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ta. With a 3-percent increase in inpatient services, we do not think more hospital facilities would be required. As a matter of fact, we have already had a huge increase in hospital beds. About 145,000 acute hospital beds have been added to the total supply between 1965 and 1972, an increase of about 20 percent. At the same time, the number of unused beds has risen from 178,000 in 1965, to 228,000 in 1972. About 25 percent of all hospital beds in the country are vacant on any given day, and so the fact that there would be a small increase in inpatient services would clearly not call for an increase in hospital bed capacity. As a matter of fact, quite the contrary, and as you know, that is why we have argued so strongly that the Hill-Burton program has more than fulfilled the need that had once existed for it to serve.

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The supply of health manpower has also increased greatly and will do so faster in the decade ahead. Physicians in active practice increased by 64,000, or 26 percent in the last decade. They are expected to increase by another 33 percent by 1980, given existing 70 policies. Similar growth is occurring in the fields of nursing and allied health. In 1960 there were 525,000 nurses, in 1970, 725,000. We believe they will exceed 1 million by 1980, just doubling in a 20-year period.

The number of dentists is one-third higher now than in 1960. By 1980, it will be 25 percent higher, so that we anticipate significant opportunities for midlevel manpower and physician extenders, the 0 nurse practitioners, dental auxiliaries and many other types of health personnel, of people who can perform services now entirely performed only by professionals.

Resources are growing faster than demand by a considerable amount, even if comprehensive health insurance is enacted. And there of course will be selective problems such as location and whether doctors are in the proper places to serve the total needs of the Nation. We are seeking to address these problems in other pieces of legislation, but I think it is clear that resource constraint should not be an argument for not enacting comprehensive health insurance. We do not believe that there are resource constraints of that kind, and we think that if you have a plan that concentrates only on catastrophic for the majority, and broad coverage with minimal cost sharing for the very low income, or one that removes cost sharing entirely, we think that will only exacerbate our resource problem.

Now, in turning to the various bills, there are many issues which certainly can yield to the process of honorable compromise. There are two or three larger issues before this hearing and before the American people that I think must be debated and decided.

One of these involves our basic approach, and it is one of the things that guided us in the presentation of our plan: should we thoughtfully repair the things that are wrong with our present partnership system of public and private protection, or should we discard it entirely and experiment with something new that might not work as satisfactorily, or indeed, not at all?

The other basic question involves equity. Should we enact comprehensive legislation that will assist all Americans, or should we instead inch forward with aid just for some categories of people, leaving others to catch up when and if they can?

The administration strongly supports the first option in each of these vital issues.

Others, as you know, call, in effect, for the virtual elimination of a $30 billion private insurance industry serving 160 million people, and doing in the main an efficient job. Such drastic changes are being proposed because the system in which that industry operates has developed some obvious gaps and shortcomings, gaps, and shortcomings which should be corrected.

However, to replace it altogether would require an unnecessary and massive expansion of our existing Federal health financing system, and while I am very proud of the work of the Social Security Administration and the Department in administering medicare, I am concerned that the proponents of a completely Federal system greatly underestimate the vast new costs and complications that would be created by expanding the Federal responsibility from protecting our 20 million aged to insuring all 220 million Americans against the cost of health care. Even the more limited move envisioned under your bill, Mr. Chairman, would more than double the number of people receiving benefits under a federally administered system and would require a very large expansion of the Federal establishment.

Now I might describe, Mr. Chairman, briefly with the use of some charts, our own proposal. As the first chart indicates, we have built our proposals around seven key features, and they are there on the chart: universal and voluntary access to affordable coverage; public financing only where private financing is inadequate; balanced and comprehensive benefits; incentives to improve the delivery system; containment of health care costs; State administration within Federal guidelines; and use of private health insurance where appropriate.

Those are the basic principles which led us to produce the proposal that we have.

Every person under our comprehensive health insurance plan would be covered. No one would be excluded, no group would be excluded, and the only people who would be excluded are people who would voluntarily decide they do not wish to have this

coverage.

We have three plans. The employee plan is set out on chart 2, and I do not think I need read the various items that are on that chart.1

Chart 3 sets out the assisted plan, which is designed to cover lowincome people, people who are high risk, or employer groups that as a group are high risk. The assisted plan provides for reduced cost-sharing and maximum financial liability protection.

I think it is important to emphasize at this point, Mr. Chairman, that the employer plan, the assisted plan, and the third plan that

1 See p. 115 for charts referred to.

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I am coming to all have identical benefits, and all of the services covered are identical. That third plan is the continuation of medicare under the Social Security Administration, but with greatly expanded benefits, benefits that would then be identical to the other two. The premiums would run about $90 a year, deductibles and coinsurance would be lower than in the employer plan. and there of would be no premium or reduced cost-sharing for low income aged persons. Again, I think the chart covers pretty well the features re of that third plan which is essentially an improved benefit strucesture for the medicare program.

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The financing for the comprehensive health insurance plan is shown in chart 5. The employee plan would be financed jointly by employers and employees, the assisted plan by the Federal and State governments, and medicare by employer and employee contributions to the medicare trust fund as at present. No new taxes and no new tax increase would be required for any feature of the administration plan.

at The benefits and services covered are on chart 6.1 They indicate the extremely broad range of comprehensive services that would be covered for all of the people of the United States who decided to be covered by this plan. You can see there all of the hospitalization, the extended care, the preventive services, the coverage of such things as mental illness, alcoholism, prescription drugs, a number of things that are left out of existing insurance coverage for the most part; 100 days of care in a skilled nursing facility, 100 home health care visits in a year, and a number of other benefits that are all set out in detail on that chart.

