It seems to me to describe this as being a program which is bringing improvement when those same people now under Medicaid can obtain services without any payments whatsoever and, of course, under the health security program would obtain services with no payments whatsoever it seems to me is a complete distortion of words and meanings.

Well, I could go on, but I do not want to take up any more time. I would like to suggest, and I am not prepared to provide the information myself at the moment, but I think that the examples that the Secretary has given us of his hypothetical examples, I think it would be very interesting if he added just one more column; I think this could be done fairly easily and that is what each of these groups would pay under the health security bill, or any other bill people might be interested in, but our particular interest would be in the health security bill, and you would find that the liability would be very, very much lower.

He gave one example which I think is particularly interesting and that is the short-term hospitalization example of 10 days. Since 12 days is the average for the elderly and for the group at $3,000, it shows an out-of-pocket expense of $270. Now, what we are talking about is an out-of-pocket expense of these two sisters; they are the kind of people who would have to pay that $270 which, incidentally, would be $50 more than under Medicare.

There is the whole question of whether or not the people under Medicare and Medicaid or the replacement program for Medicaid would or would not get second class services.

Now, under the health security bill, you have the same kind of a provision that you do in this bill-that is in this bill for the assisted program and the Medicare replacement program, that is, all doctors would have to adhere to the fee schedule. They could not charge more if they wanted to participate in the program for any services that they gave.

Now, people who did not want to be in the program at all could pay anything they wanted to but if they wanted to be in the program, they would have to do that. Under this program, this is not true. It is clear it is not true for the employer part of the program under which most people in the country would get their medical care, according to the assumption of the Secretary.

Now, if it were true that doctors would find that not being able to charge more was so highly desirable, I should think they would be clamoring for the idea that there should be the assignment as the limitation throughout the program, not just the Medicare and the poor, but throughout the program. That is obviously not the case and because the administration knows it is not the case, it provides this out for the better-off groups in the population. It does not provide it for the Medicare and Medicaid people because they know they cannot pay it anyway.

70 MILLION PEOPLE-A Two-CLASS SYSTEM OF HEALTH CARE

Well, now, I am not saying that the doctors will ignore the 70 million people who would be covered by these programs, give no

medical care whatsoever but they are not going to give them the same kind of medical care as they will people who are going to pay them more money so that, there is no question in my mind that, unlike health security, this program would set up a two-class system of health care.

Well, there are other points that could be made but we did a little figuring in advance of this. This is not commenting directly on the Secretary. We looked at the income levels under the Medicare replacement program and we found that the average Social Security beneficiary couple is now getting $296 a month.

Senator MUSKIE. That is almost exactly the same as your two sisters.

Mr. SEIDMAN. That is right, almost exactly the same as the two sisters combined. When the benefits rise by 4 percent in April, they will get an increase of $140 per year. Under the administration's plan, those people, because they will go into a different income group, will have an increase in their premiums of $102 and an increase in their deductibles of $100, an increase in the drug deductible of $50. That means a $330 potential increase in their health costs as compared with $140 increase in Social Security, before any benefits are obtained from this program and once they do begin to get services under the program, plus an increase in their coinsurance, from 15 to 20 percent and an increase in their maximum liability, the drain on their payments from 9 percent of their income to 12 percent of their income so that if they are subject to any illness, to any appreciable extent, their entire Social Security increase will be washed

out.

Let me say, by the way, that the bill does provide for escalation of all of these figures of deductibles and premiums and coinsurance and so on so that when the Secretary said in 1976, you might be able to-you might have a different situation, all of these figures would have gone up, if the program had been in effect.

Now, these are just a few of the points it seems to me that could be made in discussing the points that the Secretary made in his statement. In conclusion, Mr. Chairman, if I may, I would like to ask that there be included in the record a statement which the AFLCIO executive council has just adopted at its midwinter meeting on the administration health program as well as a fact sheet containing a summary analysis of the program.*

Senator MUSKIE. Without objection, so ordered.

Mr. SEIDMAN. Not focusing particularly on the needs of the elderly, although it does mention this, but the program as a whole as well as the statement they adopted on the question of noninstitutional services for the elderly. In other words, home health care, homemaker care, and so on, in which our executive council called for a good, hard look at this so as to develop a comprehensive system of services for the elderly and asked that such a program of services be included in any national health program that may be adopted.

