Cherkasky would have you believe, and I think perhaps that is not deliberate on his part but he is hardly the typical example of the hospital administrator in the city of New York or State of New York or, I dare say, any place in the Nation.

As far as my formal presentation, it is my opinion based upon documentary evidence which I am submitting to this committee that our elderly citizens are now paying more for their medical bills than any other segment of our society. In short, many doctors are deliberately, although legally, distorting the program to insure a greater economic return for themselves at a greater cost to the elderly people.

Now as you know a doctor has a unilateral choice either to accept assignment, which means to bill the Government directly and then be bound by the reasonable and customary charge, or in the alternative at his own option again to bill the patient. Where the ceiling is nonexistent he can bill any amount he pleases and the patient after paying the bill sends it in for reimbursement and only gets back the reasonable and customary charge.

Now one-third of the doctors in New York City have agreed to take assignments, two-thirds of them have said, "No dice, we are going to bill the patient and let the patient fend for himself," and that is exactly what is happening. He has to fend for himself because we have found that many of the doctors are charging above and beyond what they themselves have set as the locality reasonable and customary fee. Now let me explain how we arrive in this area at the reasonable and customary fee. Blue Shield by choice of the doctors was made the fiscal intermediary for part B of medicare. Blue Shield in November of 1965 sent a questionnaire to 15,000 doctors and said, "Fellows, fill out this questionnaire and let us know your customary charges for the services performed regardless of the income level of your patients but exclude from that any charity work you do or nominal fee work you do for medically indigent patients.""

They said in their letter, and I want to quote, "Gentlemen Doctors, we are doing this in order to develop programs that will provide for more realistic payments." So they gave the doctor the incentive in filling out the self-serving declaration of what his reasonable and customary fee was with advance notice that they were doing this for the purpose of determining what the rates will be to reimburse them for reasonable costs. I think we can assume that the doctors were not too modest nor self-effacing in listing what their reasonable or customary or usual charge was. This when it came back was politely and is politely referred to as the doctor's fee profile.

Now when the bill comes from a doctor after the patient paid for it, Blue Shield takes that bill and compares it with the doctor's own fee profile which as I said was a self-serving declaration and if it is not out of line with his fee profile and not out of line with the prevailing rate in his county, and it is limited county by county, then they pay it subject, of course, to the $50 deductible and the 20-percent coinsurance.

BLUE SHIELD COMMENTS ON FEES

I spoke to Blue Shield just yesterday and it confirmed the letter which they answered in response to my inquiry which said that a recent study they have made indicates, and I will read the language, "Doc

tors' charges in relation to allowed charges indicates that the percentage of allowed charges to doctors' charges is 83 percent." Translated into simple language that means according to their sample survey they admit that 17 percent of the doctors' bills are in excess of their own reasonable and customary fees in that county.

I must add, however, that Blue Shield is being very generous to the doctor because the doctor at any time on his own initiative can file a new fee profile and up his reasonable and customary charge. I understand in excess of 100 doctors have already found out about this and they are beginning to file new fee profiles.

In bread-and-butter terms what does this mean? I have given you Verifix copies of Blue Shield memoranda, and I might add that these cases have given to you are indicative of hundreds more I can submit to this committee, all of which were chosen at random from union files of laboring people, people in the working field. We are not talking about a wealthy medicare patient, we are talking about a workingman. Patient A was treated by a doctor Anthony J. Rella and was billed $500. Blue Shield said that the reasonable and customary cost was $175. After you take out the coinsurance Blue paid $140 and the patient paid $360.

Dr. Robert H. Goetz charged patient B $125. Blue Shield set $60 as the reasonable and customary charge. After taking off $50 deductible and 20 percent of coinsurance, Blue Shield gave the patient $10.83 out of a total bill of $125.

Dr. Moskowitz charged patient C $750. Blue Shield said it was only worth $300 so the patient paid $510 and Blue Shield paid $240.

Dr. C. J. Campbell charged $350 to remove a cataract. Blue Shield allowed $175 which meant that the patient paid $214 and Blue Shield $136.

I want to tell you, we have one classic case and I am allowed to get the bills and submit them to you, a woman had a cataract removed just before medicare. The doctor charged her $175. Six months later the same woman needed an operation for a cataract, same operation, on the other eye, same doctor. This time he billed her $500 and she got back a big $100 from Blue Shield.

