Mr. UNRUH. Well, I don't have that in front of me at this point, but as I remember, the cap on our program, as far as income is concerned, was far, far below that of New York, and considerably below that of several other States. How many, I do not know. Senator RANDOLPH. Mr. Speaker Mr. UNRUH. Our cap on income is $3,800-in the State of California. New York was $6,000. I think there are two or three other States with a Senator WILLIAMS. Notwithstanding the size of the family? Let me say that is one of the tragedies of not being able to develop the Cal-Med program, because we felt that quite clearly, $3,800 is not a very wildly irresponsible figure insofar as the cap is concerned. It is clear that any little extra jiggle in the health pattern of a family is going to upset that. Those people with more income ought not to be thrown into the poverty level by an unforeseen health consequence. That is the kind of a program we were trying to develop here so that we could help those people above that level with unforeseen costs. Senator RANDOLPH. This would not be in the category of the aged alone, but would go across the board, even including the middleaged; is that correct? Mr. UNRUH. That is correct. That program would have covered, in effect, virtually everyone in the State. PHYSICIANS' INCOME FROM MEDI-CAL Senator RANDOLPH. Mr. Speaker, a final observation, and perhaps a couple of other observations. Would you turn, please, to page 8. The percentage, Mr. Speaker, of these, let's say, unethical physicians-members of the medical profession that you had spotlighted here by your use of the figure 1,000. How many persons are involved in administering that program in the State of California? Mr. UNRUH. I don't believe I could-are you talking about the doctors that are Senator RANDOLPH. The Medi-Cal patients. Senator WILLIAMS. Patients, or doctors? Senator RANDOLPH. No, the doctors that administer the program. Mr. UNRUH. Somewhere between 2,200 and 2,400 doctors. Senator RANDOLPH. You mean that when you say 1,000, you are speaking of, let's say, 80 or 60 percent-50 percent? Mr. UNRUH. Forty percent-roughly 40 percent of the doctors would be making that figure. That is a gross figure, Senator, I would hasten to add. Senator WILLIAMS. That does not include the expense of medicines and nurses? Mr. UNRUH. No. Mr. MANLEY. May I add something here? Mr. UNRUH. Yes, Mr. Manley would like to Mr. MANLEY. I am informed, Senator, that there are approximately 25,000 doctors who participate in some fashion, in some small or large fashion, in the Medi-Cal program. However, there are only about 2,000 of them who participate in a large way in the program. So what we are saying here is about half of those doctors in the last fiscal year did gross $70,000 a year. Mr. UNRUH. From the program. Senator RANDOLPH. Thank you, Mr. Manley. Mr. Speaker, now let's take the 40-percent-figure, and let's think in terms of the gross income. I would like to ask you if those members of the medical profession are using, let's say, a major portion of their time-70, 80, 90 percenton this program, or are they practicing other medicine? Is this the major proportion of their income, or is it only 20 or 30 percent of their income? Mr. UNRUH. I think, Senator, probably that this constitutes a major portion of their income. In some cases it may constitute virtually all of it. The only thing that I would add to that is that our indication is that exceeds the average income of those doctors who are not practicing in that field. Senator RANDOLPH. Thank you, Mr. Speaker, and Mr. Manley. Mr. Chairman, I think we might perhaps through staff research go into this matter. It reflects itself not only in this State, but I think we might study it more carefully in other States as well. I am not attempting to Mr. UNRUH. There are other cases, but I did not list or go into them in depth because they are sensationalizing-pointing to the practices of some individual doctors which are part of the attorney general's investigation in this State,* which is supposed to be out, I believe, the first of next week-so far as the results of that are concerned. But we would be very happy to communicate that to the committee. Senator RANDOLPH. Thank you very much, Mr. Speaker. Senator WILLIAMS. A most helpful statement, Mr. Speaker, and the part that you did not read, as we said, will be included in the record. I agree with Senator Randolph that further study is indicated along many lines that you discussed. We will go off the record for a moment now. (Discussion off the record.) Senator WILLIAMS. On the record. Mr. UNRUH. Thank you very much. I appreciate the opportunity to come before you. It is a very great problem, and I appreciate the opportunity to lay it before you. Senator WILLIAMS. Thank you very much. (Subsequent to the hearing, Senator Williams asked the following questions in a letter to Mr. Unruh:) 1. You will remember that there was some discussion of Governor Reagan's proposals to "cut out a block of recipients totally and completely." Mr. Manley gave as an example the "medically indigent," a group of some 600,000 individuals. May we have additional details on this proposal and other proposed cutbacks? 2. You noted that "ethical, reputable doctors. . . are doing their dead level best" to arrive at some kind of fee schedule that could be employed in Medi-Cal. Have you additional information on this point? *Letter and report from California office of attorney general, see app. 3, pp. 811-836. 3. May we have additional details on your comment that the relative's respon bility section of Title 19 has made it "financially easy for children to place their parents in nursing homes?" 