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APPENDIXES

APPENDIX 1

ADDITIONAL INFORMATION OR EXHIBITS FROM

WITNESSES

ITEM 1: FLOOR STATEMENT BY SENATOR ROBERT F. KENNEDY ON

MEDICAID AMENDMENTS

Mr. President, I introduce, for appropriate reference, two amendments to H.R. 12080, the omnibus social security welfare bill now pending in the Senate Finance Committee.

These amendments relate to Title XIX–Medicaid. Their purpose is to lower the enormous costs of that beneficial program without injuring the millions of Americans who are deservedly aided by it. They will help to alleviate two of the most serious problems that have arisen with Medicaid, particularly in my State of New York.

The first contemplates variations in the income levels of eligibility within a State based on differences in shelter costs within a State. Studies have shown that shelter costs are the most significant variable in the cost of living as between urban and rural areas. The cost of rent and home purchase in rural areas is far less than in the cities. An income of $5,000 a year therefore buys far more in rural areas than it does in the city. As a result, there is no real need that eligibility levels for Medicaid be as high in the rural areas of New York State as they are in its large cities, and my amendment would require the States to take variations in shelter costs into account when they determine eligibility levels. I believe this is an important and constructive step forward, and would help us significantly in the State of New York.

This amendment would alleviate what has become a near-crisis situation in New York State. In some of our rural counties 75 to 80 percent of the population is eligible for Medicaid under the income eligibility levels which the State established. In these counties, welfare costs have skyrocketed over the past eighteen months. Increases of 50% and 60% in the cost of welfare are common, and 90% or more of the increases are due to the cost of Medicaid. One county executive wrote to me that welfare costs in his county are up almost 60%-over $8 million—in just one year. He pointed out that this will cause local taxes to double in short order, with the prospect ahead in the near future of a tax rate triple the current level. Many counties have been forced to borrow to meet the obligations which Medicaid has imposed.

It is no accident that the counties which have faced these difficulties are, by and large, counties where living costs, and particularly shelter costs, are lower than they are in some of the most heavily urban areas. The fact is consequently, that in these areas Medicaid is available to some who simply do not need it. Not surprisingly, these are the areas in which the greatest opposition to the program has been expressed. Under my amendment, the State would objectively determine differences in shelter costs around the State, and would accordingly establish differences in eligibility levels. The result would be decreases of as much as 20% in eligibility levels in some of the counties which are the hardest pressed at the present time. A further result would be that Medicaid would come closer to being a program which in fact serves only those who need it.

The second amendment would allow far more stringent regulation of the costs of hospital care and physician services than exists at the present time. Medical costs have risen greatly in the past year and a half, and it is no accident that this has occurred since Medicare and Medicaid have been in effect. Many of these costs are unavoidable, of course, as nurses and other personnel finally begin to receive a living wage for their work. And the costs of materials and supplies have risen. But in some areas of our country, unfortunately, there are some physicians who and some institutions which have literally reaped bonanzas from these programs. A newspaper report recently, for example, indicated that in California 1200 physicians have received $83 million in the last eighteen months in reimbursement under Medi-Cal, that State's Title XIX program, an average of $70,000 for each physician.

In New York State, the physicians' fees paid under Medicaid have increased substantially over the past year. Fees for office visits to general practitioners and specialists have more than doubled. If these fees, as well as the reimbursement to hospitals and nursing homes, were regulated under my amendment, the fiscal pinch which many counties in New York have felt as a result of Medicaid would be substantially alleviated.

The amendment would operate as follows: for in-patient care, it would limit payments to hospitals and nursing homes to the amount paid for comparable services by either the Blue Cross Plan in the area or Title XVIII, whichever is less. At the same time, it would provide incentive payments for the efficient operation of hospitals and nursing homes based upon their demonstrated ability to develop new management procedures and discharge patients promptly. For outpatient care, the amendment directs that an out-patient visit be defined and that it must include seeing a physician, and it limits payments to a hospital for an out-patient visit to a ceiling of 18% of the per diem payment for in-patient care. For payments for the services of physicians and other professionals, the amendment directs that fee schedules shall be based upon the average level of fees charged in the county or metropolitan area over the ten years previous to the adoption of the plan. The amendment would allow the development of special reimbursement methods for group practice plans.

