Quality Controls - Most of the national health insurance bills, except Health Security, make no provision for the quality of health care that would be rendered to patients. For this purpose, Professional Services Review Organizations, though important, are not enough. Quality control should be an integral part of any national health insurance program enacted by Congress. The Health Security bill establishes the Commission on the Quality of Health Care at the federal level. This commission would have the continuing responsibility of developing and enforcing national standards for participation by doctors, hospitals and other institutional providers. Today the delivery system of health care Transforming that into Reform of the delivery system - is an uncoordinated, inefficient and expensive non-system. an efficient system that delivers quality health care to all will require some fundamental changes in how people get their medical care. First, the profit-motive ethics of the marketplace must be replaced by a primary commitment to improving the health of the American people. Secondly, the country must develop organized systems of delivering health care. This should be accomplished as part of a total program, not as an isolated effort. The Health Maintenance Organization Act of 1973 is a positive step forward, but it cannot achieve its full potential until America provides the financing for comprehensive care. Health Security would provide integrated, system-wide reform of the health care delivery system. This does not mean that Health Security would scrap the existing system; rather it would build on the existing foundation. Through incentives and a Health Resources Development Fund, the system would be encouraged to reform itself. Administrative Costs - Most of the bills before this committee would mandate or subsidize the extension of private health insurance. In Canada, the national health insurance program in most provinces is administered by government. Several of the provinces initially attempted to utilize private insurers in the administration of their program. Canada found that private insurance was expensive in terms of the mechanical function of processing claims and, more importantly, incapable of influencing the delivery system to be responsive to the needs of the population. For these reasons, most provincial governments have phased out private insurers. - The cost of administration of the hospital insurance program in Canada including both federal and provincial cost is 1.15 percent of total hospitalization - expense. For the United States, this compares with a Blue Cross administration expense of 8.9 percent of hospital claims in 1973. Thus, Blue Cross is seven times more expensive than Canadian government administration. The average Canadian cost for administration of hospitalization and medical service combined is 4 percent of expenditures for health services. This compares to an operating expense ratio of 13 percent for commercial group policies in the United States for the same year. Australia had a program similar to the bills supported by the American Medical Association and the Health Insurance Association of America from 1953 to July 1, 1975. This is, pensioners were covered by a government program, and the federal government subsidized the premium payments for the poor and near poor for coverage under private health insurance. Like the AMA and HIAA bills, there was a significant amount of co-payments required by the patient. The cost of administration of this subsidized private insurance program in Australia was 25 percent of claims. Because of this high overhead cost, as of July 1, 1975, the voluntary insurance funds were replaced by a single funding agency under the direct supervision of Australia's Department of Social Security. as the basis for so-called "national health insurance" has been tried and has failed to provide health care at a reasonable cost for administration. Cost savings can be achieved in a governmentally administered program by eliminating such functions as (1) determination of eligibility, (2) processing claims with deductible and co-insurance provisions, (3) costs associated with experience rating, (4) income or means tests, (5) establishing a separate money collecting system such as for the collection of premiums and (6) marketing costs. Only Where a national health insurance program covers everybody and the plan is administered by a single agency, no determination of eligibility is necessary. the Health Security bill establishes health care as a right for all citizens. The complexities of administration resulting from variable deductibles and co-insurance as individuals move up and down the income ladder are enormous. For example, in Los Angeles the turnover of Medicaid eligibles is 70 percent a year. Yet all the bills, except Health Security, have such income tests. All of the complexities of income determination could cause a minimum overhead waste of several billion dollars which would be used to hire an enormous number of clerks, claims processors, eligibility determinators and adjustors. The tax collecting machinery for payroll taxes, which Health Security would use, is already in place. For the other proposals, the administrative cost of collecting premiums would be an added expense. In addition, high cost individual policies would be continued under these proposals, and individual policies only pay out 53 percent of premiums in benefit claims. Another major waste in the other proposal is the cost of marketing a multiplicity of different benefit packages. While all of these bills would require a minimum benefit package, the possible variations over and above this minimum package would be endless. It should be emphasized that the minimum package would also be the maximum package for the poor, but the employed and the more affluent would be able to purchase more comprehensive coverage, either through collective bargaining or by direct purchase. Since Health Security provides comprehensive benefits for all Americans, marketing costs for different policies would disappear. Because Health Security eliminates the factors that cause high administrative costs, Health Security could be administered at a cost comparable to Canada's or for about 4 percent of the cost of medical services provided by the program. The other bills, on the other hand, are similar to the program that Australia had to abandon because of the cost of administration. Low overhead costs for administration should be a major objective of any national health insurance program adopted by the Congress. Financing - The American people pay for their health care in four ways: (1) by out-of-pocket payments at the time health services are rendered, (2) by health insurance premiums, (3) by payroll taxes as required under Medicare and (4) by income taxes. 61-147 O-75-2 Out-of-pocket payments are the most regressive way of financing health care because the poor and the unhealthy have a greater need for health services than the more affluent and less sickly. Out-of-pocket expenditures are, there Premium fore, higher for the poor and unhealthy than for the rich and healthy. payments for health insurance are also highly regressive since, in effect, they are a flat head tax. Social Security taxes are more directly related to income. Income taxes are progressive. The rival bills to Health Security rely primarily on out-of-pocket payments by patients and on a head tax in the form of health insurance premiums. Health Security would be financed by a payroll tax matched by general revenues. Out-of-pocket expenditures by patients would be eliminated for physician and hospital service, and the flat premiums consumers pay under private health insurance would be abolished. Consumer Participation - Of the many bills before you, only H.R. 21 and H.R. 1 provide any role for consumers in the development and administration of the nation's health program. The interest of the American public in the national health insurance stems from the belief that such a program must be able to control costs and make health services accessible to the entire population. For too long all decisions about medical care have been made by doctors, hospital administrators and insurance company executives. It is time that consumers had a direct role in the administration of health care. Mr. Chairman, four years ago, when I concluded my testimony before the full committee, I said that I hoped that we wouldn't have to come back to the next Congress to testify again on national health insurance. I repeat that hope. The American people have waited long enough for congressional action on this issue. We believe it is vital that this Congress, at long last, enact a national health security system for America. Health Security makes economic, medical and humanitarian sense. It is a program whose time has come, and we urge speedy action on it. Appendixes Five appendixes follow including a summary of the Corman bill (H.R. 21) and a summary and analysis of the other bills that appear to have some support in Congress at the present time. These bills include the National Health Care Services Reorganization and Financing Act (H.R. 1) supported by the American Hospital Association, the National Health Care Act of 1975 (H.R. 5990) supported by the Health Insurance Association of America, the Comprehensive Health Care Insurance Act of 1975 (H.R. 6222) supported by the American Medical Association and the Catastrophic Health Insurance and Medical Reform Act (H.R. 10028).. All of these bills except Health Security have certain features in common. All would establish different programs and/or different financing mechanisms for different classes of people such as the poor, the aged, the employed or "uninsurables." All rely heavily on an income test as a way of reducing premiums and/or copayments by poor persons in order to make health insurance available to those who otherwise could not afford to pay. This denies the concept that health care is a right of all citizens. All of the bills, except H.R. 21, continue the vicious and antisocial practice of experience rating which requires the aged, the poor and mothers of childbearing age to pay higher premiums for the same protection as is provided to other citizens. None of the alternative proposals to Health Security provide universal coverage. None provide a single standard of comprehensive benefits for everybody. None have effective cost or quality controls. None have effective provisions to reform the delivery system; in fact, all would provide a financial underpinning for the fee-for-service system making change more difficult. All of the alternative bills are regressively financed. All would be very |