needed to fund the entire program: access to health care for the uninsured, the improvements in health care for the elderly and the long-term care for all Americans.

One of them particularly relied heavily on eliminating the cap on income subject to the Medicare payroll tax, which was as you mentioned Congressman Pepper's proposal for funding his home care bill. And when he was alive, he had extracted a promise that that tax would be used in that way. With his no longer being here, obviously they felt that they didn't have to be bound to that promise any more.

But I think what the whole budget process points out is that we have committees in Congress, the Ways and Means Committee and the Finance Committee, who are experts in just this issue of taxes, which to raise and which are most progressive and which would be the best combination for getting the total amount that we needed. So the idea originally was that it should be a burden on those tax writing committees to develop the taxes that were needed.

When they complained that we didn't make any suggestions of our own, the staff came up with several options. But they're merely demonstrative of what could be used and obviously the fact that the payroll tax is no longer there means that we'll have to look to other ways to do it.

Mr. PALLONE. I don't mean-don't get me wrong-I'm not trying to be critical of the commission because I understand that it's Congress that has to make these decisions, but I think it is unfortunate that this payroll tax is being used for deficit reduction because we were starting to get some support for the notion that that money could be used for long-term care and now it's not there any more. One of the questions I wanted to ask you, though, is with regard to the home health care portion of long-term care-and it may be true of custodial care as well, but certainly what I keep hearing over and over again and I think we even had a hearing a couple of years ago of the subcommittee where we talked about that-is that the studies have all shown that if Medicare includes home health care that ultimately it would save money and wouldn't cost more. And so one of the questions that keeps coming up is why do we even need to talk about a new funding mechanism for home health care if, in the long run, you're actually saving the Government money?

Is it just the initial cost or just the fact that that notion that you're going to save money is really not accepted at this point?

Mr. EDELSTEIN. Well, you do save money over an alternative placement in a nursing home. But there are many people who are not even getting the nursing home care. So to provide the home care would actually be a net increase for them. So it's not necessarily that overall there would be a savings.

Putting into place a long-term care program would have some expenses associated with it. So it's a question of are we going to finally address long-term care overall so that we don't have kind of a reverse lottery type of thing where a small number of people get hit with the burden of having to pay for very expensive long-term care but rather spread it out across the population so it's manageable for everyone.

Mr. PALLONE. I was really pleased that you brought out this and you tried to dispel this notion that a lot of the elderly can afford to pay more. I thought it was you that pointed out that even though there may not be percentage-wise as many poor elderly as a general population, that once you just go above the level of poor, you find almost a majority of elderly in that category.

And one of the things that really upsets me, I guess, in Congress-and I'm not trying to do any Congress bashing here—is the notion that I think there are a lot of people out there that have the notion that the elderly are rich and that there is a large category of wealthy people.

And one of the things that has also been-this whole notion that we've created a generation gap-in other words, that somehow people like Mr. Laracy and Mr. Riordan who, through their organizations they represent, end up lobbying Congress, have a clout over us and a hammer over us that's out of proportion to what the real needs are, so to speak.

And I hear that a lot of Congress, that the elderly are getting too much, they're demanding too much and that you're going to have a reaction now by the people who are in their thirties or forties, the Baby Boom generation, and I'm part of that group, I'm eventually going to rise up and say, "Hey, we've had it. We don't want to pay for the elderly any more. Cut back on all the programs and let them pay for themselves."

And the idea that-not only the irony that that really isn't true but there's a lot-the majority of elderly aren't that well off, but also the fact-what I find myself when I talk to people my age is that they don't react that way at all. They know-or at least a lot of them know-at least from what I hear from my constituents and maybe Jim McCann I'm sure hears the same thing-that if programs are cut for the elderly, not as much is available through Social Security or Medicare or whatever, what that all means is that the elderly person has to rely on their children and their siblings or whatever to make up the cost.

