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It would create a rather confusing situation in addition to the inequities that would arise, and may raise constitutional questions.

Senator MUSKIE. You certainly would need a lawyer. [Laughter.]

Could I ask some questions about your plan? What role would insurance companies and fiscal intermediaries have in your plan?

Mr. BRICKFIELD. Do you mean the Senator Ribicoff bill?
Senator MUSKIE. Yes.

Mr. BRICKFIELD. There will always be need, we feel, for supplemental insurance coverage. While our bill goes a long way, even under it there will be need for supplemental insurance coverage because of its copayment features.

Of course, as you know, when Social Security was enacted in 1935 many thought that we wouldn't need pension systems. Well, we need more pension systems than ever.

When Medicare was enacted in 1965, they thought that this would do away with supplemental insurance provided by the insurance industry. It hasn't done that, Senator.

What it has done is bring about an awareness on the part of people for better and more medical care.

As long as that concept exists, we feel that there will be a need for supplemental insurance. And I will tell you that our associations would hope to provide, or make available, or recommend, highquality supplemental insurance in the health care field.

Mr. HACKING. Senator, could I supplement Mr. Brickfield's answer? Senator MUSKIE. Yes.

Mr. Hacking. Besides the risk-bearing function of private insurers to which Mr. Brickfield was addressing himself, our bill would in administering coverage and so forth, also use private insurers as fiscal intermediaries in much the same way as they are presently used for Medicare in the administration of the Medicare program.


Senator MUSKIE. With respect to your program again, I understand that you also impose a means test. Do you feel that your members would not oppose such a test?

Mr. BRICKFIELD. I will let Mr. Hacking answer that, Senator. We don't think it is semantics; we think it's an income test rather than a means test. But I would defer to Mr. Hacking.

Mr. HACKING. Senator, the bill that was introduced today is really the second version of our bill. In 1972, we had a health care bill that provided benefits very similar to those in our bill today; benefits constituting comprehensive protection for the elderly.

At that time, of course, the disabled were not covered under Medicare. So our bill was directed at older persons age 62 and over.

That bill was S. 4101. It was introduced by Senator Pell and did not contain any cost-sharing features. We felt that every older person should have a right to comprehensive health care without this combination of deductibles, coinsurance, and premiums that is presently in our Medicare law.

We found however, that as a political and legislative reality, we could not, without great difficulty, get anyone to sponsor that bill.

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Many Senators and Congressmen we approached felt that, in return for comprehensive protection, the aged should pay something.

For others, the cost was simply too high. The added cost to the Federal Government under that first bill would have been something in the neighborhood of $19 billion.

The individuals that we approached, seeking sponsors, simply thought the cost was too much or thought that the cost should be shared.

We decided we would work on a second bill. We wanted to do that because we felt that in all the discussion about national health insurance legislation, the aged were being overlooked.

People were saying, “Well, they've got Medicare."

We felt a strong need to focus some attention on the aged and disabled. So we worked out a second bill.

We wanted to have it receive legislative consideration. We wanted it to be something that would generate some discussion of the health care needs of the aged by the committees of Congress with jurisdiction over that kind of legislation.

We felt it necessary therefore to introduce some sort of cost-sharing features. We looked at what others have done. We looked at H.R. 1, and we looked at the Kennedy bill, and we looked at some of the other bills that have come along like the Long-Ribicoff bill.

These bills contain catastrophic protection benefits. Most often, catastrophic benefits are defined in terms of income. In most of those bills a catastrophe is viewed as a relative thing and defined in terms of income.

So we put in a test for purposes of the catastrophic feature-you may want to call it a means test, if you like I prefer to call it an income test, and I prefer to call it that because it defines what a catastrophe is with respect to different categories. The "test" is used only for the purpose of the catastrophic feature. Our “test” has nothing to do with eligibility for coverage as is normally the case with a means test.

I would also add this: our bill in its financing would use a number of different methods. It would use some payroll tax contributions, but it would also use a substantial amount of general revenues. We think this is the way we should be going.

And we think that to the extent you get away from the payroll tax manner of financing, and get away from insured status under Social Security for covered services, you can also get away from this rigid adherence to this principle that there should be no means test in a social insurance program. If our bill is social insurance, it is social insurance in a very diluted form.

We are going to use general revenue contributions to a substantial extent. We don't think it is too much to ask that the elderly and the disabled should be somewhat responsible for part of the cost by contributing something for the comprehensive care they receive.


We do, however, think that a low-income person should not have to pay anything. Consequently, our catastrophic protection benefit

provision would exempt all low-income persons as they are defined in dollar terms from any cost sharing under our bill.

And our bill simply has one cost-sharing system; it's simply copayments. There is no combination of deductibles, premiums, coinsurance and so forth.

The low-income are exempted completely from cost sharing. Not only that, they are also exempt from any out-of-pocket expenditures for health care services that are covered under our bill, but are durationally limited.

The individuals who are in categories or classes above the lowest class would be required to pay something related to their income, but certainly no more than $750 a year for a family. We think the cost sharing is very minimal and we think that to seize upon this test as a means test is a little bit unfair.

I think it is unwise at this point. If we come down to a choice, Senator, between getting comprehensive health care protection for the elderly while all these questions with respect to national health insurance, like delivery, and the extent of the benefit package, and so forth, are being resolved, or adhering to the principle that there should not be a means test in any social insurance program, we'd opt right now for comprehensive health care protection.

