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Mr. BRICKFIELD. This second statement I was going to read, but if it is all right, I will summarize it.

Senator MUSKIE. All right.

Mr. BRICKFIELD. I will also ask my colleagues to address themselves to one or two important items we think the subcommittee should hear about.

Senator MUSKIE. Fine.



Mr. BRICKFIELD. Mr. Chairman, I would like to introduce those who are with me at the witness table this morning.

On my left is Theodore Ellenbogen, who was, for many years, Assistant General Counsel for Legislation to the Department of Health, Education, and Welfare.

On my right is James Hacking, and on his right, Laurence Lane, both of whom are associates of mine.

Mr. Chairman, Senator Abraham Ribicoff1 of Connecticut, today, is introducing a bill which our associations have spent 2 years preparing.


He is calling it the Comprehensive Medicare Reform Act of 1974. We undertook this matter, Senator, in order to carry out many of the health recommendations of the White House Conference on the Aged. The recommendations, among other things, called for immediate legislation looking toward comprehensive health care for the aged. Because of that, and other reasons, we have developed this bill that Senator Ribicoff has introduced this morning.

In my formal statement, I go over many of the statistics which you gentlemen have already heard. An important one is that Medicare is only covering 40 percent of the health care costs of the aged.

If you go back just 5 years, Senator, to 1969, it paid almost 46 percent. Its protection is decreasing. Each year it is covering less and less. Something has to be done. Not only is Medicare paying for less of the costs of the elderly-but the elderly themselves have relatively less and less money. The average head of the family over 65 has less than half of the income of what the average family has today. So it cuts two ways, and both ways are cutting into them.

Out-of-pocket health care costs are rising and income-fixed retirement income-is less for the elderly than what the average family has. Our bill does two things. It makes the benefits for the elderly more comprehensive. At the same time, it tries to bring in, in a very responsible way, cost restraints.

In the area of benefits, we would introduce intermediate nursing care which is not in Medicare today. We don't require prior hospitalization which Senator Hartke just referred to.

1 See statement, app. 2, p. 766.

We include dental care, eyeglasses, hearing aids, many of the things which the Senator from Indiana just mentioned.

We have in our bill expanded mental health care, neuropsychiatric care, whatever you want to call it. And we have in our bill catastrophic



And as I believe Mr. Cruikshank and Senator Fong pointed out, catastrophic care can be a sometimes thing. One is covered by catastrophic care provided the services which one receives are covered in the law. For example, if intermediate nursing home care is not covered in the law-and the Nixon bill does not cover it-then catastrophic care does not come into play. You cannot incur $750 and continue to get intermediate nursing home care because it's not a covered service under the Nixon bill.

So catastrophic care is a great thing but one must be careful to make certain as to what, in fact, it covers in the way of benefits.

In the area of restraints, we provide in our bill-the Senator Ribicoff bill-for prior approval of hospital budgets, and also for negotiated fees for physicians. The thrust is to keep costs down.

As you brought out this morning, Senator, and Mr. Glasser, too, our prior approval of budget cuts across the entire medical delivery system and it includes the hospitals, the nursing homes, the HMO's, and other facilities.

Also, in the area of cost restraints, the Ribicoff bill provides for HMO's and seeks to emphasize preventive care, and out-of-hospital treatment.

It also provides—and I think this is most important-home health services.

If you would permit me to digress for a moment, I would like to describe the circumstances behind your organizations' 2-year effort in the development of our own health legislation. This bill, the Medicare Amendments of 1974, is scheduled to be introduced this morning by Senator Abraham Ribicoff of Connecticut.

With the prospect for enactment of national health insurance legislation in the immediate future in serious doubt because of fundamental disagreements over the comprehensiveness of benefits, the means of financing and delivering those benefits, the degree of Federal involvement, the nature and extent of cost sharing, and the nature of catastrophic protection, our organizations, acting on the recommendation of the 1971 White House Conference on Aging for immediate legislative action to provide comprehensive health care protection for the aged, developed the Medicare Amendments of 1974. This is our contribution toward the ultimate national goal for quality health care for all Americans.

