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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.




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 312 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 31/2 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?




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 loca tions.

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 ILMO 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 administration's proposal, if enacted, would submarine legislation now in the books given the lesser requirements. Furthermore, there is nothing in this legislation, aside from this HMO, that would do anything about bringing services together, making them more readily available in one place for the elderly, and increasing the availability of physicians and other health care providers whom the elderly simply cannot find.

Senator Mtskie. Do you believe that the Medicare program coverage needs improvement rather than constriction? What is your view on that?


Mr. GLASSER. Our union, Mr. Chairman, feels very strongly that the Medicare program needs three major alterations. The first is a substantial improvement in benefits with the removal of economic deterrants to early diagnosis and treatment. The medical profession has told us that for 50 years, but somehow it hasn't reached their legislative agents in the Congress.

Second, the program needs to be integrated with the total program of health care for all Americans. At present, it is disfunctional and costly to provide medical care for the elderly as though they are the only ones in America that have problems.

Finally, it is our firm belief that if these programs were integrated with a comprehensive program containing a single uniform system of financing, the elderly would be infinitely better off.

Senator MUSKIE. The administration's proposal as described includes a prospective reimbursement system for hospitals.

In your view, is that a valuable device for increasing cost control?

Mr. Glasser. Mr. Chairman, I have on many occasions testified in various places for a prospective reimbursement of hospitals. But I have also testified, and it has been our union's position, that it is not possible to control one piece of the system unless you look at the entire system as well.

Hospitals need to be on a budget. But so do extended care facilities and physicians. If one only controls a piece of the system, the costs in the remaining pieces are expanded. For example, if hospital costs are held down, nursing home costs escalate. This is not a theoretical discussion, Mr. Chairman; this has been our experience.

Last year, the Health Benefits Advisory Committee recommended to the Cost of Living Council, of which I am a member, that there be certain controls. The controls on physicians' charges were 2.5 percent. The controls on hospital charges were 6 percent last year. Everybody felt this was good fiscal policy as, in fact, both the hospitals and physicians stayed within their respective limits. Nevertheless, the total cost of health services went up 11.1. Well, it takes some strange kind of arithmetic to figure out how to average out 2.5 percent and 6 percent to come out with 11.1 percent.

What this illustrates at the national level is that any attempt to control a piece of what is in fact a total system simply means disproportionate increases elsewhere in the system. Consequently, I am for prospective budgeting of the total system. I think it is disfunctional to try to do it with one piece.


Senator MUSKIE. That makes sense. Could I ask what provision should be included in the national health insurance plan to stimulate reform of the health delivery system?

Mr. GLASSER. For those of us who have addressed the dilemma of health care delivery, it has become patently clear that such a system must provide access for not only the elderly but for all Americans.

It should have comprehensive benefits with no organizational or economic deterrants to early diagnosis, treatment and a full range of health care services. It should have controls on the cost for the budget for the whole system.

It should have effective controls on quality. Under the present delivery structure, the consumer is almost the last person to evaluate whether his services are any good. If he survives the medical care system, he obviously thinks he is in good shape. If he dies, he can't complain. The old marketplace caveat. “Let the buyer beware,” has no place in health care. We need effective quality controls.

It should have financial and other incentives to restructure the system and thereby eliminate the fragmentation to which you refer.

It should have uniform and equitable financing, as well as multiple and diverse delivery patterns within a single financing system. We need centralized regional and local administration. We need mechanisms to assure that benefits which have been promised in the program will be delivered—which is not mentioned in the Nixon bill. And we need something else the Nixon bill neglects: effective consumer participation at each important level of policymaking. They are the people who pay for the program. They are the people who will receive the program. They ought to have their say on how it develops.

Senator MUSKIE. One final question. You say that the administration proposal does not assure access to decent health services as a right for all Americans. Rather, you say, it continues to be a privilege.

I would like to emphasize that and ask you to comment on the costsharing parts of the administration proposal in the light of the goal of making good health a right.

Mr. Glasser. This is cne of the reasons, sir, that we have such strong reservations about the health insurance industry.

The insurance industry approach, in essence, equates insuring for access to good health with insuring one's home against fire or automobile against collision. They use the same principle for all situations.


But we don't believe in the universality of this principle. We have been taught that early diagnosis and treatment are essential. Cost sharing--a key ingredient of the insurance principle--deters these services. If the cost sharing is minor, it doesn't deter it, but then there are no economic savings. So one increases the cost sharing which drives people from the system. We believe that access to health care has to be direct and quick, and we believe that the present system is not providing that access and that Mr. Nixon's plan will provide even less access.

We believe that the whole notion of cost sharing is some kind of an Alice in Wonderland thing that somebody has dreamed up. I would ask, Mr. Chairman, as I alluded to in my testimony, that we ask somebody in the administration to pick up the telephone, call seven doctors listed as surgeons in the Washington telephone book and say, “Dr. Surgeon, I need an appendectomy; my GP told me so. Because I am in a cost-sharing plan, I need to know how much you charge so I can compare your price to seven other fellows. The guy with the lowest price gets my business."

Finally, assuming he gets answers, he picks Dr. X. Now he must call seven or eight hospitals in Washington, D.C., to get their prices. This may seem ludicrous but this is an essential part of the Nixon plan. Our conscientious consumer calls these hospitals and says, “Hospitals, what do you charge for a semiprivate room, use of the surgery, X-rays, post hospital care, and any ancillary services ?” and he lists all of them. Gentlemen, I've tried it and found that won't get the information you need.

But the problem doesn't end here. Our consumer must call the surgeon of his choice and say, “Dr. Surgeon, I picked you because you were the surgeon with the lowest price. I have picked hospital X because it has the lowest prices. I am ready to have my surgery.” What does he then say when the surgeon says, “That's fine, but I'm not even on the staff of that hospital."

End of comment.
Senator MUSKIE. Thank you.
Senator Chiles.

Senator CHILES. I don't have any questions. I am delighted to read your statement. Thank you, sir.

Senator MUSKIE. Thank you very much, Mr. Glasser.

The next witness is an old friend who has appeared several times, Nelson Cruikshank, president, National Council of Senior Citizens.

Mr. Cruikshank, it is a pleasure to welcome you this morning to receive your testimony.



Mr. CRUIKSHANK. Thank you, Mr. Chairman, members of the subcommittee, it is always a pleasure to be before you, Mr. Chairman.

My name is Nelson H. Čruikshank. I am president of the National Council of Senior Citizens. Our national headquarters office is at 1511 K Street NW., Washington, D.C.

This is a nonprofit, nonpartisan organization of older people's clubs, with members in all States. The members of our more than 3,000 affiliated groups were in the forefront of the long campaign, alongside organized labor and other humanitarian groups, for the enactment of Medicare. In fact, the late President Lyndon Baines Johnson in a White House announcement on June 28, 1968, said: "Without the National Council of Senior Citizens, there would have been no Medicare.”

You can understand therefore that we are particularly grateful for the opportunity to present the views of the national council with

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