Of course, one of the features of the administration program which is definitely a cutback is that the number of home health services are

*See appendix 2, item 1, p. 976.

cut in half, from 200 under the present program to 100 under this program.

It is very interesting that the Secretary used the catastrophic argument as the reason why they wanted to set the limit, the upper limit for it, all other aspects of the program, but apparently for home health services, he used just the reverse argument. I do not know why he did that but apparently, that was tailored to the program they had, rather than any consistency or logic in the program.

Well, thank you very much, Mr. Chairman.
Senator MUSKIE. Thank you, Mr. Seidman.

STATEMENT OF NELSON CRUIKSHANK, PRESIDENT, NATIONAL
COUNCIL OF SENIOR CITIZENS

Mr. CRUIKSHANK, I will be very brief, Mr. Chairman. There are many things that I could say but your committee was very generous with respect to time with me yesterday. Just very briefly, I would point a couple of basic inconsistencies, I think, in the Secretary's statement this morning. One, Bert has already referred to.

In the approach to hospital insurance, he said it was not important to cover the most frequently recurring item because this was budgetable. The administration bill he said provided a tradeoff, namely no protection for the so-called budgetable costs in return protection against the catastrophic, down at the end of the very, very long stay in the hospital.

Senator MUSKIE. He used the word "routine." Can you distinguish between routine and chronic?

Mr. CRUIKSHANK. That is a distinction completely new to me. I do not know what he means by routine. He used the reverse argument on home health by saying we are covering the most frequently recurring costs and argued this is what a program should do.

Another one was brought very sharply into focus by the question and reply of Senator Mondale, where the Secretary was trying to convince the committee that the physician would find such advantage accepting assignments, that he would not charge beyond the reasonable charge amounts because he would be relieved of other burdens, and so forth, but in the earlier part of his statement, the Secretary relied heavily, as an argument for his program, that the assignment method was gradually being cut down under the present Medicare. Under the present Medicare program, the physician has all of the advantages resulting from accepting assignment that he has under the proposal and if it is true that if it is in few-fewer cases accepting assignment, there must be something to Senator Mondale's argument, that there is an economic interest.

Now, if that economic interest exists, generally among the poorer segment of the population, how much more would it exist as applied to the employed sections of the population. We also know with respect to that assignment question that the incidence falls with very, very widely different degrees.

The Health Insurance Benefit Advisory Council made a study of this and it shows that the doctor accepts assignments much more

generally in the case of the large bill. The small office visit, and so forth, where he feels more free and a greater chance of collecting the bill, that is where the heavy incidence of the direct billing method takes place. He takes the risk there in collecting and the costs of collecting, and so forth, but what I would like to point out is the inconsistency here that the Secretary sees no such incentive; in fact, he tells us there is an incentive the other way in his proposal, but in describing the present Medicare proposal, he describes a move away from assignment to the economic motives and results in the cutback.

Now, yesterday, Mr. Chairman, I spoke at some length about the very basic differences in the philosophy of the approach of these two programs and it seems to me that is apparent, without underscoring it, to the members of this committee, but there was, in last Sunday's Post an article of such discernment and perceptiveness, preceding these hearings, I do not know that the author even knew that these hearings were scheduled but he could very well have been preparing this paper for these hearings because it runs just to these points. It is by Prof. Rashi Fein, who is a medical economist. He is the professor of economics at Harvard Medical School and a faculty member of the Kennedy School.

This runs so much to the point of the issue now before this committee that I would like to ask, sir, it be made a part of the record. Senator MUSKIE. Without objection, it will be made a part of the record.*

Mr. CRUIKSHANK. Thank you. If you have no further questions, I am finished at this point.

Senator MUSKIE. Well, I think we have touched on the significant points here in this morning's hearing. I find that this bouncing back and forth of hypothetical examples can be very confusing and, of course, the Secretary wanted to steer away from any implication that the program represented any reduction for any significant number of people and anything we would get in the record to illuminate that point is instructive. I think your willingness to respond to his testimony has been very helpful.

I would like to suggest if, upon further reflection, there are other points you would like to make, we would, of course, welcome them for the record.

Mr. CRUIKSHANK. Thank you, sir.

Mr. SEIDMAN. Thank you.

Senator MUSKIE. Thank you very much. We stand adjourned. [Whereupon, the subcommittee adjourned at 1:15 p.m.]

*See appendix 3, item 2, p. 987.