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certified State or under the assisted health insurance program if resident in a certified State.

Even the truncated Medicare program, as proposed by the bill, would be available only in States certified under section 1861.

Section 1861 is a section which looks to the States for regulation of insurance carriers, including keeping their rates within reasonable limits for the employee insurance program.

It looks to the States for regulation of the charges or rates of institutional and other health care providers, and it looks to the States for the certification of participating providers, both institutional and noninstitutional.

I think the whole trouble of the administration's bill in this respect springs from the fact that it looks to the States for this and has no substitute in the event that a State either chooses not to participate in this regulatory program, or does not meet the Federal requirements.

To me, it is unthinkable that a straight Federal program would be created—there are two such programs here, the new Medicare program and the Employee Health Insurance Program-which relies entirely on the cooperation of the States.

It may be entirely appropriate for the States to be invited to discharge these functions even in those two programs, but if a State chooses not to, that should not result in penalizing individuals that live in such a State.

So I think it would have been essential for the bill to provide that if a State does not undertake these functions, or, having done so, does not carry them out, the Federal Government would do so. The bill not only fails to provide for this but does not even provide for decertification of a certified State that so changes its law as to be no longer certifiable, or that fails to carry out its law.

It seems to me that when a straight Federal health insurance benefit program denies to an individual participation and eligibility unless he resides or is employed in a certified State, it thereby discriminates against individuals residing in another State in such a manner as to raise a serious question of constitutionality under the Fifth Amendment, which in recent times has been interpreted by the Supreme Court to embody in effect an equal protection clause.

Apparently, the administration just shrank from the idea of having a so-called march-in provision in the bill which would operate in the event the State does not participate, even though such a provision had been included in amendments submitted by Secretary Richardson to the administration's health insurance proposal in the 92d Congress.

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BILL AMENDS IRS CODE

Again, on the last page of the bill—and this is all connected with this pervasive problem—the bill amends the Internal Revenue Code so as to make subject to Federal employer and employee hospital insurance taxes the States of the Union and municipalities and emplovees thereof that are now exempted from these Federal taxes, but this is effective only with respect to wages in States certified under section 1861. In

other words, States would be taxable as employers if they are States certified under section 1861. So would municipalities in such a State.

And they would not be so taxable if the State is not certified under that section. Here again, I think a serious constitutional question is presented, and this wholly apart from the unsettled and sensitive question whether States may be federally taxed on the privilege of employment. The tax on employers is an excise tax. The Constitution of the United States, if I remember my constitutional law, requires that Federal excise taxes shall be uniform throughout the United States. With respect to the tax on wages of employees of States and municipalities, which is an income tax, the fact that the tax would be laid only on employees in States certified under section 1861 raises a question under the due process clause of the Fifth Amendment, which has in recent years been held to embody the concept of "equal protection.”

So this, I think, raises serious questions.

For noncertified States, what the administration bill would do is amend section 218 of the Social Security Act, which now provides for Federal-State agreements for coverage of State and local government employees under title II of the Social Security Act (including Medicare), in return for the State's undertaking to pay amounts equal to payroll and wage taxes. Under the amendments, States that have such agreements would have to pay the equivalent of the Federal hospits! insurance taxes, only if the State is not a State certified under section 1861.

The mobility of our population also poses a problem as between the so-called "old Medicare” ssytem, which would be continued for persons who reside in States that are not certified, and the new system which would be available only to residents of certified States.

PROBLEMS IN MOVING FROM STATE TO STATE

Thus, as a person changed his residence from one State to another, he could move from the old Medicare system to the new one and vice versa, regardless of the State in which his qualifying wages were earned, yet wages and self-employment income earned in a certified State would go into the new trust fund and those hereafter earned in a noncertified State would go into the old hospital insurance fund. This could create quite a problem especially for an aged person who wishes to move from a certified State in which he has earned his wages to a noncertified State.

It also might have a chilling effect on the freedom to travel from State to State—to which the Supreme Court has paid much attention in recent years. I am not prepared to say that that aspect would necessarily be unconstitutional, but it raises a real doubt on that score, too, and would seem to put a heavy burden on the Government to sustain the approach of the bill against attack on that ground.

On philosophical grounds, as I indicated at first, all of these matters are also very, very questionable in my view.

Mr. BRICKFIELD. Finally, Mr. Larry Lane on the disclosure provisions on the ownership of nursing homes.

STATEMENT OF LAURENCE LANE, NATIONAL RETIRED TEACHERS

ASSOCIATION-AMERICAN ASSOCIATION OF RETIRED PERSONS

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Mr. Lane. Yes, sir; I would just make several comments briefly.

Probably one of its greatest areas of success of the Senate Special Committee on Aging has been in the area of extended care. And, in particular, one of the major accomplishments which this subcommittee cooperating with the subcommittee on Long-Term Care was able to get through the 92d Congress in the passage of Public Law 92–603 was to get some meat into the definitions within section 1861 of the present law.

One of the areas where we did get some substance was to require disclosure of ownership, and I must say that it is a very minor point when you look at this bill. However, when you come on third in a list of witnesses, you are looking for some new things to say.

One of the things that really bothered us, and I think it bothers others in this room-Val Halamandaris, I know, feels this way-is in the list of definitions on skilled nursing facilities they deleted the requirement that was imposed by Public Law 92-603 on disclosure of ownership.

In response to our question on home health care services, we received the answer from the Department of Health, Education, and Welfare—“Oh, the fact that we dropped 100 days of home health care were just an oversight."

Senator, we can't believe that they dropped the disclosure requirement on skilled nursing care as an oversight because all they needed to do was to photostat that page of the statute, and it would have read in sequence.

