MEDICAL ASSOCIATION OF GEORGIA, Senator HERMAN E. TALMADGE, Russell Building, Washington, D.C. DEAR SENATOR TALMADGE: Thank you for the opportunity offered the Medical Association of Georgia to present written comments on your bill, S. 3205. Let me begin by saying that we are in general agreement with and are in support of the statement presented by the AMA in its testimony before your subcommittee. I would particularly like to bring to your attention three areas which the MAG feels are of special concern to our members. First, in Section 20, we are quite concerned with the proposed criteria for determining reasonable charges for physicians' services. We cannot understand how physicians can be expected to react favorably to this change which imposes on them a reduction in the current reimbursement level of Medicare. This change would adversely affect not only the physician but the Medicare patient. Additionally, in this section there is an expressed concern for obtaining more physicians in shortage areas; however, we cannot accept the provision which is suggested to achieve this end. Under this provision physicians already practicing in shortage areas would be discriminated against while new physicians attracted to the area would benefit from special consideration. We reject any contention that new physicians coming into an area are greater community assets than those physicians who without the benefit of governmental induce ment had already selected a "shortage area" and established their practice. This is not to criticize inducements as a valid means by which to improve physician availability in "shortage areas" but rather we submit that such inducements should be used on a non-discriminatory basis as a means to retain those practicing in "shortage areas" as well as attract new practitioners to these communities. It may be of interest to you to know that an MAG committee, the Committee on Third Party Relations, has been involved in investigation of the use of UCR (usual, customary and reasonable), as a basis for reimbursement. As this committee develops its recommendations, we would be pleased to make them available to you and your subcommittee. Second, in Section 21, a drastic change is made in the basis for participation by physicians in Medicare. Rather than increase the number of physicians accepting assignment, the MAG feels that this section would have the opposite effect. We can understand your subcommittee's concern for reducing the costs and burden placed on Medicare patients by having a greater number of physicians accepting assignment. However, this change undermines the basic principles under which the Medicare Program was established. The physician has always had the choice of accepting or rejecting Medicare reimbursement on an individual patient basis. This freedom of choice is destroyed under this new procedure. We see no necessity for physicians entering into this kind of agreement suggested in this section. Under the current assignment method, the physician may choose to accept some patients under Medicare assignment because of their financial situation or other reasons. On the other hand, he may not accept assignment from some patients recognizing their capability to pay fully for their services and then await Medicare reimbursement. As far as the inducement offered to the physicians in becoming a provider, we would earnestly suggest that Medicare consider implementing procedures, such as multiple listing billing immediately in the interest of improving the administration of the program. As you well know, fewer and fewer physicians are currently accepting assignment from Medicare because of the unrealistic rate of reimbursement. If it were possible to compensate those participating in the program on a current basis rather than using two year old data and if it were possible to improve the administration of the program by providing reimbursement in a timely manner and by making the processing of claims more efficient, it might very well be possible to increase the number of assignments accepted in Medicare without the enactment of this section. Third, a most important change is provided for in Section 22 entitled "Hospital Associated Physicians". While we recognize that there have been some abuses in the Medicare Program, we fail to see why the vast majority of hospital based physicians must be punished and their practice habits limited by this provision. In addition to the concern we have for the imposition of these limita tions on certain physicians inherent in the bill there seems to be an opportunity for bureaucrats to expand its meaning to all physicians. The use of the terms "physician's services", "personally performed", "personally directed" and "of such a nature that its performance by a physician is customary and appropriate" would wreck havoc in a physician's practice as we know it today and as it will develop in the future. As you well know, medical practice depends a great deal on utilization of ancillary personnel (nurses, physicians assistants, medical assistants, etc.). The use of these individuals is essential to a physician who is striving to provide