Secretary WEINBERGER. And who might be young, in a very high risk industry and not poor. There would be some who would be of low income, some who would be elderly, some who would be part-time workers, but the point is you also are overlooking the advantage to a doctor in using this particular system. The bad debt problems in doctors' offices, particularly in hospitals, the problems of collection, the problems of billing, of deferred payments-a provider would be completely free of all of those problems if he took advantage of the transfer of those functions to the carrier, which he would be able to do under CHIP.

A CHARGE IN ADDITION TO MEDICARE

Senator MONDALE. Well, let's suppose under these reimbursement schedules, the amount paid for the care of those who are elderly was less than the doctor could earn caring for other patients where there is no selecting. Now, the way that is handled today under the Medicare formula is that they add a charge in addition to Medicare. Secretary WEINBERGER. Yes.

Senator MONDALE. Now, is it your theory that the doctors are so wedded to the hippocratic oath that they will nevertheless care for them or are there economic interests?

Secretary WEINBERGER. I am mindful that before Medicare came in. a great many doctors provided that service to low income category at no charge and when a lot of people speak of doctors having gotten a great bonanza from Medicare, what they mean is doctors are now being paid for work they did free for a great many people.

I am also mindful of the fact that there are some 70 million Americans in this general market who will be served under the two plans we are talking about, the Medicare and the assisted plan. I would be very surprised if many providers, assuming they are aware of the financial advantages of all of these things, would ignore a market of that size, so I think you are talking about a much larger group of people and you are talking about doctors who would be delighted and, certainly, many hospitals that would be delighted to get rid of all of the bad debt problem, all of the collection problems, all of the payments they never do get at all, and turn that whole thing over to an insurance company which would guarantee them payment at a reimbursement schedule that I hope would be reasonable and fair.

Senator MONDALE. So it is your assumption, in this bill, even though doctors under reimbursement formulas may make less caring for the elderly than they could caring for others, they would nevertheless do so. Is it because, historically, they often cared for people without charge or is it that they would get their bills paid?

Secretary WEINBERGER. Senator, your basic assumption that they make less caring for the poor is what I am trying to challenge here. Senator MONDALE. They cannot charge more than the formula? Secretary WEINBERGER. They can charge more but they have very much higher collection costs. You do not seem to have heard anything I have said about the amount of loss.

Senator MONDALE. I just said if they do not have any bad debts. Secretary WEINBERGER. You were not listening to what I said. They would have bad debts.

Senator MONDALE. So you think it is bad debts that make the difference?

Secretary WEINBERGER. I think it is the collection costs; it is having people who have to keep accounts. I think the assumption that physicians would make more money simply because they would like to be able to charge more and have with it all of these administrative costs is a wrong assumption.

Senator MONDALE. I believe in free enterprise. I think people go where the money is, generally speaking. I think doctors are people and I think our experience under Medicare is precisely that. To tell a doctor, yes, you are going to make less if you take care of old. people in terms of what you get paid but you will have fewer bad debts, is a very thin argument.

Secretary WEINBERGER. I think most doctors are like the rest of us and are more interested in the net and I would not be particularly interested if I were a doctor or a practicing attorney, again, in how much gross I had on my books. I would like to know what the net was and the net consists of the amount you save from a lot of these charges you do not have to do yourself and that, in effect, is what we are talking about.

"REASONABLE REIMBURSEMENT SCHEDULE"

It is speculative, to some extent, you are guessing and, to some extent, I will be guessing, but I think if you have a system under which a doctor does not have to be concerned in his office with any billing charges, with any collection charges, with any bad debts problems or anything he can not collect, he might very well decide he would use a reasonable reimbursement schedule and turn all of this business over to the carrier to do for him, when he is taking care of low-income or high-risk or of employed people. We do not know but that seems to me to be a very reasonable assumption and so, I do not think you can say he can make more taking care of employed people because he can charge more for them.

You have to look at the net and the net, I think, would bring it down to the point where it would be a substantial inducement for him to use that kind of system.

Senator MUSKIE. Suppose a State sets a reimbursement schedule for a certain type of health treatment of $100 and the doctors traditionally charge $200.

Why would that doctor say, "Oh, my bill will be paid, therefore, I will spend a lot of my time with people to which that kind of ceiling applies".

Secretary WEINBERGER. We have to look at it at the overall charges. Losses due to bad debts occur in doctors' offices but I would suspect a reimbursement schedule for $100 for a service normally and usually performed for $200 would not be a reimbursable schedule that would be in effect.

Senator MONDALE. So you think doctors would be looking for the patients who could be charged less over those who could be charged more on the grounds that they would not have as many bad debts?

Secretary WEINBERGER. No, sir; what I am saying is that I believe the inducements that are offered to use the reimbursement schedule 38-470-75– -3

would outweigh a physician's motivation to charge prices at a higher

rate.

Senator MONDALE. We do not know what the reimbursement schedule is?

Secretary WEINBERGER. No, we do not.

Senator MONDALE. How can you make that statement?

Secretary WEINBERGER. In the same way you can make the statement that a doctor would automatically choose a high income person even though he runs the risk of bad debts.

What I am saying is that removal of this kind of nonmedical work would result in a great many doctors not paying too much attention to whether a person was covered under this plan or that plan, or the other plan.

He would know his advantages, which are that he would be reimbursed without any administrative overhead or risk of loss on his part.

Dr. SIMMONS. I think you have got to remember that every physician lives out in a real world and you are talking about one-third of the Nation's population, covered under these two categories, Medicare and the assisted plan. You really cannot, realistically, ignore them and say you are not going to care for that segment of your community because those people are living with you; there is an ethic to the profession and I do not think that would happen.