4. Mr. Carel Mulder of the California Department of Health Care Services, said later in the day in regard to a fee schedule under Medi-Cal: “the physicians who customarily charge below the average will immediately move up to the average, and that physicians who customarily charge above the average will become disinclined to participate in the program, if it doesn't provide them with their usual fees." We would like to have your reply to this statement. (the full text of Mr. Mulder's testimony is enclosed, for whatever additional commentary you may wish to make. We are also sending to Mr. Mulder a transcript of your remarks.) 5. Your discussion of the CAL-MED proposal prompts three questions: a. How would CAL-MED mesh with the Federal Medicare coverage? b. Is it fair to assume that more emphasis could be placed upon health maintenance, or preventive medicine, than is now the case-particularly among people from age 45 and up, when such health practices and services can yield maximum benefits? c. Your testimony mentions several private organizations that offer comprehensive health services on a prepaid basis. Would such organizations have the capacity to provide the services called for by CAL-MED? What incentives could be offered for organizing personnel into similar organizations? Could Federal resources be helpful here? (The following reply was received.) ASSEMBLY CALIFORNIA LEGISLATURE, DEAR SENATOR WILLIAMS: In response to your request of November 7 that I amplify on remarks I made before your U.S. Senate Committee in Los Angeles earlier this fall, I am enclosing answers to each question you posed. In addition, I am forwarding to you a copy of a report of the California Attorney General on our Medi-Cal program operated under Title 19.* This report was the one I alluded to in my testimony which had not then been published. It contains several illustrations of fraud current in our program, plus a wealth of other material and suggestions for improved administration. Since the report is perhaps the first of its kind to be attempted by any state operating a Title 19 program, you may wish to include it in your Committee's hearing record. Suffice it to say that the Attorney General's report completely bears out my comments that some physicians and other providers of health care services in California are making exhorbitant and unjustified profits from the Medi-Cal program. I hope this material is of use to you. If there is anything additional I can provide to assist your Committee please do not hestitate to let me know. Sincerely, JESSE M. UNRUH, Speaker of the Assembly. [Enclosure] 1. The correct number of medically indigent who would have been cut by Governor Reagan was 160,000, not 600,000. These are persons who are not quite as poor as those who are public assistance recipients and in the original Medi-Cal legislation were given a lower priority for services and continuation in the program. The Governor could have legally eliminated these persons from the program and threatened to do so unless the Legislature changed the Medi-Cal law. This threat was not considered seriously by the Legislature since the result would have been greatly increased county costs because the counties would have had to care for these persons. The other proposed cutbacks by the Governor would have eliminated most of the non-required services except most drugs, emergency dental care and home health care. These were ruled illegal by the State Supreme Court. Other so-called cutbacks included a limitation of length of stay in private hospitals to eight days and a roll back of physician fees to the sixtieth (60) percentile of usual and customary fees. The latter program modifications are still in effect. *See app. 3, p. 811. 2. Many physicians in California are not unequivocally tied to the concept of usual and customary fees which has been so vigorously advanced by the California Medical Association. A particular problem has been encountered by physicians in and around the Watts area of Los Angeles with whom I have discussed the problem. Because of the low economic status of their patients, the usual fee of these physicians has been relatively low. Thus the usual and customary concept, at least theoretically, requires that they receive the same low fee for Medi-Cal patients. This has a depressing effect in these areas, especially when physicians from other nearby areas receive higher fees for the same services. These physicians feel that payment should be on a reasonable basis for the service rendered and should not depend as much upon the desires of the individual physican regarding the fee he wishes to receive. 3. Title 19 does not allow states to require that children assume any responsibility for their parents. There are good reasons for this provision, but I merely wished to point out that it also has adverse effects. In California, under old age assistance, there is relative's responsibility. Thus if the children wish to keep the parent in their home or place him in a board and care facility, they must share in the cost. However, if the parent is placed in a nursing home under Medi-Cal there is no responsibility at all. This leads to inevitable pressures for placement in nursing homes which are the most expensive alternative. What I was proposing is that we develop a more flexible approach so that the least expensive alternative does not place a greater burden upon the responsible relatives. 