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The impact has been that for those who are in the low-income class and had Medicaid, there has not been that great a difference in utilization.

For those with higher incomes there seems to be a higher use of utilization.

Those in the intermediate range—those just over the level of Medicaid into a moderate income level have appeared not to use the SMI supplemental medical insurance benefit.

So, obviously, there is some statistical information available to indicate that the deductible, or threshold cost such as imposed in the Nixon bill, would in fact have a deterrent effect.

But the analyses which we presented here last year before your committee also pointed out that when you were talking of hospital care, you are talking about a description of utilization that is not in the consumer's hand.

And this is where the figures on the out-of-pocket cost of $375, or so, might be a deterrent because the individual may not be able to afford to seek treatment.


Now we would agree that this is an extremely high level out-ofpocket payment and the fact that the administration's bill emphasizes short-term out-of-pocket costs to the individual, that we are in fact in a position here where this bill may put most elderly in a worse shape than they are now.

Senator Ribicoff has done work and has figured out that $1.2 billion in out-of-pocket costs to the elderly if you use the statistics that are available for utilization rates in the number of hospital stays.

Senator MUSKIE. You still seem to minimize the impact on utilization of increases in cost sharing.

Let me put the question this way: Are you saying that if we had no Medicare program that all the people who have been benefited by, and who have health care under the program, would have had it anyway?

I mean, that they would have made the decision to go to hospitals, or doctors, even without Medicare?

Mr. HACKING. Absolutely not, Senator, a person who can't pay for hospital services, probably would not receive those services.

If he can't pay for it then he can't obtain the service, even if it is recommended by a doctor. You are asking

Senator MUSKIE. So it is true that it does decrease utilization?

Mr. HACKING. At some point, that's true. We think that the administration's cost sharing is substantial. It is more than the aged would have to pay under the present law. We think that is a step backwardand a major step backward.

We are interested in going the other way. We are interested in providing comprehensive protection and reducing out-of-pocket costs.

The administration is really going backward here. It is quite obvious we don't support the cost-sharing features of the administration's bill. We think the principle of catastrophic protection is a good one but that doesn't mean we are also supporting the cost-sharing features that were introduced in the administration's bill in order to determine when catastrophic prctection takes hold.

Senator MUSKIE. I just wanted to make sure that the record was clear as to what your position was.

I appreciate your testimony and I appreciate your unveiling your plan before this subcommittee. I look forward to studying it with interest.

Thank you very much.
[Whereupon, the hearing was recessed at 1:10 p.m.]


Appendix 1




ACT OF 1973

APRIL 27, 1973.-Ordered to be printed
Filed under authority of the order of the Senate of April 18, 1973

Mr. KENNEDY, from the Committee on Labor and Public Welfare,

submitted the following


[To accompany S. 723]

The Committee on Labor and Public Welfare, to which was referred the bill (S. 723) to establish a National Institute of Health Care Delivery, and for other purposes having considered the same, reports favorably thereon with amendments and recommends that the bill as amended do pass.


S. 723 amends the Public Health Service Act to establish a National Institute of Health Care Delivery as a separate agency within the the Department of Health, Education, and Welfare.

The Institute's mission will be to carry out an accelerated multidisciplinary research and development effort to improve the organization and delivery of health care in the nation.

The bill also authorizes up to eight regional centers and two National Special Emphasis Centers, a Health Care Technology Center, and a Health Care Management Center.

The total authorized funding level for both the Institute and the Centers will be $100 million for the initial year, $150 million for the second year, and $180 million for the third year, for a total authorization over the three year period of $430 million.

A twenty-one member National Advisory Council on Health Care Delivery will advise the Institute on the development, priorities, and execution of its program.


S. 723 was introduced on February 1, 1973 by Senator J. Glenn Beall, Jr., and was cosponsored by Senators Peter Dominick, William Hathaway, Ernest Hollings, Jacob Javits, John Pastore, Ted Stevens and Milton Young.

The proposal was initially introduced as S. 3329 in the 92nd Congress and was considered by the Labor and Public Welfare Committee in connection with the Health Maintenance Organization and Development Act of 1972, S. 3327. The Committee incorporated the Institute as Title V of S. 3327, which was subsequently considered and passed by the Senate on September 20, 1972, by a vote of 60–14. No opposition was voiced during Senate consideration of the HMO legislation to the Institute though the Committee made a number of modifications to the bill as introduced in order to conform it to other related provisions of S. 3327, particlarly with respect to the Commission on Quality Health Care Assurance as authorized by S. 3327.

Senator Kennedy reintroduced the HMO legislation, S. 14, in this Congress in the identical form, including the National Institute of Health Care Delivery, as passed by the Senate last year. The Committee, in order to give this proposal the visibility and national attention it deserves and merits, decided to report this measure as separate legislation. The Committee was unanimous in recommending favorable action by the Senate on S. 723 but the version reported by the Committee does not contain the conforming amendments to the HMO bill referred to above, since the Committee decided to report it as a separate bill.

Since World War II, the United States has invested approximately $20 billion in biomedical research. This investment has produced many dividends in terms of major medical breakthroughs and has made the nation preeminent in the world in medical research.

On the other hand, comparatively small investments have been made in research and developments to improve the organization and delivery of health care. Appropriations for fiscal year 1973 contrast our investment in medical research as compared to health care delivery research. The total outlays for fiscal 1973 for the National Institutes of Health, the Federal Government's chief biomedical research organization, is estimated to be $2.009 billion, while the estimated budget for the National Center for Health Services Research and Development for the same year is $64.4 million. By citing this contrast, the Committee is not suggesting or implying that spending on medical research is out of line. To the contrary, the Committee and the Congress have supported an acceleration of the nation's research effort. The Committee does suggest that this disparity in spending between biomedical research and health care delivery research may help account for the nation's preeminence in biomedical research, the deficiencies in our present delivery system, and the growing gap between what medical science knows and what is delivered to our citizens.

The American people are aware of and grateful for the achievements of medical science, but they are also aware of this "gap" which is a source of public dissatisfaction. Our citizens marvel at the miraclelike heart traņsplants that are taking place, but their plea to the health care community is to make available, accessible, and affordable

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