These are by no means the only problems which beset Medicaid. Medicaid was a program with great promise. Its purpose was to make medical care available to millions of Americans for whom routine medical attention was previously an unattainable luxury and catastrophic illness a bankrupting disaster. Yet in New York State, and here in Congress, it is apparent that public confidence in the program has been badly shaken. I believe that adoption of the two amendments I have proposed today would help to restore that shaken confidence, but I think other steps need to be taken as well. I therefore call on Governor Rockefeller to establish a blue-ribbon commission composed of medical experts, fiscal experts, government officials, consumers of the medical care which medicaid provides, and other relevant persons, to look into all of the issues which have been raised and to make recommendations for the future. The Commission could investigate all of the components of the cost of Medicaid—the extent to which the surprisingly high cost of the program is a result of abuse by individual physicians and other professionals and by inefficient hospitals and nursing homes which have had no incentive to reduce management and administrative costs, and the justification for the suddenly increased fee schedules for services of physicians and other professionals that are now in effect around the State. The Commission could look into the fiscal burdens on local government around the State, and recommend steps to ease those burdens. Governor Rockefeller has already stated that he will ask the Legislature to act to have the State take over some or all of the local share of the costs, and I support that proposal. The Commission could also look into the quality of care which is being provided under Medicaid around the State, and make recommendations for new laws and new procedures to assure that the quality of care is maintained at the highest level possible. The Commission, in summary, would determine just what the taxpayer's dollar is buying with Medicaid, and could take us a long way toward understanding what new forms of delivering health services must be developed and how we are going to develop them if the provision of health care to those of our citizens who need it is not going to bankrupt us.

PROPOSED CUTBACK IN MEDICAID There is one other matter of importance at the Federal level. The House of Representatives imposed a limitation on Federal participation in programs under Title XIX which is wholly unreasonable and unworkable. It will be an unwarranted intrusion in New York State, but it will be nothing short of disastrous elsewhere. The 150% ceiling which the Administration originally proposed earlier this year was based on each State's public assistance definition of minimum need. The 133% provision in the House bill is based on the amount which the State actually pays to its public assistance recipients, which in many cases is a vastly smaller amount than its definition of minimum need. The original intention of Title XIX was that medical indigency be defined at a level substantially in excess of a state's public assistance definition of minimum need. The House bill will in many states have the opposite effect, and is therefore totally unrealistic.

For example, Mississippi, according to HEW figures, was paying 22.8% of minimum need to its ADC children in January of this year. When the 13363% limitation in the House bill goes into effect, the ceiling for medical assistance in Mississippi will be approximately 30% of its own definition of minimum need. The State of Ohio is another good example. In January 1966 its definition of minimum need was $224 a month for a family of four. However, the ADC payments were actually $170 a month for a family of that size. When the 13343% limitation goes into effect, the ceiling on medical assistance for a family of four in Ohio will, therefore, be approximately $227 a month-an unacceptably low figure.

What is really involved even in the 150% limitation originally proposed is a failure of insight about the connection between ill-health and dependency, a failure to realize that the provision of adequate health care to the poor depends upon an infusion of funds of the magnitude which Title XIX as originally enacted was intended to supply. Thus, if we cut into Title XIX, we cut into the possibilities of better health care for the poor.

Nevertheless, I think we must realistically face up to the fact that some ceiling is likely to be imposed. If the bill as it emerges from the Senate Finance Committee contains a ceiling lower than what the Administration proposed, I intended to join Senator Javits in seeking on the Senate floor to raise the ceiling to the 150% level. That is the least we can do.

Medicaid, as I have said, was a program of great promise. It was a new hope for millions of Americans to receive health services never before available to them. That hope has now been tarnished. I believe, however, that if the amendments I propose are ena d, we will have taken the first steps toward instit ng the kind of regulation that can make Medicaid a viable program for the future.

I ask unanimous consent that the amendments be printed in the Record at this point in my remarks.

