Mr. ALTMAN. It is not clear to me that we need the medical system, the highest priced provider units to provide that counseling. Mr. SCHEUER. I am not talking about higher price provider units. I am talking about physician extenders, a neighborhood health nurse operating out of a neighborhood health clinic at a fraction of the cost of a health professional and especially a health professional in a tertiary hospital. Mr. ALTMAN. I think you are right. Ms. RIVLIN. Clearly the current system has the wrong incentives and we can improve them in several ways. However, ultimately, you really are back to the kind of discussion we were having earlier about expensive treatments for dying patients. You never are sure that the patient is really terminal. Some risk is taken that somebody's life might not be saved if you don't give them maximum care. The same kind of moral problem exists with regard to preventive care. If you made all care free and very, very available at your corner, at everybody's corner, you would certainly save some lives. The question is at what cost? Mr. SCHEUER. A perfectly legitimate question. If everything is free and very, very available, how do you prevent frivolous overuse and overstress of the system? Ms. RIVLIN. That is the problem. We are looking to you for leadership. I think there are only two options. One is cost sharing, which has all these problems. It may not be effective in getting people to use the care available. They will not get care when they need it. Mr. SCHEUER. Supposing you had cost sharing at the more expensive element of the system, a tertiary hospital bed, but not when it comes to ambulatory outpatient care. Wouldn't that encourage people to think if I wait and really get sick it is going to cost me money. If I go in for a pill or a little stroking it is going to be free? Isn't that what we want them to do? Ms. RIVLIN. Suppose he really is sick and he ought to be in a hospital and can't afford it. Then you have a problem. Mr. SCHEUER. For the poor we would have to make other provisions. Let me ask you the question I was asking for a few moments ago about the outrageous abuses to date in the medicaid and the medicare programs. Is there some way we can create incentives to have either Government or the private medical profession or both exercise more adequate scrutiny and oversight than we have had in the last decade? How do we avoid that kind of disaster in the future if we put some more building blocks in place? We have put two building blocks in place and they have been abused in a systemic way. You can't describe it as haphazard. It has been systemic abuse. Mr. ALTMAN. Mr. Chairman, if I could figure out a way to do something about it I would be the first to try to see an end to this abuse. Mr. SCHEUER. Prosecute. The facts are known. They have been reported ad nauseum in the daily press over the years. Mr. ALTMAN. Well, that is a State program. The medicaid program is what we are talking about. Mr. SCHEUER. Aren't there Federal dollars? Couldn't the U.S. attorney in the southern district of New York indict these people? Mr. ALTMAN. Again, just like I was a little fearful of practicing medicine without a license, I am out of my element here. I don't really know the ramifications of when a U.S. attorney can act. Mr. SCHEUER. Is there some kind of incentive we could create? Mr. ALTMAN. I think the example of New York City more than any other example I could cite demonstrates how budget controls and tight fee controls can lead to the worst effects. In New York City it is now well known that the medicaid program pays for physician services at less than 50 percent of what the physicians charge other members of the community. As a result, very few physicians the estimates run anywhere between 10 and 25 percent of the practicing physicians will treat medicaid patients. In effect, the system lays itself open for the so-called medicaid mills and rip-off artists and everything you mentioned. The majority of the medical community in New York City does not treat medicaid patients. I have talked to high officials in the city of New York, and they know the problem. They are hard put to know what to do because the choice is either having medicaid patients go to the so-called medicaid mills or get no medical care at all. I think the answer to your question is, yes, incentives can work and one of the incentives is to pay a rate which allows people whom you trust to provide good care to want to participate in the program. I don't think you save money in the long run by underpaying the medical community and that tough trade-off is between underpaying and overpaying. Mr. SCHEUER. Doctors' salaries, the average doctor makes $55,000 a year in the country, which is a fine salary. Supposing you had him employed on an annual stipend, I would be happy to pay doctors $55,000, or start them at $40,000 and increase it incrementally. I would be willing to meet the market tests for young doctors if they would work in the underserved areas. That is not where the rip-off comes from doctors' salaries. One of the things I suppose we are going to have to experiment with is a variety of models of renumeration, not just in the HMO but in group practices and even individual practices. If a doctor wants to work in the ghetto I would be willing for the Government to pick up his rent and provide him with two service peoplea nurse and a social worker--and give him an annual stipend. That is exactly what the British do, and it doesn't work that badly. and they get doctors to work in what heretofore were underserved areas. But what I am talking about is another kind of a rip-off. Do you know what I mean when I say family ganging and ping ponging? Mr. ALTMAN. Yes, sir. Mr. SCHEUER. The outrageous business of a kid comes in for his methadone and is sent for a variety of other tests on a weekly basis. Mr. ALTMAN. Mr. Chairman, that is what I was referring to, where you pay $5 a procedure when the going rate is $15, the system lays itself open from this so-called gang family visits where you run them through, so I wind up with a bill of $75, although each procedure was only at the $5 rate. I would argue that in cases like that it might be appropriate for the rates charged by the program to be increased. Mr. SCHEUER. Now let me throw this at you: I asked some of our New York City DA's why they didn't prosecute these medicaid frauds and they said, we are so busy with violent personal crime, head-to-head crime, we don't have