And so that assuming we still have-and most people do have some kind of family relation-the ultimate result of not having insurance coverage or not having programs on a government level that pay for broad coverage, is that younger people end up paying part of this cost as well because their parents need help and they end up helping them or taking them in or whatever.

I'm just kind of talking here now rather than asking a question, but I think that we need to dispel this notion that somehow that we have-that all the elderly out there are these greedy people and the younger people are all paying for them and that somehow the younger people are suffering for it. It just doesn't make sense to

me.

I just wanted to ask one more thing of Mr. Edelstein, and that's about-you mentioned that in the Pepper Commission they had a recommendation in the social insurance program for the first 3 months for custodial care. Would you just explain that again and how that would be paid for as opposed to beyond the 3 months? I didn't understand all that.

Mr. EDELSTEIN. When they were discussing the nursing home component of the long-term care, they were very cognizant of the

cost of such a program. I think many of them would have liked to have provided more extensive coverage but the cost of an entire nursing home benefit to cover your entire stay is somewhere in the neighborhood of $70 billion just for the nursing home component. So when you combine it with the other proposals that the commission is making, it got to be a number that they thought was far and away too much to begin with.

So they had to figure out a way to provide coverage they felt was necessary without providing a complete nursing home benefit. So what they did was they segmented it and they said in the first 3 months, those people who have the best chance of going back to their homes and would need their resources to continue to live at home, we'll pay the cost of their care through a social insurance mechanism, just as we pay for the home care.

Beyond 3 months, for those people who most likely will end their time in a nursing home, we'll make sure that being in a nursing home doesn't wipe them out financially. We'll provide an adequate floor of income and asset protection much above what's provided under Medicare right now but have them contribute to the cost of care beyond those levels of protection.

So it's based on the individual's ability to pay, whereas the first portion of it is without regard to their income and assets.

Mr. PALLONE. And that's particularly important because people also mentioned at one point that the availability or the cost of the long-term care insurance right now is very much out of reach for most people.

Mr. EDELSTEIN. Right. This was viewed in combination with that so that we would be providing complete protection to the most vulnerable elderly. As I mentioned, 55 percent of the elderly would be fully protected for a nursing home stay under the commission's configuration.

An additional percentage would get some assistance, and the very well-to-do would get no assistance at all beyond the first 3 months. But that is the segment of the population that's best able to afford private long-term care insurance.

There have been some discussions about a front-end benefit versus back-end benefit. Senator Mitchell had a bill he submitted a couple of years ago for nursing home care which had a 2-year waiting period before the benefits kicked in. And so what that configuration does is focus the benefits on the people who are able to withstand paying for nursing home care on their own for 2 years, so that seemed to be, to the commission, a reverse of how these resources should be allocated.

Mr. PALLONE. Okay. Thanks a lot.

I just wanted to ask Mr. Langevin some questions. Again, you brought up so many things that we could spend days on them and we only have a few minutes, but you mentioned that the Governor's commission has some recommendations in terms of cost containment measures.

My own impression, at least in talking to health care providers and in talking with senior groups, is that when we talk about increasing costs, at least for private insurance, for example, Blue Cross/Blue Shield, that a lot of increasing costs come because of

the uninsured, because of having to pay for the uninsured or uncompensated care.

And then you mentioned another reason for increased costs is new technology, new types of treatment.

And then, of course, there's the traditional one which most people think of, which is it just costs more because health care professionals are making more, which is the one that I usually put the least amount of credence on because if anything, you hear more of them complaining about they're not making money or they're having problems making money.

What were the recommendations again with regard to containment again? I don't know that you detailed them that much.

Mr. LANGEVIN. I didn't go into detail a lot, just one of the key issues is to take the uncompensated care trust fund out of being supported by other insured parties because obviously what happens is a vicious cycle. The trust fund is funded through surcharges on insured people. Naturally, the more you put the surcharge on, the more people use the trust fund, you end up having a higher and higher cost for people who are insured.