A feature of our plan of which we are very proud and are glad that others have agreed so by copying it is the health card proposal under which we would have in effect a credit card type of payment system for the payments that would be required by individuals 1 under our plan. The health card would not only enable patients to be admitted to hospitals and have treatment started without advance. payments, but would also enable them to spread the payments that they might be required to make over a considerable period of time, and it would lead to lower administrative costs. It would lead to a much better method of gathering necessary health statistics and data. It would enable the individual to have particular health problems or allergies or blood types and so on coded on the card, and it would also, we think, provide for a very much better method of administering and utilizing review and resource planning data.

The reimbursement system for providers is shown on Chart 7, and again, we see the partnership aspects of this plan. The States themselves would determine the reimbursement rates subject to Federal guidelines for all covered services, and the administration would be by the private health insurance companies that have written the policies.

For institutional services, the rates established would be on a prospective or prenegotiated budget process which we think experience here and abroad has shown to be the best method of keeping

costs down and providing for reasonable charges. Institutions would have to accept the established reimbursement as payment in full. Full participating doctors would accept the State-established rates as payment in full for all of the covered services, and for all enrollees under the program. Physicians who decided not to participate in that way would accept the State-established rates as payment in full for medicare and the assisted low-income or high-risk enrollees. If they wished, this group could charge more for the employeremployee enrollees. But if they do so, they would have to go through the expensive administrative and collection procedures which they would be free from if they decided to use the established reimbursement rates. This would eliminate a great deal of the collecting problems for them, and it would eliminate a lot of the bad debt risks. If they wish to risk bad debts for that one group, they would be entitled to charge more.

For drugs, reimbursement would be based on the lowest price generally charged, assuming substitution where there was assurance of equivalence.

The cost-sharing requirements are based on ability to pay under our proposal, so those individuals and families with the highest incomes would pay the highest amounts, while the aged and the poor would pay less. We propose universal cost-sharing for everyone, however because we believe it is essential that every person be aware of the cost of using health care services and resources.

Enrollees under the employee plan would pay no more than 25 percent of the premium, which we estimate now to be approximately $150. We hope it would be less when the forces of competition come into play. They would pay a $150-per-person general deductible up to a maximum of three in the family in a year, and a $50-per-person drug deductible and 25 percent coinsurance. The maximum annual liability per family would be $1,500, at which point the catastrophic illness provision would attach. For individuals, this figure would be $1.050.

Under the assisted plan. for people with lower incomes or higher health risks, there would be no premiums or deductibles for families with annual incomes below $2,500. They would have a coinsurance rate of 10 percent. For those families, the maximum liability would range from zero to $150, depending on income. For low income single persons with incomes of less than $1,750, there would similarly be no premiums or deductibles, and a 10 percent coinsurance rate. The coinsurance feature, the cost-sharing, runs through all portions of the plan by deliberate design, Mr. Chairman, because we do think it is essential to prevent the overutilization that we have seen can wreck other health care systems.

Charts 9 and 10 set out the various cost-sharing provisions of the assisted plan, and shows the sliding scale and the income relationship of these charts.

Chart 11 now will show the cost-sharing schedules for the medicare plan, which are lower than those of the employee plan. Under

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CHIP, medicare beneficiaries would pay about $90 in premiums. There would be a $100 annual deductible, a $50 annual drug deductible, and 20 percent coinsurance. The maximum annual liability that would attach would be $750. Of course, the cost-sharing for low-income aged would be much less. For example, an elderly person with an income of $1,700 would pay no premium or deductible charges, and his or her coinsurance rate would be 10 percent, and that would apply only up to a maximum annual liability of $102. In the proposal the administration has set forth, the administrative structure calls for a partnership of private carriers, the States, and the Federal Government. Specifically, private carriers would administer the employee plan, the States would administer the assisted plan, and medicare would continue to be administered by the Federal Government. There would be provision for regulation by the States of insurance carriers participating under the employee and assisted plans, but no large Federal organization need be set up, nor would there be any major increase in Federal employment as a result of our plan.

And as we have said many times, and repeat again, there would be no Federal tax increase under our plan.

Requirements for professional review would be provided under our plan to assure that care provided was of high quality and was medically necessary. re In addition, there are numerous cost control provisions embodied in the comprehensive health insurance plan that we believe will be effective in controlling the ever-rising health care costs.

Future price and cost behavior is very difficult to forecast at any time. Added to our difficulties, of course, are the uncertainties surrounding the behavior of the health industry now that the economic stabilization controls have been removed. Everybody anticipates some increases. We hope they will be held to an absolute minimum, and we are doing all we can in the absence of controls to insure that the price increases are held to a minimum.

Our original cost estimates that we have used throughout our various presentations have been based on the assumption that cost controls on health care prices would remain in effect. We urged that they remain in effect. Congress has seen fit not to follow this, and therefore we are going to have some difficulties in making any kind of cost estimates for any national health insurance proposal. And the original estimates that we made have to be taken, I think, are subject to the increases that may come at the moment.

Our original estimate was that the comprehensive health insurance plan would result in a total of $5.9 billion in new Federal costs expressed in 1975 prices, when the plan is fully implemented. $4.1 billion of that would be for financing coverage for individuals under 65. The remaining $1.8 billion would be spent on the aged. The $5.9 billion increase in Federal health spending could be financed without a tax increase, and the way that would be done of course would be by simply assigning it a sufficiently high priority to use the growing revenues that are anticipated.