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I would strongly urge that your subcommittee make an effort to document the extent of overcharging by physicians in the Medicare Program. This should be done in the light of the criterion that the fee is a burden to the patient and that he has not agreed to it beforehand. A few lurid instances do not indicate general abuse by the profession, although they are often so interpreted. I would venture to say that you will find that only a very small percentage of physicians attempt to take advantage of their patients or the Medicare Program.

Once you and the Medical Profession know precisely how many physicians are charging excessive fees, I am sure that the Medical Societies at all levels will cooperate whole-heartedly in curbing them. I therefore urge that the Federal Government do nothing at the moment and that, when the necessity for action is demonstrated, the Medical Societies be given the task of policing their own members. Our record in this regard should leave no doubt that we

can do so effectively. I would like to thank you and the other members of the subcommittee for having given me the opportunity of presenting the views of organized medicine in this area. Sincerely yours,

GEORGE HIMLER, M.D.,

Chairman, The Coordinating Council. We now have Mr. James A. Brindle, president of the Health Insurance Plan of Greater New York City, accompanied by Mr. Samuel Shapiro, vice president and director of research and statistics. I understand you rearranged your travel plans to be here. I appreciate your courtesy and your patience.

STATEMENT OF JAMES A. BRINDLE, PRESIDENT, HEALTH INSURANCE PLAN OF GREATER NEW YORK CITY, ACCOMPANIED BY SAMUEL SHAPIRO, VICE PRESIDENT AND DIRECTOR OF RESEARCH AND STATISTICS

Mr. BRINDLE. Thank you. I appreciate being here even though it is late in the day. I did get some benefit out of the day from hearing the other witnesses and it was not a wasted day for me by any means.

I have included in my written presentation a description of the health insurance plan. Particularly relevant to this hearing is the fact that this plan addresses itself not just to the payment of medical care, which preoccupies most health insurance, but it is vitally concerned with the important problem that was brought to your attention this morning by the distinguished physicians who were sitting here. They pointed out a number of times that our concern is not so much how to round up the money to pay for medical care, because in our insurance systems, private and public, we are pretty well along down that line. We have to learn how better to organize medical care. In short, we need to address ourselves to the organization, efficiency, economy, and productivity of medical care systems.

GROUP PRACTICE BENEFITS DEMONSTRATED You also heard advocated by another witness that there be experiments with the organization and operation of medical services. Actually experimentation is often used as a way to say let's look further at the question and postpone making a decision. You don't need experimentation to demonstrate the validity of group practice prepayment where the physicians are functioning as a team. Their cost effectiveness has been amply demonstrated in the Federal employees health benefits program, which shows that you get better integrated and a much lower rate of hospitalization out of prepaid group practice programs.

I want to turn now to the Government-financed program of medicare and medicaid. Generally in these programs you have a very broad range of benefits, broader than in most insurance plans. Prepaid group practice can play a very important role in furthering continuity of care by having the family physician take responsibility for coordinating the whole course of treatment of a patient. The physicians in the group act as a team both when the patient is ambulatory and when he is hospitalized. He does not go from one clinic to another, from one physician to another.

A critical component of prepaid group practice is its concern with preventive health services. Also, it goes beyond traditional medical care by utilizing social services and health education. These benefits apply in HIP to the 115,000 people enrolled under medicare and medicaid just as they do to the 645,000 other enrollees in the plan.

Another characteristic of the group practice prepayment plans is that you do not have additional bills; the premium paid by the Government and by the member of the plan in the case of medicare actually covers the cost and there are no large out-of-pocket payments to be made.

We have a formula for controlling costs and providing quality care but help is needed. Just as after World War II the grave deficiencies of the hospital system brought about massive Federal help through the Hill-Burton Act for the construction and development and repair and upgrading of hospitals, if we really want to get our money's worth for the vast government and private expenditures in health

care, it is now time to turn our attention to more limited but equally important subsidies to get a better organization of medical services.

We have done pretty well in providing reasonably adequate hospitals for the population of the United States but we have seriously neglected the 85 percent of health care—for the aged 75 percent of health care that does not take place in the hospital. It takes place in the doctors' offices or in clinics. Subsidies similar to those under Hill-Burton are now required in more modest measure to develop more of these group practice prepayment plans which I am convinced have already demonstrated their value.

We have a limited provision now in HUD for the guarantee of mortgage loans for medical centers. This is for 90 percent of the cost of a medical center. But the center may not be in a hospital—the ideal location for such a facility—it has to be free standing. There are so many limitations around this that I think in the 6 or so months that it has been operating it has been applied to only one such center. Federal grants and loans and loan guarantees are needed to help spread prepaid group practice. A program like HIP, which now serves three-quarters of a million people, requires further development for which outside resources are essential.

Also, there is considerable knowledge within HIP and other prepay. ment group practice plans (the largest being Kaiser-Permanente, which serves one and a half million people) that needs to become accessible to others. We have been asked to help develop a group practice prepayment plan in cooperation with some labor unions and health officials in Providence. We tried to get staff to do this but what we really need to do is develop an educational system in existing plans to train people to spread this kind of more efficient and effective medical care in other areas. Key expenditures are needed to get such a program started.