time for the white collar stuff. Now, hundreds of millions of dollars of Government funds are going down the drain. Would it make sense for us to say in the law if any State division of health wants to set up a new division of medicaid fraud, a prosecuting arm to investigate and prepare cases and prosecute cases of medicaid and medicare fraud, that the Federal Government would pay 90 percent of the cost of funding that. If the county DA, like Manhattan, New York County or Queens County or Brooklyn County would set up a division of medicaid fraud, in the DA's office, to ferret out these cases, prepare them and prosecute, the Federal Government will pay 90 percent of the cost of setting that up. It might be that any recoveries that they got, any recoveries of funds they got might first go or 50 percent or 75 percent of any reimbursement they got as a result of the prosecuting-would go to pay off the Federal assistance. Would an approach like that make sense or do we tell the county medical society you have got to get to work to police your profession and we will give you thus and such assistance to do that job, which isn't being done? Is that an obligation that the medical profession itself ought to take on? Is it perhaps that they are not doing it because of the expense of policing their own profession? We have to have a whole new systemic approach to oversight here if we are going to put some more building blocks in place. Mr. ALTMAN. Well, I can't and won't speak for the medical profession. With respect to the 90 percent matching rates, such procedures have been tried in the past, not for activities like this one, and it is worthy of some thought. My own feeling is New York and New York State and other States have very strong financial incentives to do it now but I can't tell you why Mr. SCHEUER. The moneys they recover aren't primarily their moneys, aren't they Federal money they are recovering? Mr. ALTMAN. No, the medicaid program has a matching requirement right now where the costs in New York are shared 50–50. In some States the costs are 78 percent Federal money and 22 percent State money. So we already have in the medicaid program a substantial incentive for efficient State operation. Mr. SCHEUER. It doesn't work. You may think you have the incentive but in practical terms it ain't there. They are not doing it. Let me put it another way: Let me pose the same question I posed to Congressman Brock Adams. If you were writing medicaid and medicare today, in the light of everything that we have learned and everything that you have learned in the decade that has passed, how would you do it differently in terms of the fraud and the ripoffs and the abuses? What would you factor in there that wasn't factored-in a decade ago? Mr. ALTMAN. For one thing, I guess I would think seriously about even for reasonably low-income people some small amount of cost sharing so that they could let us know occasionally when they felt health care costs were out of line. Second, I would change the reimbursement system so that in areas like New York City the rates were higher and that there was more accountability for services on the part of the general medical community rather than a small amount, but I think the question is much broader than that and I really don't feel qualified at this time to sort out all the answers. It is fairly broad and I can't tell you why New York City doesn't run a better fraud and abuse sys tem. Ms. RIVLIN. I think you put your finger on part of the problem. We have to do two things at once. We need an effective way of preventing fraud and abuse. But you have got to make sure you don't put all the potential providers out of business. This is part of the reason nursing home standards aren't better enforced. Mr. SCHEUER. I didn't get that. Ms. RIVLIN. I am agreeing with the basic point that Dr. Altman was making. When you have a good system to get rid of fraud you have to also be sure you don't put all of the potential providers out of business. You have to think about what the incentives are to the providers. This is the basic point Dr. Atlman was making. Mr. SCHEUER. I agree with you and I agree that there ought to be legitimate professional and financial incentives for the whole broad range of the medical profession to be providers and to serve in those neighborhoods. Well, you have all been extremely generous with your time and it has been very stimulating and very challenging, and we are delighted and grateful to you and, at this point, we will call the meeting adjourned. [Whereupon, at 5:25 p.m. the subcommittee adjourned, to reconvene at 1:30 p.m. the following day, Thursday, February 26, 1976.] NATIONAL HEALTH INSURANCE Administration THURSDAY, FEBRUARY 26, 1976 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON HEALTH AND THE ENVIRONMENT, The subcommittee met at 1:30 p.m., pursuant to notice in Room 2322, Rayburn House Office Building, Hon. Henry A. Waxman presiding. [Hon. Paul G. Rogers, chairman.] Mr. WAXMAN. The hearing will come to order. Mr. William Ryan, why don't we have Mr. McNerney and Mr. Kittredge join you. I understand some of you have time problems. Your statements will be made part of the record. You may proceed in any way you wish. STATEMENTS OF WILLIAM E. RYAN, PRESIDENT DESIGNATE, NATIONAL ASSOCIATION OF BLUE SHIELD PLANS; WALTER J. MCNERNEY, PRESIDENT, BLUE CROSS ASSOCIATION; JOHN K. KITTREDGE, F.S.A., SENIOR VICE PRESIDENT, PRUDENTIAL INSURANCE COMPANY OF AMERICA; ROBERT BALL, SENIOR SCHOLAR, INSTITUTE OF MEDICINE, NATIONAL ACADEMY OF SCIENCES; LAWRENCE S. LEWIN, PRESIDENT, LEWIN AND ASSOCIATES, INC., AND ISIDORE S. FALK, PROFESSOR OF PUBLIC HEALTH, YALE UNIVERSITY SCHOOL OF MEDICINE, MEMBER, EXECUTIVE COMMITTEE, HEALTH SECURITY ACTION COUNCIL, AND CHAIRMAN, TECHNICAL SUBCOMMITTEE, COMMITTEE FOR NATIONAL HEALTH INSURANCE Mr. RYAN. I am William E. Ryan, president designate of the National Association of Blue Shield Plans. The Association consists of 71 locally based, not for profit medical care prepayment plans employing 55.000 people and covering 72 million private subscribers and an additional 12 million as agents for Government programs. I am privileged to appear before you today to testify on national health insurance. We have submitted lengthy statement [see p. 1328]. For convenience I will confine my remarks to a brief summary of that statement. The private health care financing system in the United States is unique and it has served the majority of Americans quite well. |