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substantial increase over the $98 million recommended in the original budget. We do not believe the transfer of the $18 million to formula (bloc) grants will be

utilized for innovative projects.

One of the most promising methods for containing medical care costs is to stimulate the development of medical group practice and especially prepaid group practice as a competing system to fee-for-service. The magnitude of potential savings is in the order of 30 percent! We hope the subcommittee will pay particular attention to this data from the Report of the National Advisory Commission on Health Manpower which studied the Kaiser Foundation prepaid health plans in California. The number of beds per 1,000 persons in the Kaiser system was 1.76 in Northern California and 1.66 in Southern California as compared to 3.39 beds per thousand for the state as a whole. Hospital utilization per 1,000 population was but one-half of the California rate and the annual cost per person for hospitalization among Kaiser subscribers was $29.92 as compared to $56.02 for California as a whole. Total per capita expenses for health services under the Kaiser health plan came to $81.83 as compared to $131.82 for all Californians. These figures

are for the year 1965. It is also significant that from 1960 to 1965, the annual hospital expense per person rose 15.4 percent in the Kaiser organization while the average increase for the United States was 49.7 percent!

The economies in hospitalization and medical procedures by group practice plans are well documented. The Federal Employees Health Benefits Program covering over 7 million persons in calendar year 1966 is one example. Days of hospitalization were 408 per thousand for group practice and 808 to 884 per thousand for the insurance option and for the Blue Cross option

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essentially double. It is something of

a paradox that at a time when the American public and the Congress are rightly concerned with rising medical costs that Congress will appropriate hundreds of millions of dollars for more hospital beds but next to nothing for the development of programs which reduce hospital bed needs.

And there is a growing interest in the development of group practice plans. The Yale, Harvard and Johns Hopkins medical schools are developing prepaid group practice programs in New Haven, Boston, and in the new city of Columbia in Maryland. The stimulation of such developments by Congress could do more to contain the escalation in medical costs than many-fold expenditures in other programs.

In spite of potentially massive savings that could be achieved through stimulating the development of group practice, the Office of Group Practice Development of HSMHA has a budget of but $196,000 and a budgeted staff of 6 professional people.

Contract funds only amount to $130,000, We strongly urge this Office be given the funds it needs and should have. We recommend $300,000 for the Office of Group Practice Development and that this office be allocated $1 million in contract funds. The Office of Group Practice Development does not have a line item in the budget. Therefore, we recommend a declaration of intent be incorporated

in the Committee Report.

The President's Commission on Heart Disease, Cancer and Stroke, described three years ago the severe toll in human suffering which these diseases inflict on the American public. Each diminishes the strength of our nation. The American people look forward to the day when major inroads will be made against these diseases. The Regional Medical Program has, within the short time it has been in operation, made remarkable strides in developing cooperative arrangements with the medical profession, our medical colleges and other health institutions. This program holds great promise of making available to patients the latest advances in the diagnosis and treatment of heart disease, cancer, stroke and related diseases. This coordination of effort also holds great promise, not only of providing the best of care for those afflicted, but also of avoiding the needless costs of a duplication and wasteful proliferation of diagnostic and treatment centers in our hospitals. For this activity $120.6 million had been originally requested. The administration has recommended a $24.7 million reduction. We hope Congress will appropriate $120.6 million recommended in the original budget.

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For the Hill-Burton program, revisions of which are now under consideration by the Congress, we would recommend the full amount originally requested except that consideration should be given to appropriating the full amount for outpatient facilities authorized in the Public Health Service Act, namely: $20 million. represents an increase of only $4.1 million for outpatient facilities. The importance of making health services available and accessible through conveniently 10cated outpatient facilities as a means of reducing the long-run need for hospital beds cannot be underestimated. For example, when the Columbia Point Health Center

was established to serve 6,000 poor in Boston, in-hospital use declined 80 percent
because health care was available early, under a single roof and within walking
distance of the home. The administration has recommended a $104.5 million reduction
from the original request for the Hill-Burton program, all of which would be in
grants for hospital construction. We ask Congress to reject the reduction.