4. The statement by Mr. Mulder appears to have a certain amount of validity. However, there is no evidence that physicians can't or won't raise their fees under the usual and customary concept; in fact, all the evidence would appear to be the contrary. It should also be noted that even now the state does not really know if the charge a physician makes to Medi-Cal is his "usual" charge. The best that is known is whether it falls within a range of fees which is "customary" in the community. The observation that some physicians will be disinclined to participate under a fee schedule is undoubtedly true. We know that some do not participate today under the usual and customary concept at the sixtieth (60) percentile. The real question that Medi-Cal should ask is: What fee should we pay in order to get an adequate number of physicians to participate. I do not believe that question has really been asked. His answer should be the basis for establishing a fee. 5. (a) CAL-MED would provide supplementary coverage to Medicare depending upon the income and family size of the person involved. (b) It would certainly be desirable for more emphasis to be placed upon health maintenance or preventive medicine, but I am not sure that such an approach would occur automatically under CAL-MED which is essentially a funding mechanism. However, to the extent that prepayment organizations accept the responsibility for providing comprehensive services to persons, it is hoped that they would develop such approaches as a means of reducing ultimate costs. (c) Existing prepayment organizations would probably not have the capacity to provide CAL-MED coverage to all eligible persons. The incentive for organization will most likely be created by the demand for these services. This will occur, if it does, because of the lower cost in providing services. CAL-MED will operate on a competitive basis and only those organizations which can provide quality services at a reasonable cost will survive and grow. Senator WILLIAMS. Congressman Reinecke has a time problem. Is Congressman Reinecke still here? Do you want to submit a statement? STATEMENT OF HON. ED REINECKE, REPRESENTATIVE IN CONGRESS, 27TH CONGRESSIONAL DISTRICT, CALIFORNIA Mr. REINECKE. Yes, Senators. I would ask the inclusion of a statement I have already delivered to the Secretary. I would just like to express my appreciation for the care and time that you gentlemen are taking away from your schedules, when I am sure you have other requirements at this time of the year. We appreciate that you would be here to concern yourselves about the health services for our citizens here in California. Senator WILLIAMS. Well, we appreciate your time. I know we are working in a common purpose. Mr. Reinecke. We are indeed. (The complete statement of Congressman Reinecke follows:) PREPARED STATEMENT OF THE HONORABLE ED REINECKE, REPRESENTATIVE IN CONGRESS, 27TH CONGRESSIONAL DISTRICT, CALIFORNIA Mr. Chairman, I am deeply gratified to appear here today, and I welcome this opportunity to be able to participate in these Hearings. The fine work of this Subcommittee in probing the causes of the increase in the costs of health services has been widely recognized. Your impartial examination of present organization of services and present patterns of practice have shown that both human and financial resources are being wasted. Your investigations have also yielded valuable information as to how the deficiencies in our health services may be corrected so that public confidence in the programs of Medicare and Medicaid may be restored. I am pleased to be able to participate in these proceedings not only because of my deep interest in the subject, but also because of my longstanding concern for the well-being of those who have contributed so much to the growth of this Nation. We cannot afford to turn our backs on those of our elders, whether through no fault of their own, are no longer able to provide for themselves or whether they are able, at sacrifice, to pay their bills. Testimony given at previous hearings in Washington, D.C. and in New York City, certainly made this point clear. Hopefully, the hearings here in Los Angeles will prove equally valuable. Los Angeles is a particularly appropriate place in which to continue your inquiry. Like any large city, it has its quota of problems. But it also has more than its quota of intelligent and innovative leaders and institutions. Their experience in dealing with the costs and delivery of health services in this area, will no doubt provide valuable lessons for the rest of the Nation. EFFECT OF RISING COSTS ON MEDICARE PROGRAM Mr. Chairman, perhaps the most important problem confronting Congress with respect to the medicare program is the effect that raising costs have had on the program and the older people it is designed to protect. As you will recall, last year Congress had to increase the payroll taxes which support the hospital insurance part of medicare, known as Part A, by more than one billion dollars a year-just to meet the increasing cost of hospital care. And I want to emphasize that this increase was not the result of greater use of hospitals by older people-it was solely the result of the increase in the costs of hospital care. The American Hospital Association announced earlier this year that hospital costs will probably go up by 15% a year for at least three years. It is fortunate indeed that actual increases have not yet reached this level, but there is good chance that the AHA assessment may still prove correct. If Congress had been able to spend even half of the billion dollars for increased health benefits under the program, significant improvements affording additional protection to the elderly could have been made. Instead all of the increased taxes had to go for the higher costs of the existing program. In fact, the benefits under Part A were even slightly reduced. As you know, Mr. Chairman, the premiums under the medical insurance part of medicare-the so-called Part B-had to be increased by one-third, from $3 each for the aged person and the government, to $4 each. This increase was caused largely by the fact that physicians' fees rose very rapidly during the year after the medicare program was enacted. Though earlier this year the aged were given a modest and much needed increase to their cash benefits, a good part of that increase had to be paid out for increased premiums. EFFECT ON MEDI-CAL The increase in the costs of health care dramatically affected the medicaid program here in California, known as Medi-Cal. The Department of Health, Education, and Welfare estimated last December that the Federal share of the medicaid program for this fiscal year would be a little over $1.5 billion. The estimate now for this year is one billion dollars more! While not all of this |