make it more difficult for elderly persons to find physicians willing to treat them. Furthermore, from our experience with some of the present organized medical programs we know, too, that once a physician is provided two levels of payment for the same service, the patient who pays the lesser sum inevitably receives less attention and poorer quality care.

The unfortunate way in which the elderly aged would be taken advantage of in this new proposal is further illustrated by the increase in premiums. As of July 1, 1974 the Medicare part B is slated to be $6.70. Under the CHIP program it would be $7.50 per month.

From a fiscal standpoint we see liberalized benefits, which in substantial measure are cosmetic, increased out-of-pocket payments by the beneficiaries, and a continuation of the present Medicare tax of 1.8 percent on income up to $13,200 on employees and employers. Spokesmen for the administration have claimed that their new proposal for the elderly is a more expensive package than the current program. We find the evidence does not appear to support this claim.

VOLUNTARY PARTICIPATION IN AHIP

Those under 65 on voluntary or involuntary retirement who are on low or marginal incomes, which is the case in most instances, would presumably be covered by the AHIP. The States could contract with insurers for Federal-State subsidies for coverage for these persons, but participation in AHIP would be voluntary. Given the cost requirements of this plan, millions of poor people are likely to decline participation either because they would not have the funds to pay for participation or because they do not wish to subject themselves to demeaning means tests.

Most State Medicaid programs do not impose deductible and copay requirements on their enrollees. The early aged as well as all other eligible in AHIP would now have the privilege of paying these deductibles and coinsurance. Patient cost sharing features of AHIP are scaled to individual and family income. Two examples:

(a) Under the Nixon plan an early aged family with an annual income up to $2,499 would have to pay a direct coinsurance of 10 percent for all medical care and charges received up to a maximum of 6 percent of income. A family with $2,400 income would pay 10 percent coinsurance or $144 per year maximum.

(b) Under the Nixon plan a family with $3,000 income-family of four-would be obligated to make annual cash payments of up to $270 per year. Thus the poor and many of the early aged would be worse off under these proposals.

Furthermore, the CHIP plan does not take into account the fact that large numbers of these unemployed, marginally employed or early retired persons do not lead routinized or systematized lives. They simply do not have the personal life structure to participate in an insurance scheme requiring regular premium payments, deductibles and coinsurance. Many of these people will simply fall by the wayside, outside the system.

A major justification by administration spokesmen for the so-called cost sharing by the consumer is that it will prevent excessive demand and require the consumer to shop for the least expensive health care.

These claims ignore the basic fact that approximately 80 percent of all health care costs are controlled today by physicians, not consumers. They place people in hospitals and nursing homes and discharge them; they order prescription drugs and no one else can. Further, it is exceedingly naive to suggest that consumers have free choice to shop among physicians or hospitals to choose the best at the lowest price. Those who make such assertions have not tried to do so. And I suggest, Mr. Chairman, that perhaps when the administration comes here, you might ask them.

Despite long dicussions on the subject, and the number of studies, there is no definitive evidence to demonstrate that coinsurance and deductibles reduce the cost of health care, unless the coinsurance and deductibles are sufficiently high to deter needed preventive services, early diagnosis and treatment.

ADMINISTRATION IGNORES RECOMMENDATIONS

The Medicare program under the Nixon plan would continue to be administered directly by the Social Security Administration through the present system of private insurance company fiscal intermediaries. The administration has chosen to ignore recommendations from its own Health Insurance Benefits Advisory Council beginning in 1968 which raised questions as to the appropriateness of using these fiscal agents.

These questions derive from concern as to the effectiveness of these fiscal agents in both cost and quality control. Subsequently, many more questions have been raised by reports of the Comptroller General of the administrative practices of these fiscal agents. The handling of Medicare funds by the private fiscal intermediaries—that means insurance companies has been characterized by the Senate Finance Committee staff (in a 1970 committee report) as "erratic, inefficient, costly and inconsistent with congressional intent." But the administration is wedded to the private health insurance industry.