Our bill is designed to reverse the present trend of declining Medicare protection and increasing out-of-pocket health care expenditures by reducing or eliminating the durational limitations on items and services already covered under present law, covering additionally needed items and services, and replacing existing cost-sharing devices with a single rational system of copayments subject to a catastrophic protection feature related to income.

While providing comprehensive health care protection for this Nation's aged and disabled, it would also confront directly the problem of escalating health care costs by completely reversing existing reimbursement procedures. Under our bill, Medicare charges by an institutional provider (such as hospitals, et cetera) would be approved for a year in advance on the basis of prospectively approved budgets and schedules of charges derived from those budgets. In the case of most noninstitutional providers (such as doctors and other licensed practitioners) reimbursement would be made on the basis of negotiated rates.

At this point, Mr. Chairman, I would like to bring to your attention the copy of our organizations' prepared statement. This document not. only discusses our bill, but contains in parts 5 and 6 our analysis and criticisms of the Comprehensive Health Care Act from the point of view of the aged and disabled.

[See app. 4, p. 780, for prepared statement.]

In outlining what we have attempted to do in this prepared statement, I would ask you to turn to the table of contents. Part 2 of our statement is a statistical description of this Nation's health care needy the aged and disabled. We have demonstrated statistically that, despite rising income from 1965 to date, a substantial percentage of the aged (18 percent or almost 4 million) remain below the poverty level and that the aged still have far less disposable income for the purchase of heath care protection than do the nonaged whose income rose more rapidly over the same period. We also demonstrate that the aged, facing a higher incidence of illness and disability, are most in need of adequate health protection.2


In part 3 of this statement, we have undertaken to demonstrate the declining health care protection being provided by the Medicare system in the face of rapidly escalating health care costs and to suggest that part of that escalation has been stimulated by the very nature of the Medicare system. We have also undertaken to demonstrate the obvious consequence-substantial increases in out-of-pocket expenditures for health care on the part of the aged. Our conclusion is that health care legislation for this Nation's health care needy must, on the one hand, provide comprehensive health care protection, and on the other, deal directly with the problem of rising costs.

That the Medicare Amendments of 1974 carry out these objectives far more effectively than present law is the thrust of part 4.

In part 5, after presenting a description of the administration's Comprehensive Health Insurance Act of 1974, we demonstrate how this major legislation fails to meet the dimensions of the health care needs of the aged and disabled.

As this subcommittee is well aware, Medicare's health care protection over the years has fallen to the point where, in fiscal 1973, only

1 Prepared statement, pt. 2. p. 5. In 1972, households headed by an aged person had median income of only 42 percent of the national family level.

2 On a percentage basis, the medical bill for an aged person in 1973 was $1,044; for the nonaged, $553.

Prepared statement, pt. 3, subpart B, cost experience under Medicare from the point of view of the provider, p. 12.

40.6 percent of the health care expenses of the aged were covered by the system. As recently as 1969, the figure was 46 percent.*

While Medicare's protection has been declining on the one hand, health care costs, especially hospital costs, have been rising on the other.

With Medicare's reimbursement procedure under part A of Medicare structured so as to provide full cost recovery, hospital charges, in the absence of any incentive to restrain costs, are likely to be above the minimum level necessary to provide services. Hospitals are neither profit-maximizing nor competitive. There is little or nothing in the economic system that would tend to keep hospital costs to the minimum necessary to provide services of a given quality-except the inability of the patient to afford the price of services. To the extent that the Medicare system has removed this ultimate but crude restraint, it is logical that it has contributed to the increasing cost levels. Any system which reimburses all costs by a third party, whether it be the employee business expense account or hospital charges, must be closely monitored if costs are to be held to reasonable levels. The expansion of covered items and services under Medicare to provide the comprehensive health care protection needed by the aged and disabled must be coupled with the development of a system to monitor costs closely. We believe, Mr. Chairman, that our bill, the Medicare Amendments of 1974, would accomplish both of these objectives; namely, comprehensive care and cost restraint.


As to comprehensiveness, our bill, in addition to preserving present benefits, would add additionally needed ones. It would, for example, abolish prior hospital stay requirements and abolish other limitations. It would add intermediate care facility services. Psychiatric care benefits would be greatly expanded. Dental services and other professional and supporting services (for example, optometrists and podiatrists) would also be added. The bill would extend the coverage of drugs (including biologicals) so as to include outpatient drugs.5

Moreover, the present coverage for devices, appliances, and equipment would be expanded to all others (including eyeglasses and hearing aids) listed by the Secretary.

