It should also be emphasized that the reluctance of physicians to participate did not mean that needed services were withheld. In many instances, those eligible for Medicaid had health and hospital insurance either privately or through their employers or unions. Their situation remained essentially unchanged. Those who were previously on the Welfare rolls as money assistance recipients continued to receive their care in voluntary and municipal clinics and on the Welfare supported wards of hospitals. These individuals still do not lack for medical care. They have merely been deprived of the hoped for improvement in its quality and the manner in which it is rendered. Finally, most Medicare patients who also qualified for Medicaid benefits had purchased the supplementary insurance offered by Senior Care, so that they too were left with more or less adequate coverage. Nevertheless, it is clear that the failure of the State to implement its Medical Assistance Plan in a fashion that would make it possible for physicians to participate wholeheartedly has caused the Program to fall far short of its goals.

Oddly enough, the public has shown relatively little enthusiasm for Medicaid, particularly in New York City. It is my opinion that this is largely because enrollment was left in the hands of the Welfare Department or the Department of Social Serivces as it is now called. The establishment of eligibility, registration and administration were still conducted in a manner strongly reminiscent of old welfare methods. The welfare connotation of the assistance program were apparently sufficiently strong and distasteful to outweigh its possible benefits in the minds of the recipients. In New York City, after prolonged effort, less than one-half of the estimated three million eligibles have been enrolled to date.

In spite of these limitations on utilization, the costs of the program have increased spectacularly. The major reason was an apparently uncontrollable increase in hospital per diem rates. A second factor was a huge demand for nursing home and convalescent care, payment for which had now become primarily a government responsibility. The implementation of Title XIX became so costly that some upstate communities found it necessary to curtail their school programs and other essential services to avoid crushing tax increases. Some counties have threatened not to put Medicaid into full effect because even their 25% contribution to the total cost would entail an unacceptable rise in taxes. It is gradually becoming clear that the New York State program, excellent though it is in concept, is overly ambitious. There is evidence that a very substantial number of citizens do not wish to support so large a program through taxation and the recommendations of the House Ways and Means Committee suggest that Congress may not wish to commit the Federal Government to providing matching funds on the required scale.

An assessment of the present status of Medicaid in New York State indicates that it has had little effect in changing the manner in which services are provided for the medically indigent. Its main effect has been to reapportion the responsibility for the costs of medical care. The basic intent of the legislation, which was to improve the quality of health services and to allow the recipients to receive those services in a dignified manner has not materialized.

If maladministration, a dissatisfied medical profession and a disinterested public were Medicaid's only handicaps, it would still qualify for a guardedly favorable prognosis, since most of these could be overcome in time. Unfortunately, the attitude assumed by State officials toward the medical profession and the medical societies will require drastic revision if physicians are to give the program the support it must have. The State law makes the Commissioner of Health responsible for the quality and availability of medical care. This is reasonable since the State is the paying agency. The corolaries that the Commissioners of Health and Social Welfare have adopted to the basic theorem are not quite so reasonable. Postgraduate study requirements were established for general practitioners who wished to participate in the program beyond March 1, 1968. The Medical Society objected on the grounds that this was more properly a function of the State Education Department and that if done at all, it should be done by that body in cooperation with the Medical Society. The argument was advanced that these requirements constituted a secondary and possibly illegal licensure by the State Health Department. Objection to this principle is still keeping large numbers of physicians from participating.

Qualifications were also required of specialists which, although acceptable in themselves, were completely unnecessary. It is common knowledge that a specialist, by the nature of his work, requires a hospital in which to practice.

The requirements established by hospitals for specialists are more stringent than those adopted by the State and are more than sufficient to prevent unqualified physicians from rendering specialists care.

Beyond this, the State officials, in their fee discussions with the Medical Society have obviously worked on the assumption that, unless rigid State controls were established, physicians would abuse the program. The Medical Societies had already offered the services of their Grievance Committees and Boards of Censors to curb excesses where they existed. These have obviously been trivial since, after 18 months of operation in New York City, the Health and Welfare Departments have identified only a dozen or so cases for the societies to look into as possible instances of abuse. These cases have not yet been formally submitted.

