NATIONAL HEALTH INSURANCE Budget and Financing Issues WEDNESDAY, FEBRUARY 25, 1976 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HEALTH AND THE ENVIRONMENT, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Washington, D.C. The subcommittee met at 2 p.m., pursuant to notice in room 2322, Rayburn House Office Building, Hon. Paul G. Rogers, chairman, presiding. Mr. ROGERS. The subcommittee will come to order, please. We are continuing hearings into proposals for national health insurance. We have as our first witness our distinguished colleague from the State of Washington, the Honorable Brock Adams, who is chairman of the Committee on the Budget of the U.S. House of Representatives and, of course, a member of the full committee, Interstate and Foreign Commerce, and is most knowledgeable in all of these affairs. We are particularly anxious to hear his thinking on this subject matter as it may relate to the budget and to other matters of national concern. So we welcome you to the subcommittee and we are pleased to have you here. Your statement will be made a part of the record in full [see page 1161] and you may proceed as you desire. STATEMENT OF HON. BROCK ADAMS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON Mr. ADAMS. Thank you, Mr. Chairman. Since you have made my statement a part of the record, I will go through and highlight the points within it and not give it in full, and I will then be very happy to respond to any questions the committee may have. I would like to emphasize that, as chairman of the Budget Committee, I am appearing here today to try to give to the committee information on the development of funding for the national economy that we have developed so far and to emphasize that the Budget Committee has not taken a position pro or con on national health insurance since this is within the jurisdiution of the other committees. I want to indicate that, other than the factual material which I am most happy to share with the committee as to the amounts of money that may be available now and in future years, the views that I present are my own views and not those of the committee. In other words, we have not had a flat note on the merits of the issue and I am not really here to try to advocate one plan as opposed to the other. I know you are also going to have Dr. Rivlin of the Congressional Budget Office to give the committee the benefit of whatever expertise we may have gathered on what some of these plans may cost, what some of the costing proposals may be that are required and when or at what point is could be included within the Federal budget. First I will state my personal position, which is that I think we should establish and implement a system of national health insurance and that it should have the following objectives: to give all Americans access to good health care; to end financial hardship caused by illness; to improve the efficiency and effectiveness of the health care delivery system; and to provide incentives to both the provers and the consumers to hold down health care costs. Now I would like briefly to address the timing of potential legislation. I believe that in order to enact national health insurance we should accept the fact that this will be a permanent program and, therefore, should be provided for within revenues available to the Federal Government. We should assume that it will be funded out of revenues, not from money borrowed to fund it, because it is not-and I don't think the committee should advocate and I hope they will not-any kind of temporary measure. I think we can borrow sums of money, and probably will have to borrow at times in the future as a macroeconomic policy. Such borrowing would mean running a Federal deficit from time to time for emergency situations like either a recession or, God forbid, if we have another war, or if we develop some national defense emergency such as that. Those are the types of situations I refer to in the budget language as temporary needs or programs for which we need to use deficit or borrowing procedures. But national health insurance does not fit within that category. It will be a year-to-year program and will require money set aside every year to accomplish that. I have emphasized that I think health insurance should be a permanent program. I don't think the day is far off when we can have revenues available to do this. I have set forth in my statement on February 18, 1976, on the floor of the House, my general views on how I think the economy should function and I know the chairman is well aware of those views so I will not repeat them now. My statement contained a series of potential 5-year budget projections that cover three ranges. These three ranges are, (1) the President's budget; (2) the current services range which has been produced by the Congressional Budget Office and simply projects what it will cost the Federal Government to continue the programs presently in existence at their current level of services, taking into account expected inflation; and (3) an illustrative set of projections which is between those two and shows how some current services can be maintained while at the same time reducing last year's deficit, and not cutting back drastically on current programs, as is suggested in the President's budget. Now, I believe, in terms of timing for national health insurance and the general budget picture, that fiscal year 1977, for which you are now beginning to develop your proposals to give to the House floor and the Budget Committee, is an appropriate year, for enacting the basic implementing legislation if you so desire. This is because it is estimated that it will take a minimum of 2 years to implement any of the plans that I have heard about, and to move into the major expenditures that will be required. Based on current estimates, we probably could allocate as much as $200 million in start-up costs following the enactment of enabling legislation. Now, the estimates as illustrated in the chart also indicate that if we exercise restraint across the board in Federal programs—and we have been trying to make this point to all of the various spending committees of the House and of the Senate-there could be as much at $15 to $20 billion of revenue above outlays available by the fiscal year 1980, for which I am trying to sketch a potential timetable. If you do decide as a committee that you wish to spend anything on national health insurance in fiscal 1977 it is imperative under the Budget Act that the March 15 report of the Interstate and Foreign Commerce Committee to the Budget Committee specifies that you intend or you expect to do something this year, so that we can take it into the planning of the overall budget; and, second, if you want it in fiscal year 1977, it is imperative that the authorizing legislation be reported from full committee by May 15, 1976. It doesn't have to have gone to the floor, but it would have to be reported by May 15, 1976. I am neither advocating nor prohibiting in any fashion whether or not you make a decision to spend money on national health. insurance in fiscal year 1977, but those of us who serve on the Budget Committee have attempted to go to the authorizing committees whenever they have major pieces of legislation that involve potential new spending programs