In the past, labor unions, foundations, and industries like the Kaiser industry on the west coast have put up the kickoff money to start group practice. However, if we don't make new sizable expenditures to spread and develop these plans, I think we will be coming back here for another hearing in 10 years and deploring the rapid increase of cost and the inefficiency of medical care. The ability to do something significant to change the picture is within our grasp. My suggestion is that we turn our attention to precise Federal subsidies administered by people who know the group practice prepayment field to help spread this kind of program around the country.

Thank you, Senator.
Senator SMATHERS. Thank you very much.

(The prepared statement of Mr. Brindle follows:) PREPARED STATEMENT BY JAMES BRINDLE, PRESIDENT, HEALTH INSURANCE PLAN OF

GREATER NEW YORK My name is James Brindle. I am President of the Health Insurance Plan of Greater New York (HIP). I am grateful for the opportunity to testify before your committee and to bring to your attention some of the problems of those involved in group practice prepayment. It is also gratifying that the committee comes to an area in which the problems of protecting the health of the people are most difficult and complex.

The Health Insurance Plan of Greater New York is a prepaid group practice plan that has been providing comprehensive medical care since 1947. It is incorporated by the State of New York as a nonprofit organization and has as its goal delivering high-quality care through physicians functioning as a team in wellequipped medical centers. The policy-making body of the Plan is the Board of Directors whose members come from civic groups, trade unions, universities, financial institutions, and government.

HIP enrollees are entitled to receive comprehensive medical care from physicians associated with 31 medical groups distributed throughout New York City and Nassau County. Coverage includes preventive and diagnostic medical services as well as therapy for specific illness, from family physicians and specialists, in the office, home, and hospital. When unusual medical skills are required, such as in cobalt therapy or heart surgery, patients are referred to highly specialized facilities in the area for diagnosis and therapy. These are the basic benefits available to HIP members at no cost beyond the premium-i.e., there are no deductibles or coinsurance payments for such services. On payment of a supplemental premium, members receive additional benefits that cover a major part of the bills for anesthesia, special duty nursing, prescribed drugs. All HIP members are covered for Blue Cross hospital benefits or some similar hospital insurance.

Medical groups are affiliated with HIP through contracts which specify subscriber benefits and payments to the groups, and provide for adherence to professional standards. Thirty of the 31 groups are partnerships; one is hospital based and its physicians are salaried. HIP's payments to medical groups consist of a monthly capitation fee that is the same for all groups; differential payments determined by the extent to which the group is meeting program objectives set by HIP; and bonus payments to increase the likelihood of recruiting well-trained physicians on a full-time basis.

At present 760,000 persons are enrolled in the Plan. Practically all of these members had the opportunity to make a choice between HIP and other health insurance plans. About half of the Plan's members are employees of the City

1 Except for a $2 fee which may be charged for home calls requested and made between 10 p.m. and 7 a.m.

83-481--68—pt. 2- -9

of New York and related agencies. Other sources of enrollment are health and welfare funds of trade unions and management in non-government industries and the employees of State and Federal agencies. About 115,000 of HIP's members are enrolled through Medicaid or are Medicare Part B beneficiaries. The composition of this group on August 31, 1967, follows: Medicaid enrollment.----

69, 132

47, 129 17, 341

Under 65 years of age.
65 years of age or older, living at home (almost all on Medicare).
Patients in nursing homes (mostly persons over 65 years of age and

on Medicare)--

3, 662

Medicare enrollment

46, 827

There are two points of special interest to this committee about the Medicaid and Medicare enrollees. First, they are eligible for the same range of basic benefits as all other enrollees in the Plan and the medical groups make no distinction between them and the other subscribers in rendering services; the sole consideration is the need for preventive and therapeutic medical care. Second, consistent with the general policy of HIP to provide benefits without financial barriers on a service basis rather than on an indemnity or fee-for-service basis, there are no deductibles or coinsurance out-of-pocket payments to be met by the HIP members. Costs are met through capitation payments by governmental agencies for the Medicaid enrollees. In the case of Medicare beneficiaries not receiving Medicaid, a capitation payment is made by the Social Security Administration which meets the cost of covered services less the average value of the deductible and 20 per cent coinsurance under Part B. Costs for uncovered services, which include important immunizations, eye refractions, and general physical examinations, and for the deductible and coinsurance are met through the payment of an additional premium of $1.50 per month.' This additional payment is made directly by the beneficiary or by a health and welfare fund on his behalf. By payment of an additional monthly premium of $1.94, the Medicare HIP member is also entitled to supplementary coverage under the most common Blue Cross contract..

This then is a brief description of the membership and scope of benefits of HIP. I now want to deal in somewhat greater detail with several aspects of the program which are relevant to this hearing.