Therefore, people who provide the insurance are taking a second look at whether or not they want to provide that insurance and you end up with more uninsured feeding on a smaller and smaller portion of insured people to fund that pool.

So now they're looking at taking that out of that arena and putting it into a public financing area through the employer-based tax. One of the other things is to prevent the proliferation of highcost technologies when they're not utilized and put the people who would make investments in those areas more at risk through incentives in the hospital rate setting system and obviously a simplified rate setting system, so there would be less jamming of that system and to try and focus on the high tech items to make a level playing field, for instance, between the private practice of medicine and an institutional medicine state.

Mr. PALLONE. Has the second method, the way of dealing with new technologies, has that been tried anywhere in the State or elsewhere in the country? That they have put into place those kind of containment benefits just to see how it works?

Mr. LANGEVIN. We've had a State health plan in New Jersey for some time. We've had a certificate of need process and as a result, New Jersey enjoys, I think, a pretty good cost containment record. We are one of the highest cost of living States in the entire country so the fact that the cost of health care is also high is not surprising but the rate of increase, I think, is notably curtailed. And that comes from the health planning efforts we have in place now. I think where the push is on the commission's part is to bring more of the high-tech items into this playing arena which right now are not there.

Mr. RIORDAN. Frank?

Mr. PALLONE. Yes, Mr. Riordan.

Mr. RIORDAN. I would like to add to that that one of the major cost containment aspects that was treated in the report was the use of HMOs and Preferred Provider organizations where there would be control of the patient and it wouldn't be a fee-for-service, it would rather be a recommendation of the PPO and the HMO as

to the kind of services that were needed. That was looked upon as being an effective means of cost containment.

Thank you.

Mr. PALLONE. Okay. Thanks. I just wanted to mention again because this is for the Aging Committee which is national but you talk about this innovative plan to get coverage for people who are working that's been suggested by the commission and I think that that's something that our committee really should look into and what types of analogies we can make with that on a national level. So basically it provides some sort of either subsidy or tax incentive for the employer that's publicly financed? Just go through that again.

Mr. LANGEVIN. Essentially what it does is it puts a tax levy on employers of $144 per employee. That's across the board, when you have an insured employee, you will pay $144. Then there's also a disincentive, if you will, of $1,000 levied on employers who do not offer employee health coverage.

Again, to take the idea of taxing people who have insurance now even further to fund uncompensated care in the State and put it back to having an incentive to provide health insurance for employees.

Mr. PALLONE. And I assume we're going to get the usual argument that this is going to make New Jersey industries or New Jersey companies less competitive and therefore we shouldn't do it. Do you have a response to that?

Mr. LANGEVIN. I would just point out one thing. I think New Jerseyeans and many of us don't even realize it-enjoy one of the few-we're one of the States that enjoys a basically 100 percent guarantee of health care in the hospital.

Anybody who has been hospitalized recently I think will attest to the fact that they don't necessarily get your health insurance card first before they let you in the door in this State and the reason that is is because health care is guaranteed in the hospitals. They may ask you for your card, but if you don't give it to them they don't tell you to go back out the front door. I think that's something we've all come to-we live in New Jersey and almost accept it as the way life it is. It's not that way in other States.

Other States, people who have my job in other States continually investigate patient dumping-that is, people coming in not being insured and being shown their way back out the front door. So I think that's a benefit that's worthwhile to get.

I think that the current system, the uncompensated care trust fund funded through insurance as it is now by the people who have insurance was a good idea when it was initiated but I think it's obviously starting to fall on its own weight and we need to take a second look at it. And probably the most, I think, reasonable way to do it is to have the surcharge and the $1,000 disincentive.

Mr. PALLONE. I know that our two advocates here have raised the two hot issues, I suppose, of the assignment and national health insurance.

I just wanted to ask with regard to the assignment issue, one of the concerns I have with this budget, Joe and Frank, is that we've only talked today about the extra cost to the elderly, either with