Senator MUSKIE. My only purpose in raising the issue is to get an explanation. You said that the cost of your original bill would have been $19 billion. What is the cost of this one!

Mr. BRICKFIELD. $17 billion.

Mr. LANE. I would add, Senator, on that $17 billion, I do have marked up here—we're speaking approximately of an induced cost with $2.5 billion, transferred from the private sector of approximately $11.5 billion, transfer between States and local government-current Medicaid costs transferred back to the Federal Government-approximately $3.1 billion.

So the total additional cost that we are speaking of, which would be your induced cost, and you transfer from the private sector, would come to approximately about $14 billion. That is in addition to current Medicare expenditures.

Senator MUSKIE. Which figure would you use to compare with your original $19 billion?

Mr. Hacking. Senator, I would like to point out that our original bill would have only covered the aged. There was no coverage there for the disabled because they weren't covered under Medicare at the time.

That $19 billion figure would have been substantially higher if our original bill had also covered the disabled. We would probably be talking about $22 billion, or more.

You have got to understand in comparing the costs of our two bills that the persons who would be covered under our bill now are two groups: the aged and the disabled, whereas, under the prior bill, there was just the aged.

Mr. BRICKFIELD. I would like to make this chart a part of the record, if I may, Senator.

Senator MUSKIE. Of course.

TABLE 1.-Estimate of added cost to Federal taxpayers of proposed national health bill dated February 25, 1974

Millions Transferred from private sector.

$11, 514 Transferred from State and local governments.

3, 116 Induced cost to Federal Government

2, 485


17, 115


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Senator MUSKIE. It seems to be the same price tag.
Mr. Hacking. But we expanded the coverage.

Senator MUSKIE. I understand. I am just trying to measure the shock effect that persuaded you to move to the income test.

Mr. LANE. Senator, on working on this, we did our best to try to get the cost—to be as cost conscious as possible.

But, again, we do stick to this feeling that health should be a right and cost should not be a deterrent. Therefore, that's what we ended up with.

Senator Muskie. I understand the problem. I was just trying to get a definition of the basic thrust of your bill.

You do have some small copayments. Would you comment on whether they would be such as to have a real impact on utilization ?


Mr. HIACKING. No, Senator, it is very unlikely that they are going to have an impact on utilization. As a matter of fact, as far as we're concerned, we den't think that the deductibles and coinsurance of the present law, really have an effect on utiliz:ition of services.

They may have an effect on utilization with respect to some of the less costly items like physician services, services of optometrists, and so forth, but when you are talking about hospitalization, we just don't think that deductible coinsurance, copayments, or anything like that, are really going to hold down utilization unless the cost sharing is so high as to preclude its serious consideration by the Congress.

If you charged enough by way of copayments, coinsurance, deductibles, or whatever, certainly you would have an effect on utilization. But you would have to charge substantial amounts.

Senator MUSKIE. How would you apply that principle to the administration's proposal for cost sharing?

Mr. HACKING. Well, the cost-sharing provisions under each of those basic programs under the employee health care insurance, assisted health care insurances, and so forth, all differ.


Certainly the cost sharing is more substantial under the employee health care insurance plans. We don't think that the cost-sharing features under the Federal health care insurance program would be completely able to restrain utilization, but it would affect short-term health care services.

We didn't consider the employee health insurance plan and the assisted health care insurance program in as much detail as we considered the Federal health care insurance program.

Senator MUSKIE. If you recall Mr. Cruikshank's testimony, the increased costs for short-term care for the elderly, from the President's proposal, was rather substantial—as much as 200 to 400 percent.

You don't regard that as inhibiting utilization?

Mr. HACKING. Well, the higher the cost sharing, the more likely the restraint on utilization.

But it's really hard to say. If a doctor says you need hospitalization, for example, and it's either that or die, how many people sit down and figure out what it's going to cost ?

Senator MUSKIE. Under that analysis, there is no inhibition at any level.

Mr. HACKING. I don't know what the level is, Senator, I'm just speculating.

Mr. LANE. You might add, Senator, the deterrent cost of the initial cost, if there is any administration bilí, is quite substantial and it may be a deterrent to the individual to seek medical care, to seek hospital

But a decision to put an individual into the hospital is not the consumer's decision. It is the physician's. Therefore, when Jim was speaking of the effect on utilization, he was speaking in terms of cost-consciousness. One of the arguments that the administration has used is that the impact would be to lower utilization into lower costs.




In looking at it from the consumer's standpoint there definitely would be a great out-of-pocket cost, and there may be an effect—which this committee explored last year-that an individual would deter seeking medical care on preventive, or just on a regular basis, and instead would hold off until his situation was so acute that he would require a higher level of care.

Therefore, not only would the cost to him be greater but the cost to the providers, or Medicare, would be greater–because he would need acute care at a greater degree.

But we really don't have the statistics to fully comment on where this level of marginal deterrents might be.

Senator MUSKIE. Well, in my statement I used an illustration, which you may recall: a 12-day stay would cost $314 under the President's proposal as opposed to the present charge of $84.

Is that kind of escalation likely to have an impact on utilization, in your judgment ?

Mr. LANE. The statistics that were drawn up on the SMI program of Social Security would give you an indication that as it relates to current utilization, the cost level of seeking care would have been income related.

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