The total CHIP plan will double the annual income of the $26 billion insurance industry within a few years. Fully 15 percent of all the money collected will never reach the health care system. It will be retained by the insurers for overhead costs and profits. The 15 percent figure was given to the Congress by the administration. The insurers will keep more than $712 billion and pass along the rest to the doctors and hospitals without any real controls over costs or quality of services. The incentives will be to inflate costs even further since the insurance retention-profits, et cetera-will increase accordingly.

The administration claims that the insurance commissions in the 50 States would control the charges and costs of insurance carriers for the EHIP and AHIP programs. In most States these controls are nominal to nonexistent and what controls there are vary among the States. Neither the record of the insurance industry to date-and I have substantial evidence on this, Mr. Chairman-nor the control mechanisms available to insurance commissioners indicates any evidence they have been able to have any meaningful influence on the skyrocketing costs of health care in the last decade or on the often questionable quality of that care. Yet the administration in its new proposal suggests we have more of the same.

S. 2970 would turn over many more billions of dollars to the insurance companies and through them to the providers of care, and the consumer is completely left out. He is given no direct voice at any point in the system, except the opportunity to foot the bill.

As one looks at the elderly's needs and their search for access to decent health care, certain characteristics merit attention:

The elderly believe that a lifetime of work and payment of taxes gives them the right to expect assured access to health services. S. 2970 does not assure that right, particularly for the early aged.

BASIC PROBLEMS UNSOLVED

The elderly have trouble finding physicians who will care for them. The Nixon bill will worsen this situation.

The elderly are having increasing problems in meeting the out-ofpocket expenditures under Medicare. Their position would be even worse under CHIP.

The elderly want to feel they can readily seek out health services when they are worried about the many symptoms of ill health that are a part of the aging process. The Nixon plan sets up new barriers to early access to care.

The elderly are concerned about whether they are getting the right kinds of services, delivered in the right way. The administration is suggesting that untried physician controlled Professional Standards Review Organizations will deal with the quality problem. This concept opposed by many physicians and consumers alike does not appear to have a very good prognosis.

The elderly seek care centrally offered and easily available. The Nixon proposal does nothing about making these health services more readily available through system reorganization.

The elderly are deeply worried about problems of long-term_custodial care. The Nixon plan does nothing about this and in fact reduces extended care benefits.

Because the Nixon program does little about the basic problems that are the causes of the present crisis in health care for the elderly and for all other Americans, it cannot be considered a meaningful approach to solution of these problems. The evidence, I believe, is substantial that it will exacerbate these problems through providing more limited benefits at higher costs to the elderly.

But there are constructive alternatives, Mr. Chairman. They lie in the adoption by the Congress of a comprehensive health security proposal which would provide universal access to health services for all Americans and which would make possible major changes in the delivery system and in cost and quality controls. Such a program is within the economic means of our country. In fact, immediately and over time, S. 2970 is likely to cost Americans more for fewer benefits than the health security program. It is possible to bring about comprehensive change which would help the elderly and all Americans within the parameters of what this country is now spending for health care. The program proposed in S. 3, the health security program now before the Congress is considered by our union to be a realistic and constructive approach to dealing with the basic causes of the problems with which we are grappling in these hearings. After re

view of the CHIP proposal, we believe it becomes even more evident that health security is the far more realistic approach.

The elderly and this country need more than just a CHIP. We need a whole health program, Mr. Chairman. I hope these hearings will illuminate that need.

Senator MUSKIE. Thank you very much, Mr. Glasser for your excellent statement, which meets our high expectations for your testimony today.

Mr. GLASSER. Thank you.

Senator MUSKIE. You have anticipated many of my questions, but let me touch on a few points for emphasis, if I may.

You have given us your evaluation of the health insurance industry record on cost control by testifying that the industry gives no evidence of effective cost control.

NO ROLE FOR INSURANCE INDUSTRY?