ITEM 2: ADDITIONAL STATEMENTS BY JAMES G. HAUGHTON,* FIRST DEPUTY ADMINISTRATOR, HEALTH SERVICES ADMINISTRATION, CITY OF NEW YORK

EXHIBIT A. THE FUTURE OF PUBLIC GENERAL HOSPITALS—AN ADDRESS DELIVERED

AT THE 95TH ANNUAL MEETING OF THE AMERICAN PUBLIC HEALTH ASSOCIATION, OCTOBER 26, 1967, MIAMI BEACH, FLORIDA

“There is really no reason for city-run hospitals anymore. The 'charity' patient for whom they were set up originally no longer exists. Medicare and Medicaid have made everyone a 'private patient.” So wrote Dr. Martin Cherkasky, Director of Montefiore Hospital and Medical Center in New York City, in the magazine section of the New York Times on October 8, 1967.' Dr. Cherkasky was, of course, making reference to the New York City municipal hospital system and to the fact that New York State has the most liberal Medicaid program in the the nation. What he overlooked was that not only New Yorkers read the New York Times and, furthermore, that less than 30 States have Medicaid programs. But more important than both of those omissions was his minimizing the very selective admission policies of most voluntary hospitals-particularly the teaching hospitals.

The discussion of the future of public hospitals has predictably had as its focus the future of medical education. This, of course, because the “charity" hospital and the “charity' ward of the voluntary hospital have traditionally been the locus for post-academic medical training. It is difficult, therefore, to discuss the public hospital without simultaneously discussing the "charity" ward of the

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voluntary hospital because some of the issues to be discussed have relevance to both.

The professions have taught the public that there is a difference in the care one receives in a “charity” service, be it public or voluntary. The public has been taught that the care on a "private" or "semi-private" service is better, that on the public ("charity") service he is perceived and treated, not as a patient, but as a teaching instrument to be probed, analyzed and studied ad nauseum and furthermore, to be the subject of research and experimentation. He has also been taught that upon admission to such a service he loses contact with his personal physician no matter how competent.

This education of the patient has been reinforced by the fact that Medicare provides "semi-private" care and defines it to exclude ward service. While in social terms I would have been more proud of my profession had the discussion been focused on ways of eliminating the dual system and quality of services as between poor and affluent patients, I am not overly disturbed by the concern over the future of medical education if in the process of resolving that problem the dual system is abolished and the patient and his needs become the central issue.

Across the nation there is mounting evidence that the poor, released from the shackles of charity medicine, are seeking their care in the semi-private facilities of voluntary and proprietary hospitals rather than in the “charity” facilities of either the public or voluntary ospital even when this means weeks of waiting for electric services. In our own N.Y.C. municipal system we are predicting a 30% annual decrease in patient days over the next five years.

Clearly, the double standard is no longer acceptable to the public and should not be acceptable to us as health professionals. The real question is how to accomplish the change. The course adopted by the public is obviously not the answer since in many communities the public hospital is an important medical resource and the voluntary system could not carry the full load. In the voluntary system a part of the solution is relatively simple, the wards can be converted to semi-private facilities. But will this change in physical plant really accomplish the substantive social change? I think not.

In the public hospital the whole problem is more difficult. The poor mainte nance and obsolescence will be expensive to correct and the image of inadequate "charity" care is more deeply etched in the minds of the public.

It seems to me the voluntary teaching hospitals must begin by accepting as the primary criterion for hospital admission the need of the patient for hospital care. The premise that something can be learned from every patient is not as far-fetched a notion as some medical educators seem to think. The patient must be perceived not as a bearer of disease to be studied, but as a human being with medical needs to be met expertly, kindly, gently and with dignity. If this cannot be achieved and accepted in the voluntary sector, the public hospital will always suffer because it will always be a residual system reserved for the "undesirable" patient.