Let me give you another example. Dr. George W. Fish operated on patient E's prostate gland and charged $1,000. What did he get back from Blue Shield? Two hundred dollars because Blue Shield said the customary and usual fee was $300. So after the $50 deductible, 20 percent coinsurance, the patient paid $800, Blue Shield paid $200.

Incidentally, all this, as I say, is documented in the evidence I have submitted to the committee.

Now what happens if a patient does not go to a private doctor, he goes to one of these clinics that these gentlemen were talking about? Just this morning, to give you an example of patient F, again documented in what I am giving this committee, Mrs. F has a blood condition. She went to Mount Sinai Clinic once a week for years. She was charged $1.50 for a B12 shot and then raised it to $1.75. She never sees the doctor because the nurse knows her, knows her condition, knows what to do.

Immediately after medicare Mount Sinai bills her $20. She pays now for the first two and a half visits at $20 a visit and after 20 percent

coinsurence she pays $4 a visit instead of $1.75. Well her husband told me what public service can do with medicare so far as he was concerned. [Applause.]

Senator SMATHERS. I might ask you there, Senator, just to see how you feel about it, Do you think we ought to do away with medicare? Senator THALER. Not at all; but I think very seriously that the Congress ought to say that any doctor who treats a patient whose bills are paid by the Government ought to be constrained to accept the reasonable and customary fee in the locality and ought not to be given the privilege of taking Government funds and still charging more.

Incidentally, under H.R. 12080 you are about to compound the felony because up until the present time if a doctor had a poor patient and the patient did not have funds he had to take an assignment because the patient could not get reimbursement unless he paid the bill. Now the way the bill passed the House of Representatives, the patient can send in the bill to Blue Shield before he pays it so that the doctor can grab hold of the reasonable and customary fee and still keep dunning the poor patient for the balance of the fee, and that even makes it worse. It is before the Senate at the present time and I would hope that that amendment to the present legislation is deleted because this will mean that no doctor will hereafter take an assignment, there would be no purpose for him to do so.

More importantly, we are having difficulty, I as a State senator, of any effort to find out what is happening. Blue Cross will not tell us the rates that they pay either to hospitals or to nursing homes, either for in-patient or out-patient care. I called Blue Cross, I spoke to Doug Wohman, and he said Social Security tells us this is confidential information. Why should it be confidential, especially to a State senator? I then called the State health department. I have spoken to the commissioner of the State health department, the commissioner of the State welfare department, and they tell me that they cannot get the rates that are being paid but if we can see what is happening under medicaid maybe we can come to the conclusion why.

COST-PLUS FORMULA

Now let me tell you how medicaid is reimbursing all these gentlemen you see up here today. They have a cost-plus formula which says, fellows, the more you spend we will reimburse you at a higher per diem rate. Not only will we reimburse you for all your expenditures-and incidentally I looked over some of these statements that are rendered by the hospitals, many of our hospitals buy retail, they buy their food at the corner drugstore. Many other of your major hospitals buy all their necessary furniture and other things through R. H. Macy's, they make no effort to economize. The more they spend, the more they get with no incentive at all for economy. But more importantly, the medicaid formula as approved by the Federal Government says, in addition to all your expenditures you will get 5 percent for research.

Now this does not say, is this hospital qualified to do research? Every hospital is entitled to 5 percent. Nobody goes in and says, fellows, do you have qualified people to conduct research or are you using clinical material to try out drugs for commercial outfits? Nobody says, are the objectives of your research any good? It merely says for every dollar

you spend you get another 5 cents for research if you spend it. So of course they spend it.

Then you get 5 percent more for repairs. It does not make any difference if this hospital needs 12 percent and this hospital only needs 2 percent, but on an across the board 5 percent not based on their need for repairs but based upon their expenditures plus 111⁄2 percent for accumulated obsolescence and that they can accumulate over the years.

Eleven and a half cents is added to the formula based on how much they spend, not on how much they need. And boy they are spending it; it is almost unbelievable. Not for patient care but for desks, for carpets for doctors, for decorations for the offices, for all kinds of fancy personnel-not to increase the available salaries for nurses but the doctors have doubled their fees.