HOME HEALTH SERVICES You don't go from No. 9 to No. 11. As it relates to home health services, if I may just add another comment, we feel that the administration's bill falls way short. Our associations are very pleased with the leading effort that you have been giving in the area of home health care to improve services, to expand services, and to make that section of the Social Security law of the Medicare section have substance. I might add that in the piece of legislation which we have drafted, which Senator Ribicoff is introducing, we provided for unlimited home health services-in many ways copying what your committee has suggested was needed.

One other deletion in the administration's bill is in the definition of physician's services, the administration's bill drops even the limited provision for chiropractic service that was put in for us by Public Law 92-603.

I would suggest that the members of this committee might wish to very carefully review those definitions when you make your recommendations to the Senate Finance Committee.

Somehow in those definitions some of the things that have been done already seem to have disappeared.

We can't believe that all of them were by oversight.

Senator MUSKIE. Thank you very much. You have given us a great deal to digest, and I am sure it will all be very helpful.

May I say that on the question of finding something new to say, that repetition in this field is often as useful as something new, so we ought not be overly concerned. But I understand what you are saying.

I have just three or four questions that might be helpful for you to respond to.

LACK OF STANDARDS On page 94 of your detailed statement, you mention a criticism of CHIP: The lack of standards for the promulgation of regulations by the Secretary regarding State reimbursement standards which, in your words, "seems to be an unwise abdication of responsibility."

Could you enlarge upon the possible consequences of this?

Mr. HACKING. Yes, Senator, as I said earlier, without describing in the bill procedure for reimbursement and the standards to be used, there is nothing there on which to base reimbursement. I think the end result is going to be an exacerbation of the problem we've been having throughout the Medicare period with rising costs—especially, rising hospital costs.

The administration's bill would apparently wipe away all the standards that are presently in the Medicare law.

The "reasonable costs"-the "reasonable charges”-standards and all that goes with it—it's just wiped away in the case of the Federal health care insurance programs in certified States.

In noncertified States, I would assume that the existing standards would continue to apply. They are going to have tremendous administrative problems where you may have different reimbursement procedures for different States-and, indeed, different reimbursement procedures functioning in the same State. The whole thing just couldn't possibly work without uniformity across the entire country.

I think that the administration has not considered this matter as well as it should. I certainly hope the Congress would before this particular bill begins to move along.

There are other problems that will arise because of this lack of uniformity. The fate of the disabled is a great concern of ours, and we make several points about it in our prepared statement.

We thought we were making some progress by extending Medicare coverage to some of the disabled. We also hoped that when some statistics were available as to what the cost of covering the disabled would be, we would be able to expand and extend that coverage.

But this particular bill would leave them under the assisted health care insurance programs in certified States provided that those certified States decided to establish such a program.

But there is nothing in that bill that requires as a condition for certification that a State establish such a program.

Since the disabled are not covered under the Federal Health Care Insurance program which would apply in certified States, but a certified State decides not to establish an assisted health care program because it doesn't think the Federal grant is adequate, then the disabled are without protection—even those disabled who are presently covered with Medicare.

Mr. LANE. Senator, I would add that I believe we have learned from Medicaid that sometimes this did not work, leaving it to the States.

The requirements written into the original Medicaid law have since been deleted—the requirements of keeping care up, requirements of having a program in full.

Those requirements when it gets down to the cost analysis at one point or another get amended so they no longer have any merit. This has happened with Public Law 92-603.

FRAGMENTATION OF PROGRAM

Senator MUSKIE. You seem to have the same evaluation that Mr. Cruikshank has. What this does is create more than 50 systems that would probably insure inadequate protection and fragmentation of the program.

Mr. Ellenbogen, I just want to emphasize a point you raised. If a person pays payroll tax in the State of Michigan, then moved to a noncertified State, would he be entitled to nothing?

Mr. ELLENBOGEN. Under the new Medicare? That's exactly right, so long as he remains in that noncertified State, but he would be entitled to benefits under the old Medicare system that the bill would continue in such States. But the Hospital Insurance Trust Fund under the old program would not be replenished from earnings in Michigan if that's assumed to be a certified State.

First of all, the new section 1831 says: “The Secretary shall establish a Federal health care benefits program”—that's on page 27 of the bill—under which an individual residing in a State certified by the Secretary under section 1861 would enjoy entitlement to the new program.

Then the effective date provision, on page 104, says in effect: Notwithstanding the general effective date provision, the provisions of title XVIII of the Social Security Act as in effect prior to the enactment of this act shall remain in effect on and after January 1, 1976 with respect to individuals entitled to hospital insurance benefits under section 226 of the Social Security Act as amended by this act.

Note that this bill amends section 226 so as to limit entitlement to the old Medicare, which is based on section 226, to individuals residing in a noncertified State.

So, going on here: shall remain in effect on and after January 1, 1976 with respect to individuals entitled to hospital insurance benefits under section 226 of the Social Security Act as amended by this act, "and wages and self-employment income earned in States not certified by the Secretary under section 1861 of the Social Security Act, as amended by this act. The phrase I have quoted with respect to earnings in noncertified States would have the effect of continuing to earmark the taxes on those earnings for the present Hospital Insurance Fund, from which part A of the present Medicare program would continue to be financed. Whether such financing would then be adequate is, of course, speculative.

But individuals while residing in States other than those certified, could come in only under the preexisting Medicare program, no matter in which State the qualifying wages were earned.

So if they have moved from State to State, some States certified, some not, this might seriously adversely affect their rights.

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