These attitudes, which still persist and are not necessary to the proper functioning of the program, are resented by physicians who are justly proud of their record, unequalled among the professions, in policing the quality of their services and unethical practices among their members.

EXCLUSION OF PHYSICIAN GROUPS

A final and most important source of friction has been the deliberate exclusion of physician groups from even the possibility of influencing or modifying the Medicaid Program. Physician representation to the Departments involved has been only through advisory committees in spite of the fact that the State Medical Society has repeatedly assured them that its members will not implement programs that they have no voice in forming and under conditions they cannot negotiate. To put it simply, the medical profession has not been taken into partnership in implementing the program, as they have in other states. They have merely been handed a fixed plan, deficient in most major operational respects, and told to make it work. Important numbers and even more important segments of the profession have declined to do so.

The preceding portion of this presentation covers what I believe to be the operating failures of Medicaid in New York State. It is the Medical Society's hope that many or all of these will be corrected and our committees will continue to meet patiently with State representatives, even though progress, from our point of view, has been agonizingly slow.

There is one fundamental defect in the New York State implementation of Medicaid which may not influence its effectiveness for medical assistance recipients, but may affect medical services to all the people of the State. I would like to develop this theme briefly because I consider it to be of major importance.

It is clear to everyone that health needs are essentially the same for persons under 65 years of age as those over 65. Employed and solvent individuals and those covered by adequate health insurance have the same health requirements as the indigent. Patients, even in relatively high income brackets, often cannot pay out of pocket for the care of chronic or catastrophic illness without incurring a financial malaise proportional to their physical one. Those of us who have been active in the field of voluntary health and hospital insurance have long been aware of the urgent need of comprehensive coverage for all segments of the population regardless of their age, income or the source of their health care financing. The private health insurance industry, commercial and voluntary, is at present our only mechanism for providing protection against the costs of illness through prepayment. I am aware that there are still many deficiencies in the coverage they offer but the record shows a steady improvement in the scope of protection. It is important that this trend continue. It is essential that we consider the health needs of the entire nation rather than fragment it into groups according to age, income level, disabilities and other irrelevant conditions. It is true that the problems of the aged and indigent with respect to payment for health care are more acute than those of the rest of the population and that they require more immediate assistance, but that assistance must be offered in the context of ultimately creating comprehensive health insurance for all.

Congress apparently recognized this need when it directed that Medicare be extended through the private insurance industry. The intermediary role assigned to the carriers has not been entirely comfortable, but it is amenable to correction or conversion to a true carrier role which would probably be more effective. Nevertheless, the major immediate effect of involving the private carriers has been to encourage them to develop insurance mechanisms that are more effective

than current ones and that will apply uniformly to everyone. Within the limits of their actuarial restrictions, they are experimenting with wider coverage, better utilization control, new payment policies and have made strides toward more efficient administration. Their experiences with Medicare have been and will continue to be useful in improving their own product.

There are additional benefits to be derived from the involvement of the insurance industry in programs supported by public funds. The general relationship between physician and patient remains unchanged. Over the years, they have become accustomed to the usual insurance procedures and are fairly comfortable with them. Physicians have found Medicare forms and health insurance forms in general to be simple. They eliminate the need for additional secretarial and accounting help to keep payment records straight. By contrast, Medicaid has been a severe penalty.

Finally, the economies inherent in utilizing the existing facilities of the insurance carriers are almost too obvious to mention. If there is any doubt in anyone's mind concerning the capacity of the insurance carriers to manage the burden of the administration of Medicaid, the Medicare record speaks for itself. It is true that Medicaid is a much more massive program, but the operating efficiency and the data processing capacity that the insurance companies have developed over the years will take a long time to duplicate in government and will be wasteful in the bargain. Commercial and voluntary health insurance now cover approximately 150 million people in this country and disburse more than $9 billion annually in payment for services. They can certainly expand to include Medicaid.

Most states that have implemented Title XIX have employed the insurance industry in its administration. Not so in New York State. From the very beginning, the Medical Society of the State of New York has insisted that the Title XVIII intermediaries administer Title XIX. Legislation was sponsored in the New York State Legislature to make it permissible for the Welfare Districts to choose this type of operation. The carriers have indicated their willingness to undertake the task. The New York State Department of Social Services, again taking refuge in the home rule rights of the Welfare Districts, has declined even to encouage the use of intermediaries. The local offices, on the other hand, have indicated that they would not consider such a move unless they were told to do so by Albany.