Present limitations on duration of inpatient hospital, skilled nursing, and home health care would be abolished."

Over the same period, Medicare's share of doctor fees has declined from 61 percent to 55 percent. Refusing to accept an assignment and taking as full payment whatever Medicare deems reasonable, many physicians collect the amount of their fees (which in some cases may be whatever the traffic will bear) directly from the aged patient, leaving him, in turn, to collect Medicare's reasonable and sometimes inadequate payment. Finally, Medicare's coverage of hospital costs has fallen from 66 percent to 61 percent.

5 However, during the first 5 years, drugs dispensed in pharmacies will be covered only if listed on a list of maintenance drugs established by the Secretary and, thereafter, if listed as appropriate on the Secretary's general list designed to provide practitioners with an armamentarium necessary and sufficient for rational drug therapy. Drugs dispensed in a physician's office would be covered if listed on the general list just mentioned.

The durational limit applicable to benefits under our bill are a limit of 150 days of care in a benefit period for psychiatric inpatient care, a 160-day limit on psychiatric (mental health) services furnished to a patient of a mental health day care service affiliated with a hospital or approved by the Secretary, and a 20-consultation-a-year limit on psychiatric (mental health) services furnished in a psychiatrist's office.

Premiums, deductibles, and coinsurance under present law would be eliminated. Instead, the bill would substitute a system of minimum copayments with respect to the more expensive items of health care." However, these copayments and remaining limitations on benefits would be subject to a catastrophic protection feature. Low-income persons would pay nothing, and others would pay out-of-pocket amounts related to their income but in no case more than $750 per family per


As to cost restraint under the bill, participating institutional providers (hospitals and so forth) would be required to submit annually a budget and schedule of proposed rates and charges, based on the cost of efficient delivery of services, for approval. Reimbursement would be based on predetermined, approved rates, thereby providing incentives for efficiency and economy."

With respect to noninstitutional services of licensed professional practitioners (physicians and so forth), payment would be provided in accordance with annually predetermined fee schedules for local areas. Finally, a provider would be required to accept the Medicare payment (plus any copayment) as full charge for the service.


Using our organizations' health bill as the standard, we shall now address ourselves to an evaluation of the administration's Comprehensive Health Insurance Act from the point of view of the aged.

The administration's bill (pt. C of title I) would replace Medicare in certified States, but not in others, with a Federal health care benefits program (FHIP).

Eligibility, under FHIP, would be limited to an aged individual who wishes to participate and who is entitled to the Social Security section 202 benefits or is a qualified railroad retirement beneficiary."

In comparing FHIP with present Medicare, we wish to point out that there is no provision for voluntary enrollment in the absence of Social Security section 202 entitlement or qualified railroad retirement entitlement (except for transitional entitlement). The disabled are not covered at all. This latter group would have to be covered under the State-administered assisted health insurance program (AHIP), if resident in a certified State. While it may be argued that the FHIP program should not be evaluated out of context of the AHIP plans available in a certified State, we wish to point out that certification for FHIP is not contingent upon the availability of AHIP plans. In

7 Inpatient hospital services, skilled nursing services, home health services, physician and dentist services, mental health day care, diagnostic outpatient services, and independent laboratory or independent radiology services, devices, appliances, and equipment, certain drugs, and ambulance services. (See prepared statement, pt. 4, subpt. B, sec. 4, "Cost sharing," p. 39.)

8 Physician and other services generally available to institution patients, whether performed by employed staff or by arrangements made by the institution, would be treated as institutional services except for services by physicians, dentists, or podiatrists with respect to their private patients.

Under the Comprehensive Health Insurance Act, employment with the Federal, State, or local governments in certified States would be covered employment for purposes of the health insurance taxes. A Government employee could be deemed entitled to Social Security section 202 benefits, on the basis of such services but solely for the purpose of entitlement to FHIP. Such employment is not covered directly under present law. This new provision may be subject to challenge by the States.

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