When Dr. Cherkasky says he raised the salary of a radiologist from $14,000 to $29,000, if it were limited to the radiologists I have had no objections but when we signed an affiliation contract just a few months ago they doubled the salary of every doctor because they had Government funds. Those doctors were not quitting. To the contrary, we had hundreds and thousands of doctors who were willing to contribute on a voluntary basis their efforts. You know what happened to them in the city of New York? They were kicked out of the hospitals and replaced by paid physicians.

I will tell you another thing, Senator. In this city of ours with the shortage of doctors, and we have the low level of care available to the people, one-third of our doctors are physically barred from coming into any hospital. They cannot bring their patients into any hospital. They even take care of them in their offices or at homes or they have to assign the patient to another doctor, they cannot get in. Yet every day you read in the newspapers that we can't get interns, we cannot get residents, and that they are flooded with foreign doctors who are poorly trained and can't even communicate with the patient because they cannot speak English.

More importantly, under this new medicaid reimbursement rate what has happened actually? Let me give you figures. Mount Sinai charges $81.85 a day for a ward patient. Let me repeat that. This is an official federally approved per diem rate, $81.85 per day for a ward patient and $17.56 for a clinic visit.

Let me reiterate. I am talking about medicaid officially approved reimbursement per diem rates. Montefiore charges $87.94 a day for a ward and $26.20 for a clinic visit. Presbyterian Hospital charges $76.95 and $15.22, respectively. Roosevelt charges $80.15 and $18.60, respectively. St. Lukes charges $89.91 and $20.30, respectively.

Another gimmick has come up and this is something new; it has never been given any publicity before. They now get an average of $80, let's say, a particular hospital for the patient being in there in a ward. They add to a medicare patient bill a sum of money in some hospitals as low as 3 percent, in some hospitals it goes up to $1.32 per day. In other hospitals it is as high as 20 percent for the availability of anesthesiology, pathology, and radiology-three, as you know, excluded services under part A. This is not for their receiving these services, they have gone into the insurance program. They say, you are paying this percentage because we have these services available in the

institution and that money is distributed among certain of the select doctors in many of the hospitals, it does not go to the hospital. If you need pathology, if you need anesthesiology, or if you need radiology, you get an additional bill which you pay under part B of medicare. So they are saying just because we are a hospital and you have these services here you pay for it and it does not go into the revenue of the hospital.

As a matter of fact, I wrote to the commissioner of the New York State Health Department, Dr. Andrew C. Fleck, Jr. He replied to me on October 11, and I quote:

It is also my understanding that the Social Security Administration has no regulations concerning the hospital's subsequent disposition of such funds.

In other words, this is added to the salaries in many institutions where they are already paying these well-intentioned doctors who are desirous only of doing good for their community.

It would seem to me that we have a great program here in principle but you cannot, in my opinion as a legislator of 9 years, take substantial Government funds and trust it to a private sector that is almost wholly uncontrolled, trust to their conscience, to their morality, to their compassion because that is too frequently an inadequate safeguard to prevent greed. We have a responsibility, you on the Federal level and I on a State level, to make certain that when we commit Government funds and I might tell you that these gentlemen up here did not bother saying to you that approximately 50 percent of their entire budget is now paid out of medicare and medicaid funds.

ON-SPOT AUDIT SOUGHT

Somebody ought to have an on-the-spot audit before expenditures are made as to where they are going, not a postaudit. But it is important enough as we have done under the defense program to have an accountant on the premises to determine whether expenditures are wisely made before they are made. I have gone into hospital after hospital and seen the most complex, sophisticated research equipment while at the same time the interns and the nurses literally cry that they could not get crutches or wheelchairs or electrocardiograms or pacemakers.

I have gone with one of the gentlemen of the press here into voluntary hospital and municipal hospital alike to see how patients were used not for their benefits but as clinical material for the property of science and for the purpose of teacher training. Human life is more important than to live it in the sole jurisdiction of a profession that has demonstrated on many scores that it no longer is bound by the Hippocratic oath. It would seem to me that the senior citizen today in many ways is worse off than he was prior to medicare. [Applause.] Where Government funds are so largely committed to a basic social program we in the legislature must not permit a private sector to continue to make their own private ground rules. Medicare which was supposed to eliminate indignity and humiliation under the old KerrMills program has nevertheless forced a large percentage of the elderly covered under medicare to still seek additional assistance under

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