As a result, almost all of them are administering their own plans. The City of New York has installed expensive data processing equipment which is not really needed, since it duplicates the machine capacity of Blue Cross and Blue Shield. The Department of Social Services has had difficulty in putting the program into operation and has caused needless shortages in personnel and delays in payment.

If this trend toward self-administration is not quickly reversed, it will become permanent and we will have two programs for medical assistance or insurance existing side by side and duplicating most of their facilities. The development of a uniform, comprehensive and economical health care program based on the prepayment principle and applying to all the population will have been retarded or permanently impaired.

If I were asked to write one or two simple prescriptions to put New York State Medicaid on its feet, I would recommend that the physicians, through the State Medical Society, be given a partnership role in its development and policy-making. The second prescription would be that the insurance carriers of the State be given the administration of the program with the proviso that they make it uniform throughout the State.

Before concluding, I would like to respond to those specific questions that were asked of me that I have not covered earlier in this presentation.

(1) Regarding the controversy on the scaling of physicians' fees: There is an unquestionable difference in the fee practices of physicians in different areas of the State. The demand of the Medical Society of the State of New York for payment on the basis of the usual, customary and prevailing fee is based on this fact. A fixed fee schedule, under these circumstances can result in paying some physicians more than they would usually charge for a service. This is wasteful. Parenthetically, this is not too likely to happen in New York because the schedule is set at such a low level. On the other hand, the same fixed fee schedule may result in underpaying other physicians who may thereupon withdraw from participation.

The Medical Society of the State of New York is in the process of setting up a fee study to determine the extent and validity of regional fee differences. The New York State Department of Health may institute a limited pilot project in four counties from which we may derive some conclusions on the impact of the usual and customary payment concept and administrative difficulties if any.

(2) The question of eligibility levels has been covered earlier in this presentation. I am reluctant to advocate a specific reduction in income ceiling. In general, I consider the proposal of the House Ways and Means Committee of a progressive reduction ranging from 150% to 133% and finally to 125% of income ceiling for eligibility for money assistance to be excessively severe in this State. This would cut the income ceiling for eligibility for medical assistance for the mythical family of four to $3,900 per year as compared to $5,300 under Kerr Mills. If I were forced to quote a figure, the $5,300 level, with possible minor modification, would be my choice for the present.

(3) The City of New York was not 60 days behind in paying doctors for Medicaid services in September 1967. From what we have been able to gather (and our requests for information are not rewarded with a profusion of verifiable data), it was 90 to 120 days behind at that time. Claims that were submitted prior to the installation of electronic data processing machinery were being processed individually by hand and were many months behind. It is the stated objective of the City's Department of Social Services to be caught up with past claims and to process new claims within 60 days by November 15, 1967.

In closing, I would like to thank the Committee for this opportunity to present the views of the medical profession on these extremely important questions. Senator SMATHERS. All right, sir. Thank you very much, Doctor. We appreciate your courtesy in coming and your cooperation.

If there are any additional questions we want to ask you, we will correspond and you may answer them for the record.

(The chairman addressed the following questions to Dr. Himler in a letter subsequent to the hearings:)

1. The Subcommittee is primarily concerned with the effects of Medicare and Medicaid upon existing and further health services available to the elderly. We would welcome some thoughts from you on this subject.

2. The controversy about the need for a scaling of physicians fees, based on upstate New York and metropolitan New York City current practices, conceivably could have great importance to the future of the Medicaid program. May we have your views on this subject?

3. The New York Daily News of September 21, 1967 quoted you as saying that too many individuals in New York State are now available for Medicaid. What reduction do you advocate? The same article says that the city is 60 days behind on paying doctors for treatment given under Medicaid. Has the situation improved since that time? Do you-as the article says-advocate placing Medicaid in the hands of a statewide intermediary, such as Blue Cross?

(The following reply was received:)

DEAR SENATOR SMATHERS:

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In answer to your questions:

NOVEMBER 6, 1967.