It all depends on what is a fair reimbursement rate set by the State and that is something neither you nor I can predict.

Senator MONDALE. Not under this bill; we do not have the slightest idea.

ECONOMIC INCENTIVES

Senator MUSKIE. One of the problems is we are taking a pig in a poke. You are asking the people to believe that the doctors are not motivated by economics. I do not think they are going to accept that, and I do not either.

Secretary WEINBERGER. Senator, you have no bill before you which says an appendectomy charge can only be so much. There is no bill that sets reimbursement.

Senator MUSKIE. We have a bill that does not say anything on that point.

Secretary WEINBERGER. We have a bill that does say something. It requires a reimbursement schedule to be adopted or the various plans do not come into operation at all.

Senator MONDALE. And the higher the reimbursement rates, the higher the premiums?

Secretary WEINBERGER. You have a situation now contrary to the one Senator Muskie faced, when he was speaking of his earlier days, when you had all of these different kinds of policies offered to you, you have now a situation in which insurance companies will all be writing substantially the same policies and I believe very firmly that with the numbers of people involved and the competition involved, you would get your premium costs down considerably under the $600.

Senator MONDALE. I have taken more than my time. I would like to place in the record an article appearing in this morning's paper. Senator MUSKIE. Without objection, the article* will be included. Commissioner CARDWELL. In response to Senator Mondale's comments, I think if you do examine this issue, strictly in terms of economic incentives, his starting point is a very valid one: the experience in Medicare and Medicaid shows that economic incentives alone, when directed at an isolated group, are not sufficient to insure that the group will receive adequate care at a reasonable price.

In other words, the physician has, in many cases, been attracted to the source of the greatest dollar. But there is a combination in this proposal-the reimbursement schedules which would be established by the States and the arrangements concerning who will participate and who will not participate.

The practicing physician is given the choice of not participating but he will have to think twice when he looks at the total U.S. population staring him in the face; he no longer can look at just the aged as an isolated group.

If he decides not to participate, he is cutting himself off from the vast majority of workers, young people, old people, high risk, and that is where the economic incentives we believe will change if you just examine them in economic terms. I would suggest that you look at those two things together and not just the reimbursement issue by itself. Senator MUSKIE. Thank you. I am glad to get that answer. I was going to put the question; it is good to get the answer before we put the question.

Senator Stafford, I yield at this point.

Senator STAFFORD. Thank you, Mr. Chairman. I am sorry another commitment kept me from hearing most of the Secretary's statement this morning. I have been trying to read it as the hearing has progressed.

It happens, Mr. Secretary, that this morning, I received a lengthy letter of inquiry from the Medical Center Hospital in Vermont on the particular matter and I think I would like to ask for your comments on a couple of rather narrow issues here so that I can respond to the inquiry I have received.

CHRONIC DISEASE TREATMENT

These have to do with interim regulations published by the Social Security Administration under Public Law 92-603, dealing with chronic disease treatment. I would appreciate your comment on the regulations and maybe your comments on what CHIP might do in connection with it.

The Medical Center contends that charge ceilings based on all dialyses performed in any institution is too low in all of those institutions that will provide permanent institutional dialysis.

Mr. Secretary, I invite your comment on this and what the situation might be under the CHIP program?

*See appendix 3, item 1, p. 984.

Secretary WEINBERGER. Senator, we have published the preliminary regulations and we are gathering comments on them now in preparation for the final regulations.

This is a new field, this is the first program in which everyone with a disease has been covered, regardless of age and regardless of income. We believe there is great advantage to home treatment for this disease and we also recognize that the treatment is very expensive, wherever it is carried out. We are carrying out the intent of the law to the best of our ability, both with our preliminary regulations and with the use of the comments that are coming in to make it final. Mr. Cardwell of the Social Security Commission is in direct charge of this program and he might want to respond specifically to this point but I would say this is another of the comments which are going to be used in the drafting of the final regulations.

Commissioner CARDWELL. I think that is a correct answer. We would be glad to take this individual case under consideration. We would also be glad to talk to them and seek an extension of the deadline for submittal of any comments or criticisms of the proposed regulations. Secretary WEINBERGER. I would say that the renal dialysis program is taken over by and would continue under the Comprehensive Health Insurance Plan so when we do get the regulations in final form, having taken into consideration all of these comments and others, that would be a program which we would continue.

We would not terminate that program or anything of the kind under the Comprehensive Health Insurance Plan.

Senator STAFFORD. I appreciate that answer. I think I will send you a copy of this letter, if I may, for comment. It is from the head of the program at the Vermont Medical Center and one comment is worth putting in the record here. When he says the legislation was designed to encourage more people to receive dialysis and transplantation care in the most economic and efficient manner possible which I guess we all agree is true as far as intent but then he says our first 9 month experience with this law would suggest the opposite in happening so I will send you this whole letter.

Secretary WEINBERGER. A lot depends on the region of the country and whether home care is available and these machines are still not in enormous supply.

Senator STAFFORD. Let me add this. The 3-month waiting period before Medicare coverage of dialysis costs begin remains a problem that discourages people who have the disease. Would you have any comment on how CHIP might remedy this?

Secretary WEINBERGER. That would require change in the existing statute. We have no authority to make any change in the absence of a statutory change.

Senator STAFFORD. Thank you very much. Once I have managed to read the entire statement, I may have some further questions, but for the present, I will yield.

Senator MUSKIE. Senator Percy?

Senator PERCY. Mr. Secreteary