The decision in the early 1940's to organize HIP on a group practice basis with fully prepaid basic benefits was reached after careful deliberation. It was predicated on the principle, visionary at the time, that medical knowledge and technology would soon become so complex that the ability to provide highquality care at a reasonable cost would be greatly enhanced by having physicians practice as a team in well-equipped facilities.

What does the record show? Increasingly leaders in industry, medicine, and government have reached the same conclusion as the originators of HIP. In his recent volume, “The Doctor Shortage,” Rashi Fein of the Brookings Institution examined approaches to increase output of medical care services, to improve the quality of care, and to control costs. His conclusion was that the advantages in favor of group practice were so compelling that its development should be fostered on a broad scale.

Experience in HIP provides strong support for this assessment. Most of the examples do not relate specifically to the aging population. However, any measure that has an impact on the economics or quality of medical care in general is, of course, important for those in the more advanced age groups.

No "RUNAWAY" ON PHYSICIAN SERVICES

Contrary to the forecasts of runaway utilization when costs are fully prepaid, the use of physician services in HIP has been at about the same rate (approximately 5 physician visits per person per year) as is reported for the general population. It is clear that removing the economic deterrent to receiving medical

1 This supplemental premium is applicable for Medicare beneficiaries who were previously enrolled in HIP under a group contract; the premium is $3 per month for beneficiaries joining HIP as individuals after age 65.

care has not resulted in abnormal use of services. In fact, hospital utilization is substantially lower in HIP than in the fee-for-service medical insurance in this area. This finding was reported earlier based on experience during the late 1950's. The largest and most comprehensive of the studies conducted on the issue compared City employees and their dependents enrolled in HIP-Blue Cross with other large employment groups of persons covered by Blue Shield-Blue Cross. The hospital admission rate in the study year (1955) for HIP subscribers was 81.1 per 1,000 and for those covered by Blue Shield was 93.0 per 1,000. (These rates are adjusted for differences in age-sex composition.)

More recent data for City employees and their dependents enrolled in HIP indicate that there has been almost no change in the hospital admission rate since 1955; in 1962 it was 78.1 per 1,000 and in 1964 it was 84.0. On the other hand, hospital rates in the general community have slowly increased over the ten years, 1955-1964.

Lower hospital utilization is not unique to HIP. In the Federal Employee Health Benefits Program, wherever prepaid group practice exists, members of the group practice plan have far lower hospital utilization than Federal employees and their dependents in other plans. The margin varies from about 35 per cent to 45 per cent. In our opinion, the savings in costly hospital days result principally from the availability of medical group centers with diagnostic facilities, capitation reimbursement of the medical group in contrast to the situation outside of group practice where the physician's fee is directly linked to the service rendered, and the use of highly qualified specialists.

Two other studies will be cited. In 1951, four to five years after the start of service, HIP became part of a comprehensive study which compared morbidity levels, disability due to illness, and medical care practices in HIP and in the city at large. It was found that a larger proportion of the HIP membership saw a physician during the year; they were more likely to receive preventive health services; more of them had family doctors, pediatric care for their children, and dental attention, than did the general population. Also, HIP members appeared to have a lower threshold for recognizing acute illnesses and they tended to seek medical care earlier in the course of illness than was the case in New York City as a whole.

In September 1962, the Department of Welfare enrolled about 13,000 recipients of public assistance in seven of the medical groups affiliated with HIP in the largest of its experimental efforts to bring Welfare clients into the mainstream of medical care rather than to isolate them in special programs and clinics designed to serve only the poor. Twelve thousand of the new enrollees were receiving Old Age Assistance (OAA) and living in their own homes. They represented about 38 per cent of the OAA caseload in the city at the time. The other new enrollees were patients in proprietary nursing homes and made up about 30 per cent of the Welfare clients in such homes.

Comparisons were made of the medical and hospital care experience of a sample of Old Age Assistance recipients in HIP and those not so enrolled ; similarly for nursing home patients (Exhibit). Physician visit rates were almost identical among those in HIP and the non-HIP group; hospital utilization rates were consistent with the differences found before the demonstration program started. However, the proportion of those in HIP who received no ambulatory care went down whereas the corresponding proportion in the non-HIP group remained unchanged. There was a major change in where the HIP patient saw the physician, the shift being from high dependence on home visits to the receipt of most out-patient care in the medical group center. This change was partly due to special measures taken to increase the possibility that the OAA's, like all other members, would obtain their medical care at the group centers where laboratory tests, X-rays, and immunizations could be carried out.

Another observation was that the kind of patients who tended to be lower utilizers were likely to get more service when they were enrolled in HIP than they did otherwise. For instance, Puerto Ricans, a relatively low utilizing group, saw doctors more often if they were enrolled in HIP than if they were not. Finally, during the study year, the death rates among the OAA recipients in HIP and those not in HIP were about the same; in the next year and a half mortality aming the HIP group was lower than among the others : 11.7 per 100 as compared with 13.3 per 100—a difference of 13.7 per cent.

1 The rate for 1964 includes the experience among persons who died during the year; earlier data do not. Inclusion of deaths accounts for the difference between the 1962 and 1964 rates.

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