(1) I do believe that it would be wise to repeal the requirement that Medicare beneficiaries be in a general hospital for at least three days before admission to an extended care facility.

(a) Repeal would save Medicare funds because most patients who are admitted to a long term care facility have had sufficient preliminary work-up to make hospitalization unnecessary. The hospitalization plus the attendent laboratory work are much more costly than an equivalent stay in a nursing home. In addition, due to the scarcity of extended care accommodations the hospitalization, once initiated is often extended unnecessarily because there is no nursing home bed immediately available for the patient.

(b) Practitioners have no ethical problem in admitting patients for three days of prior hospitalization since it is required by law. Their main problem is to get the patients into the hospital and then to move them on promptly.

(c) Elimination of the prior admission to a general hospital except where the patient's condition requires it would certainly be sparing of scarce hospital beds. In most instances there is enough information regarding the patient's condition already available to make it unnecessary. In those instances where there is not, the physician should be permitted to admit the patient to a general hospital for necessary work-up.

(d) The main effect would be savings in total cost and better distribution of accommodations in short supply. It can be argued that care in a general hospital is at least as good as that in long term care facilities.

(2) I was not present when the statement you refer to was made but I think my statement before the Subcommittee should suffice to show that organized medicine, rather than being antisocial, has shown a very responsible attitude toward Medicare and Medicaid. It is true that physicians, through their Societies have called for fees equivalent to their usual charges to their private patients. As you are aware, physicians are generally in short supply and, as a result, most of them are busier than they wish to be. It is unlikely that they will accept large numbers of additional patients at fees that are substantially below their customary charges.

At the same time, in New York State at least, the State Medical Society took a keen interest in the Kerr-Mills implementation and is on record as having recommending that its benefits be expanded. This can hardly be construed as antisocial. As far as linking standards of quality to fees is concerned, it should be obvious that there is a very definite relationship between the two. In New York City, most of the indigent, elderly or otherwise, have received their medical care in clinics, on the wards of municipal and voluntary hospitals or from closed panel groups. The purpose of the Medicare Law, as I understand it, was to make it possible for the indigent and elderly to receive their medical care in the same fashion as persons of greater means. This would include the privilege of being treated by their personal physician. If reimbursement rates are far below standard, it is clear that they will have difficulty in finding physicians of high caliber to accept them. This is the link between payment rates and quality of care in general. At the same time it should be emphasized that once a physician accepts a patient, he has only one standard of care regardless of the reimbursement.

(3) I did have an opportunity to hear Senator Seymour Thaler's testimony. He made a great point of the fact that 17% of physicians were charging fees in excess of the prevailing fees in the New York Area. He based this on a letter he had received from a vice-president of Blue Shield. The finding is hardly surprising when one considers that the prevailing fees were set in such a fashion as to include 83% of physicians' fees which is about the median fee plus a standard deviation. The statement, taken out of context, distorts the facts.

(a) In every community there are a number of physicians who charge fees considerably in excess of those that prevail among their colleagues. These are often highly qualified, experienced men with large practices. Part of the reason for the high fees is the desire to keep those practices within manageable proportions. I believe that the medical societies would not condemn fees that are in excess of Medicare allowances provided that those fees did not work a hardship on the patient and that they were discussed with him in advance. In this connection, many medical societies have encouraged their physicians to have such fee discussions whenever possible, prior to rendering care.

(b) It would be helpful to know the extent of the problem before prescribing a remedy. As I stated earlier, it was expected that about 17% of the physicians in our community would charge fees above the prevailing level because it was at that percentage that the fees were pegged. Most of these physicians have patients who are in the higher income brackets and I believe that their charges cause no hardship and are not a problem per se.

In those instances when the fees are a hardship to the patients and have not been discussed and agreed on with them in advance, we have offered the services of our Medical Society Grievance Committees. Although such committees do not have the power to order physicians to reduce their fees, they have been quite effective in controlling excesses, purely through moral suasion. If this mechanism should not prove to be effective, the Medical Societies would have to develop wider authority which they do not now legally have. (c) In answer to your final question, my personal opinions are almost identical with the recommendations I have set forth above since I was involved in developing many of these principles.