National Institutes of Health

Funds for the institutional support of medical, dental and other education schools as well as for traineeships and fellowships for physicians, dentists, nurses and allied health professions are contained in the budget for the Bureau of Health

Manpower.

There is little general agreement as between the providers and consumers of health services on most health care issues, but the urgent need to expand health manpower is no longer an issue in dispute. Organized medicine long opposed use of Federal funds to increase the supply of physicians. However, last year they reversed their position. We welcome their support. That there is a critical shortage in almost all categories of the health professions is widely recognized.

The original appropriation request for the Bureau of Health Manpower is $218,824,000. We recommend a substantial increase. For institutional support of Our medical, dental and related schools, only $96.4 million was originally requested. administration has asked for a $5 million increase in this amount, but we urge a substantial increase over the amounts requested in either the Johnson or Nixon Administration budgets.

To increase our supply of physicians and other health professionals, it is essential that deserving students from low and middle income families be given the opportunity to pursue a health career. The cost of a medical education is such that only upper-middle and high income families can afford to send their sons and daughters to medical schools. The budget request for student assistance including traineeships, scholarships and loans is $104 million. The administration has recommended a $5 million reduction for this activity. We not only hope Congress will reject this reduction but will significantly increase the amount originally requested.

The

Social and Rehabilitation Service

Maintenance Payments

We commend the Administration's request to postpone the so-called AFDC freeze and include the $322 million for that purpose. Indeed, we hope the Congress will repeal this harsh and inhumane restriction.

As you know, the AFL-CIO strongly opposed the freeze when it was first under consideration in the Congress and has urged its repeal ever since its enactment. In a recent statement on public welfare, the Executive Council of the AFL-CIO described the freeze as "harsh, punitive, and coercive." The Executive Council pointed out that an estimated 1,100,000 children would be eliminated from the rolls altogether or have their payments reduced if the welfare freeze were to be implemented on July 1, 1969. It went on to state that "no just nation can tolerate this kind of treatment of its least fortunate children. The welfare freeze must be repealed."

It must be remembered that a postponement does not alleviate the pressure on state and local governments to gear up for an impending cutback each year.

In the Social Security Amendments of 1967, Congress requires the states to have adjusted their maintenance standards to reflect fully the rise in the cost of living by July 1969. Few of the states have done this and many have even taken action to cut back on payments. In most cases, these cut-backs result at least in part, from inadequate state financial resources to maintain welfare payments at decent levels. Nevertheless, Federal matching funds should be appropriated to permit states, able to do so, to raise their payments to reflect the rise in living costs.

Medicaid

The $505 million slash from state estimates of Medicaid needs

comes without justification when one recalls that those estimates were
solicited as recently as 4 months ago. The cost of medical care has
not decreased, and there has been no substantial reduction in the number

of the nation's poor. The states and cities are finding it increasingly

more difficult to finance their share of medical care. In light of these

facts, the logic of such a disproportionate budget cut -- which is five

times greater than any other single health program

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is at best obscure.

It is ironic that while members of Congress have been investigating the miserable health endured by many poor Americans, the Administration is asking that $505 million be cut from the Medicaid program whose goal was originally defined by Congress as making comprehensive health care available to all needy and medically needy. Thus, at the same time a national commitment has been made to the needs of children, the Administration is asking that the Congress cut back health services to the children with the greatest need.

The proposed administration budget represents an approximate 6% increase over the '69 budget. The rate of increase in medical costs over last year is estimated at 8.5%. In the absence of any controls in costs of the delivery of medical services, this 8.5% differential can only result in a reduction of services, or a decrease in the

number of people receiving service.

The Administration's explanation for part of the cut is that it is based on a downward estimate from the States as to the amount of Federal matching funds required. In view of the escalating medical costs and the increasing number of people eligible for medical assistance, this could only mean that the states are planning to cut back on their programs because they cannot meet their share of the cost of current programs under the existing Federal-state matching formulae. Thus, this calls for an increase rather than a cut-back in Federal funds.

The answer to increased costs is not a cut-back in needed services or harshly restrictive eligibility, but establishment of reasonable and effective cost controls for medicaid providers. What the Administration is asking of this Committee and what it is doing administratively will have little effect, if any, on regulating costs; but will instead cut back even further, medical and hospital

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