Do you think it would be possible to integrate the resources of the health insurance industry and a national health insurance system without compromising cost control reforms?

Mr. GLASSER. My answer to you, sir, is no. I have studied this problem for some 12 years. Our committee for national health insurance has had a committee of technical experts studying the problem for some 5 years.

We are absolutely convinced by the very nature of the structure of the insurance business that it is not possible to turn over the administration of health care and insurance benefits to an industry which is primarily profit-oriented, which does not have the means for control, and expect control.

The evidence is a little startling, Mr. Chairman. The best segment in the sense of the industry is Blue Cross-Blue Shield, which is nonprofit. In the last 32 years, for Chrysler workers in Michigan-that's our largest work group in the auto industry-for the same benefits the costs have gone up 92 percent. Premium costs have increased 92 percent in the last 312 years. That far exceeds the curve on the national increases in health care.

The insurance industry is an industry that is devoted to the exchange of dollars. You give them so many dollars, they try to husband them and pay out so many dollars.

What we need is a health care administration system. The insurance industry has done nothing-zero-absolutely nothing about protecting the quality of health care. One of the simplest criteria of quality of care is accreditation of a hospital by the Joint Commission of Accreditation of Hospitals. At this point, after some 28 years in the business, between 1946 and 1973, no major insurance company requires accreditation of a hospital, so they pay on an equal basis to both a charnel house or a reasonably good hospital.

We have not in our experience been able to get any kind of quality control from the private health insurance industry. We have not been able to receive any kind of scripture on cost controls, and the record in our industry-and in the country in general-reveals that though they are interested, they do not have the capacity. And the notion that the administration would give to this industry twice as much money with

practically a guarantee of no risk loss-and then give them, in fact, this huge new profit administrative cost-is abominable.

Let me cite just one other figure and then I won't make any further speeches in response to a simple question.

Between 1970 and 1973, the administrative costs and the profits of the private insurers in this country, health insurers, grew 120 percent from $1.5 billion to $3.3 billion, this under cost control. It has been estimated that the CHIP proposal would double the $26 billion income of this industry in a few years.

Senator MUSKIE. Would, in your opinion, the administration's proposal change significantly the total amount of money from all sources that America now pays for health care?

SAME PREMIUM FOR ALL WORKERS

Mr. GLASSER. No, sir, I don't believe it would. The total amount of money that America pays for health care would continue. It would come different ways into the system. There would be further retrogression in the way in which the money is introduced in that the mandated premium would be the same for a worker who earns $7,500 a year as for a worker who earns $75,000 a year. There would be more out-ofpocket expenditures by the elderly. There would be more out-of-pocket expenditures by the poor, but the total would come to about the same.

Senator MUSKIE. Do you think it is possible to construct a national health care system which would increase the amount of health care Americans receive, and with a decrease in total cost?

Mr. GLASSER. No, I do not, sir. However, there has been a design developed for a national health insurance program which would provide substantially more benefits more effectively at approximately the same cost.

It is not our belief that we can get "economy" medical care. I do believe that through spending our money with better controls on cost and quality through the development of annual budgets that it is possible to take the dollars we are now spending and buy substantially more Medicare.

Senator MUSKIE. One problem that troubles the elderly is the fragmentation of the health care system, and their need to find services from a variety of uncoordinated institutions, and a variety of locations.

Do you think that the administration's plan contains proposals to correct fragmentation of health care?

Mr. GLASSER. No, sir, as a matter of fact, the administration's proposals go counter to integrating the health care structure. Please let me indicate to you, sir, that no week goes by that we do not have calls from those who are elderly and cannot find their way into the system. They can't get to doctors; or they can't get into a hospital; or, they have been referred to a specialist and they have no transportation. We are all too aware of the serious problems caused by fragmentation.

The President has signed into law the HMO legislation which passed both Houses of Congress. This bill provides also that employees, and others covered by the plan, may choose an HMO as an alternate means of care. But since the mandated benefits of the legislation now on the books are greater than those in this administration proposal, the ad