of the difference in terms of payment.

And I know that with the legislation passed last year in some time, we may see some change. Unfortunately, I don't know if we will have any doctors left serving in any of those areas. That is a real crisis, and we are going to have to do something.

By increasing copayments, we sort of pass the buck to the patient, and the fact is they come out of the hospital with a computer printout. That is what their bill looks like now, and we expect them to be advocates for themselves.

I think the message I get back is they want us to be their advocates, and I think it really means taking on the issue here and

facing up to it, facing some risks for me and for the administration and for others in Congress.

I know it's tough, but I think that is where we are at. That is where I am getting the feedback, and I want to pass that along and share with my colleagues as well as with you, Dr. Sullivan.

Thank you.

The CHAIRMAN. Thank you.

Mr. James.

Mr. JAMES. One of the problems that I have observed in the private sector is that when the government tightens down with their DRG, when the government tightens down with their regulations which may be abused on the best of principles and reasoning, et cetera, what happens in actuality in hospitals is they pass it on to the private sector and the bills are then proportionately higher, at least this is what hospital administrators have told me, although many county hospitals have lost millions. One in my county, two of them did. They lose money.

But they tell me, the administrators, they have told me that the reason it is higher is because it used to be, though the rules have changed, though it may be now, over the last 5 years, the DRG, for example, out-payment of services, et cetera, since the medical economy is one-third driven by the Federal dollars is what I understand.

If that be the case, how do we keep-when you squeeze on this end of the balloon, how do we keep the other end of the balloon from bulging; that is the private sector, and therefore affecting our premiums because I have come to the conclusion that I pay 30 to 50 percent higher, I mean some higher percentage.

If you pay cash, you don't have those government regulations to protect you or your small insurance company. Only the very large groups that might have some leverage in contracting with hospitals. But you would pay dollar for dollar that inflated price that is caused by the indigent cost that isn't covered by anyone in the county hospital, et cetera. I would like your comment, perhaps.

There is one other thing before we get to that. How would we prevent that, one. And two, when we say there is 33 million uninsured incidents reported to emphasize that they may be uninsured but many of those, some of them at least, get substantial health care benefits from the counties and the states, et cetera, so it'smaybe it's not as bad a problem in relationship to re-organizing our priorities.

And maybe all medical bills might come down if some proper aggress is involved with the issue.

Do you have any comments on any of that?

Secretary SULLIVAN. Yes, Mr. James.

On the latter issue, you are quite correct, that whereas we talk about 31 or 33 million uninsured, the fact is it's a rare individual who does not receive needed health care in our country, and much of that does appear on the ledgers of our hospitals as uncompensated care or care for the indigent.

So clearly, we need to address that problem. But I want to be sure that there is no misunderstanding that most people who do need care receive it.

On the question of the shift of costs-

Mr. JAMES. Excuse me just a minute.

It appears to me that perhaps, we are paying it and may not know it, the private sector, the form of our premiums already in some respects, in some respects, we are paying it by larger premiums that we might otherwise avoid some of the effect if everyone were insured.

Do you follow what I am saying? To some extent, are we not paying it some way or another?

Secretary SULLIVAN. Well, I am sure that much of the care that is provided is more expensive than it should be because what happens with the individuals without insurance is that they do delay going to a hospital or a physician's office until the condition has indeed worsened, and therefore, they crowd our emergency rooms, and the costs of providing that care is much more expensive.

We also have another problem in our system, and that is the cost of liability insurance-not only the direct costs of premiums, but also the costs of defensive medicine that our hospitals and our physicians undertake in ordering tests that really are not necessary and don't contribute to the care of a patient, but rather are provided to protect themselves if there should be a suit.

So that is one example of the kinds of things that we have to look at in trying to fashion a comprehensive solution. That clearly has to be part of it as well.

We are concerned that we ensure that we undertake actions that don't shift costs from one part of the system to the next, but really get costs under control. We already spend more money than any other nation, yet our health status is not as good.

That means that we, whether it's the public dollar or private dollar, are not getting our money's worth. And that is really what we are interested in correcting.

The CHAIRMAN. Thank you.

Dr. Sullivan, you said in your opening statement that you look forward to a continued dialogue with this committee.

May I state that we look forward to that dialogue. We sincerely hope that we can work with you to pass the proper legislation. You and I know that it is going to cost money. It's not going to be free, but it is going to be in the best interests of our entire community. I thank you for your presence and for your testimony. Secretary SULLIVAN. Thank you.

The CHAIRMAN. The hearing is adjourned.

[Whereupon, at 12:15 p.m., the hearing was adjourned.]

APPENDIX I

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The story portrayed in the attached House Committee on Aging study is one of people -- lower and middle income older Americans and the pressures they face from a society-wide problem - rapidly rising health and long term care costs. While virtually all lower and middle income Americans feel some pressure from these costs, the problem is acute for people whose incomes rise no faster than overall inflation. It is acute for those who have high out-of-pocket health costs or who are at high risk of facing high costs. When these two factors come together as they do for older and lower/middle income elderly, the problem can become unbearable. The elderly's pocketbooks are quickly being emptied as the elderly face spending twenty percent of their income on health care.

The study's result dramatically points out the great need for change. Change in how the nation contains its health and long term care costs is long overdue. Federal, state and employer actions have been relative failures in their primary objective, containing their own costs. Their actions have been too narrow in their application, failing to protect elderly and non-elderly consumers from costs uncovered by public or private third party payers.

As the final chapter of the study suggests, a comprehensive system of cost containment is essential if costs are to be kept affordable for all Americans, including the uninsured and underinsured of all ages. The failure to do comprehensive cost containment will fall most heavily on younger Americans with little or no insurance and on older Americans with lower, relatively fixed incomes.

A nation's respect for all its elders comes from what they did, their contribution to a free and strong America, and from who they are, proud people delicately balancing their own needs with those of their grandchildren and children. Our elders ask no undue attention, only that attention necessary to survive the special trials of later years. They ask only to be treated fairly. They ask only to retain their dignity and independence. They ask only for society to recognize the extra pressure on the elderly facing high health care costs with only limited incomes.

EDWARD R. ROYBAL Chairman, House Select Committee on Aging

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