E-5 The insurance companies have never sold much health insurance with reasonably comprehensive coverage. Voluntary health insurance under the catastrophic bill would continue to emphasize the payment of expenses related to in-hospital costs. Private health insurance policies place no emphasis on preventive health care. Half More than one-fourth of the civilian population under 65 do not have coverage of X-ray and laboratory examinations outside the hospital. the population have no coverage for physician visits in the home or office. About half have no coverage of prescription drugs outside of the hospital. The catastrophic insurance bill would do nothing to improve these Americans' access to care. Benefits under the Catastrophic Health Insurance Program do not cover skilled nursing home care, a surprising omission. Medicare patients who might exhaust their entitlement to post-hospital extended care of 100 days would not be eligible for catastrophic benefits. If such a patient had remained in the hospital, his hospital bills would be paid by the catastrophic program without any limit. Moreover, an insurance carrier need not offer skilled nursing home care in its benefit package as a basic requirement to be certified by HEW under the voluntary health insurance program. Only those eligible for the Medical Assistance Plan for Low Income Individuals and Families would have coverage for skilled and intermediate nursing home care. Neither is preventive care a required benefit under Title III in order for a private health insurance policy to be entitled to the seal of approval by the Secretary of HEW. Title II, the medical assistance plan does not cover preventive care for adults over the age of 17. E-6 - The total emphasis of the program is not to prevent illness but only to pay for acute care in the most expensive way in the high cost hospital. In fact, the bill specifically provides that Title I, the catastrophic plan, would pay in addition to any other public or private health insurance policy that the seriously ill patient might have. Such a double payment gives both the doctor and hospital every incentive to hospitalize and overtreat as even exorbitant bills would be fully covered. After experiencing the cost escalation that occurred after the passage of Medicare, the catastrophic proposal would simply amplify the Medicare experience with its escalation in cost. The ineffective cost control provisions of Medicare would be continued. Hospitals would be reimbursed on a cost basis and physicians would be paid their usual and customary charges. Doctors would not have to accept their customary fees in full payment for their services except for those covered by the low-income plan. The catastrophic bill is an invitation for cost escalation, not cost control. The cost of administration of the bill would be horrendous. The cost of administering the income test to low-income individuals and families would be at least 25 percent of benefit payouts. The spend down provision is especially difficult to administer since it is impossible to know who is and is not eligible for the program at any given time. In fact, it is likely that Title II is unadministrable. Built into the catastrophic plan is a costly rip-off for the insurance This results from the provision that the employer receives the same 50 percent tax credit against the 1 percent payroll tax whether or not he industry. E-7 elects to be insured by the Social Security Administration or by a private Because of this tax credit, the employer has no carrier of his choosing. The only control would be an "actuarial" table of values which would be submitted by an Actuarial Committee in HEW. Health insurance benefits equal the premiums collected less administrative costs. Actuarial calculations are unnecessary. Insurance companies make their money by building actuarial risk factors into these premiums. These risk factors are just disguised profits. incentive to bargain with the carrier over premium rates. The bill accepts the present unstructured nonsystem of health care delivery and provides no incentives for rationalizing the delivery of health services. The bill would have no impact on alleviating the health manpower shortages nor about redistributing physicians from areas that are over-doctored to areas that are under-doctored. To the contrary by emphasizing the highest cost care, it is likely to have just the opposite effect. The catastrophic proposal does nothing to increase the supply of primary physicans (general practitioners, internists and pediatricians) who provide care for 90 percent of routine illnesses and nothing about the overabundance of superspecialists and surgeons to take care of rare conditions. In fact, the catastrophic insurance program will result in a neglect of preventive and day-to-day care, thereby guaranteeing more catastrophic illness and more superspecialists. Thus, the bill is the antithesis of what a good health program should be. STATEMENT OF JEFFERY COHELAN, EXECUTIVE DIRECTOR GROUP HEALTH ASSOCIATION OF AMERICA, WASHINGTON, D.C. Mr. Chairman, ny name is Jeffery Cohelan, and I am the Executive Director of the Group Health Association of America. GHAA is an organization which represents the major prepaid group practice plans in the country. These prepaid group practice plans are the basis of the Health Maintenance Organization concept. Our interest in National Health Insurance is devoted primarily to how national health insurance will impact on HMO's. My testimony, therefore, this morning will deal mainly with the role Health Maintenance Organizations should play in any proposal that is ultimately adopted by Congress. Over the past few decades, prepaid group practice has been recognized as a workable and desirable alternative mode of health care delivery. I should stress that none of us involved in this system have ever maintained prepaid group practice, or HMO's, as the only method by which health care should be made available to consumers. Our system of care should be considered as an alternative to the traditional fee-for-service concept within the framework of the entire health services mechanism. By the same token, Mr. Chairman, we do not consider ourselves to be an experiment. In those areas where HMO's have been relatively free to organize and operate, their success has more than justified the recent recognition they have been given. One cannot consider the Kaiser program with 2.8 million members in six states, or the Group Health Cooperative of Puget Sound, with over 180,000 members or the Health Insurance Plan of T Greater New York, with nearly three quarters of a million members, as a mere experiment. Indeed, these plans and their continued growth has demonstrated the advantages of combining the financing and delivery - 2 mechanisms of care into a single entity. The resultant economic efficiencies and quality care in such organizations serve the consumer well. The prepayment feature offers the consumer a broad range of health care services paid for in advance at a time when they can best be afforded. It was no wonder, then, we were heartened at the enactment of the Health Maintenance Organization Act of 1973. This commitment of support for independent, financially viable HMOs came as good news to us and, more importantly, generated an interest in HMOs by all sectors of the American economy concerned with the spiralling costs of health care. As a result, American business, insurance companies, consumer groups, labor and providers have in varying degrees evinced an interest in the development of Health Maintenance Organizations. Unfortunately, as with any new federal program, there are a number of problems with the HMO program which have retarded their development, including restrictive provisions in the Act, lack of sufficient funding, and difficulty in administration of the program. We are confident that the amendatory legislation now before the Congress will, if adopted, solve most of these problems and HMO's will then be able to experience their anticipated growth. Mr. Chairman, we believe that Health Maintenance Organizations should play a key role in any national health insurance scheme adopted by the Congress. We believe the Congress, and this Committee in particular, should ensure that HMO's are included in any national legislation in a manner that will allow their growth under any national health insurance plan adopted. We do not ask for special treatment or special exemption. We do ask that those |