FUTURE ROLE OF PUBLIC HOSPITALS

The public hospital cannot continue to be a resource exclusively for the poor because it will then inevitably be a poor hospital. Recent health legislation has created the financial resources which if properly used can transform the physical facilities of public hospitals into resources which are acceptable to all segments of the population. The community should be encouraged to take an active interest in its public hospital and to participate meaningfully in planning and in the formulation of operating policy. This has already begun in some parts of the country where non-profit corporations have been formed to administer public hospitals and in others where lay boards have been formed to participate in policy-making.

The competent private physician should be encouraged to use the facilities of the public hospital and to admit his private patients regardless of their method of payment. When such full community involvement in the life of the public hospital is achieved, it will be less difficult to muster adequate financial support for these hospitals and the aura of chronic underfinancing will be dissipated.

In many parts of the country the major issue associated with the problems of the public hospital is the rigidity of the civil service system with its inflexible joh classifications and low salaries. This has made it virtually impossible to utilize new types of health care personnel and to attract competent administrators and other professional personnel. Overcoming such rigidities is a responsibility of the community, and leaders in the health industry must take the responsibility for mustering the political and community support necessary to break through these barriers.

In all hospitals, but particularly in the public hospitals, teaching and service goals must be balanced and teaching objectives must not transcend the service objectives. This balance of objectives is clearly possible for we know that some of the most outstanding teaching institutions in the country are completely private, and equal attention is given to the necessary technical competence and training of personnel and to the rendering of considerate and acceptable service.

It is true that there are definite problems when a teaching institution has a large service commitment, but it is possible for such a hospital to take the leadership in organizing neighborhood satellite facilities and mobilizing local professionals to staff them under the supervision of the teaching facility with the participation of house staff in a meaningful educational experience. For in the final analysis, the public hospital, if it is to attract and maintain the support of the community, must accept a commitment to provide basic care for the population.

The question of whether all public hospitals should be turned over to voluntary operation is in many instances an academic one since frequently there are no voluntary institutions available or willing to take on the responsibility. What seems more to the point is that we commit ourselves to taking whatever steps are necessary to eliminate the differences in quality between care for the poor and care for others, that we foster the rational organization of resources in order to keep the cost of care within our reach and that we set as our goal dignified, personalized, competent health care for those who need it.

EXHIBIT B, GOVERNMENT'S ROLE IN HEALTH CARE, PAST, PRESENT, AND FUTURE

AN ADDRESS DELIVERED AT THE 72ND ANNUAL CONVENTION AND SCIENTIFIC AsSEMBLY OF THE NATIONAL MEDICAL ASSOCIATION, August 9, 1967, St. Louis, MISSOURI

By James G. Haughton, M.D., M.P.H., F.A.P.H.A. The dictionary of the Encyclopedia Brittanica defines the word "pedantic" as "making an ostentatious display of knowledge". Today I am accepting the risk of being accused of redantry because I have frequently been appalled by the ignorance which is displayed by my fellow physicians about important activities of government, important legislation before State and Federal legislative bodies and important points of view held by politicians all concerning the field of health care and all bearing important implications for the future of medical practice in the United States.

The role of government in health care today is pervasive and will continue to be so. To understand where we are and where we are headed it may help to look back over the route we have come, for as we review the past we may gain insights which help us understand the present and predict what it portends for the future.

As I begin my research in preparing this paper I reviewed the history of the United States Public Health Service and several other Federal agencies. It became obvious that the history of the Public Health Service is in fact the story of the evolution of Federal participation in health care over the past 170 years.

The Public Health Service began when in 1798 President John Adams signed a bill authorizing medical care for merchant seamen and establishing the U.S. Marine Hospital Service. It was established in recognition of the responsibility of the Federal government for the well being of its seamen since the merchant fleet had been the Nation's economic lifeline and a major element of its naval defense. Much of what has happened since has been a reflection of an expanding Federal recognition of responsibility for the health of the populace.

As early as 1799 a pattern of Federal-State cooperation began when Congress authorized Federal officers to cooperate with State authorities in the enforcement of their quarantine laws. In the ensuing years an expanding pattern of FederalState-Local partnership has evolved which has manifested itself in a variety of programs which have done much to raise the level of health in the nation.

In the early years physicians of the Marine Hospitals were authorized to help communities curb severe epidemics of cholera and yellow fever. As the popula

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