and to indicate to them that those deadlines are involved. If you decide that is too tight a deadline, you can, of course, proceed with authorizing legislation after that date but its first chance for spending would be in fiscal year 1978 unless the committee could persuade the Budget Committee to waive the rules as an emergency and go to the floor avoiding the Budget Act procedures. Because of the size of the deficit we have been running, I have found that most committees are rather reluctant to go to the Rules Committee and ask for a waiver at this time, because the Rules Committee is very nervous about the size of the deficit we had in fiscal year 1976 and is very nervous about what it may be in fiscal 1977. As you can see from the projections which are listed in my prepared text, that deficit can range anywhere from the President's $43 billion-and it is my understanding that they are now saying that that estimate was too low and the deficit will be higher-to a potential deficit under the current services budget of $64 billion for this coming fiscal year. Again I mention that fact for the sole purpose of giving this committee information as to what the total budget constraints are for the coming fiscal year and what the size of the potential deficit for the fiscal year will be. Now, my final remarks, Mr. Chairman, and again, I am not attempting to tell the committee how it should operate its cost controls, but only to report to the committee the experience we have had under medicare and the dangers which we must accept when we place this in the total Federal budget and deal in terms of the costs of the program. If this program is to pass, I think it is essential that there be something within the bill to keep the cost of medical care at a reasonable level. Now, the reason for this is that if we do not have these cost controls, we will have the same kind of programs in cost escalation that we have in existing financing programs, namely, in medicare and medicaid. In 1972, these costs were $12.9 billion. In 1976 they had grown to $25.8 billion. And they are projected at current services by the Congressional Budget Office-that is without changing program controls, or changing benefits-to be at $48.5 billion by fiscal year 1981. Now, that increase has not just come from an increasing number of beneficiaries. Our examination indicates that $10.3 billion of that increase in cost over the past 5 years-80 percent of it-has come from higher costs for physician and hospital services. There is no question in my mind that the rising spiral in medical care prices has materially contributed to the delay in the enactment of a national health insurance system and that we must act now to curb the drastic annual increase in hospital costs and physician fees. If we do not, then in my opinion the enactment of national health insurance will be further postponed because we are not just dealing with the problem of trying to squeeze a program into the narrow range of revenues available by fiscal year 1980, but trying to squeeze in a program that is growing in cost. Now, I know your committee has the expertise to deal with the cost control matter, but I would just throw out this suggestion to you for your consideration. The President has proposed a 4-percent cap on physicians' fees in the payment of Federal money to physicians and a 7-percent cap for hospital increases. I do not think think that proposal will work and I do think it will shift the burden to those who can least afford it-the aged and the disabledbecause the physicians are entitled to pass on additional amounts above that. I might suggest that we establish a more flexible system, which would be limited, for example, to say 133 percent of each region's price index for all services. This would limit the increase in hospital reimbursements in fiscal year 1977 to about 10 percent, declining to about 812 percent in fiscal year 1978. Further, the major private insurers of health care should be encouraged to adopt a similar reimbursement policy so that institutional providers do not simply pass on to the privately insured patients those costs disallowed by the Federal Government. To give you a comparison, the administration's actuaries estimate that without this hospital costs will rise 15 percent in fiscal year 1977 while the increase in the Consumer Price Index is estimated to be about 612 percent. I just don't think we can put in place a national health insurance program if we continue to have provider costs rising at 212 times the percentage of inflationary costs generally. Incidentally, such a flexible program would have about $600 million in fiscal year 1977. Again, I am not trying to advocate that this should be the committee's position, but to give you the parameters of how much money you are talking about. In closing, I would say this, as my personal viewpoint. I know your subcommittee has done work with HMO's and PSRO's, and comprehensive health planning. As a member of the full committee, I want to compliment the subcommittee for the hours and hours of effort you have spent on these, and I support this "rationalizing" of the system that the subcommittee is attempting to do. I think we also have to move in the area of preventive health care and health education programs, which this committee has been considering. Finally, I would like to emphasize my view of the role of the Budget Committee. It is to give the various authorizing committees a better idea of what funds will be available now and in the future to carry out programs under your jurisdiction. I feel that we must and should have a national health insurance legislative program that will be realistically funded and effective for bringing to all Americans the finest health care that medical science can provide. Clearly the committee has the depth of experience and knowledge to determine the best mechanism for doing this. I hope that my remarks today from the perspective of the overall budget are in some way helpful to the committee and I would be very happy to answer any questions that I am able to do. [Congressman Adams' prepared statement follows:] STATEMENT OF HON. BROCK ADAMS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON INTRODUCTION I want to thank you, Mr. Chairman, for your invitation to present my views on some of the issues involved in the development of a national systems of health insurance. While I am appearing here because I am Chairman of the Committee on the Budget, I want to make it clear that the Committee as a whole has not taken a position on the enactment of national health insurance to date. My testimony, therefore, reflects my own views. I have stated before and continue to believe that we must establish and implement a system of national health insurance which would achieve the following objectives: give all Americans access to good care, end financial hardship caused by illness, improve the efficiency and effectiveness of the health care delivery system, and provide, licentives to both provider and consumer of health care to hold down costs. The issue before this Subcommittee is, which arrangement of services, management, controls and financing can best achieve the objectives. While I will not address myself to specific legislative proposals which have been introduced, I |