quality care to increasing numbers of patients. We believe that this section of the bill threatens the use of physician extenders by physicians not only in hospital based practice but in private office practice as well. I hope that you will find these comments of benefit to you and your subcommittee. If I can offer any further assistance, please feel free to contact me. Sincerely, FLEMING L. JOLLEY, M.D., President, Medical Association of Georgia. U.S. SENATE, COMMITTEE ON FINANCE, Washington, D.C., August 11, 1976. Hon. RUSSELL B. LONG, Chairman, Senate Finance Committee, DEAR RUSSELL: I have been requested by a Mr. Sandford Brandt of the National Association for Mental Health, Incorporated, to insert my introductory remarks to S. 3708 into the official record of the S. 3205 hearings. I would appreciate it if you would make the enclosed statement on S. 3708 a part of the official hearing record. Thank you very much for your cooperation. Enclosure. [From the Congressional Record, July 29, 1976] BILL BROCK. SENATE (By Mr. Brock) S. 3708. A bill to amend title XVIII of the Social Security Act to include community mental health centers among the entities which may be qualified providers of services for medicare purpose, to redefine terms used in such title so as to reflect such inclusion. Referred to the Committee on Finance. LEFT HAND, RIGHT HAND AND MENTAL HEALTH Mr. BROCK. Mr. President, time and time again we see two congressional committees or two administrative agencies come out with conflicting regulations. Some of these are understandable, for example an agency concerned with productivity is bound to have conflicting ideas with one concerned with environmental problems. These are problems that must be worked out and I can understand and appreciate that kind of problem. What I do not understand, however, is how one committee and agency of HEW can encourage the establishment of something as important as community mental health centers, with Federal funds, while another agency and committee say that service cannot be reimbursed with Federal funds. Congressional and administrative support for community mental health centers goes back to at least 1963 when Congress passed the Mental Retardation Facilities and Community Mental Health Centers Construction Act (P.L. 88164). Throughout the years, congressional support has been strong. Two years later, the act was amended by Public Law 89-105 to provide for matching funds for staffing of these centers. The law was further amended to extend the length of staffing grants support (P.L. 90-31), then to give special consideration to programs serving poverty areas (P.L. 91-211) and then to all centers in meeting the special needs of alcoholics, drug abusers and children (P.L. 90-574). Finally and most germane to the problem, Congress mandated in Public Law 94-63 that community mental health centers serve the elderly. 75-502-76- -37 What is the problem? The problem is that although both Congress and the administration agree that the Community centers should serve the community and then collect as much money as possible from third party providers, another agency has restricted the flow of third party funds from one of the largest programs-medicare. This is particularly sad since most of our elderly Americans only have medicare coverage. The administration has promulgated regulations and policies that severely restrict center reimbursement under medicare, but the fault is not all with the administration. Another problem is that four different House and Senate committees have jurisdiction over CMHC legislation and medicare programs and they have also failed to correct this injustice. The bill I am introducing today is to correct this obvious discrepancy of having the Federal left hand aiding the community mental health centers while the Federal right hand says that they cannot be reimbursed with Federal funds. My bill simply states that qualified community mental health centers with qualified persons would be allowed to be reimbursed for their services from medicare. It is time that the Federal left and right hands got together in this vital area of concern-mental health. STATEMENT OF EDWARD J. WILSMANN, PRESIDENT, HOMEMAKERS HOME AND HEALTH CARE SERVICES/DIVISION OF THE UPJOHN Co. I'm sure the Committee is interested in both management and reimbursement reform in the Medicare and Medicaid programs. Therefore, why has it ignored new developments in the field? Medicare expenditures for home health have tripled in the past two years. There are eight and one-half million disabled people in America who are not now institutionalized. Our elderly population of twenty-two million is increasing at the rate of one thousand daily. We now have study after study proving the medical desirability of home health care and the benefits of its cost effectiveness. A home health care delivery system has tremendous potential for immediate cost savings. Yet, as you know, the program, as currently defined under Medicare, is stifled by a lack of providers and by restrictive definitions which tie the service to acute care and the so-called non-profit agencies. We now have a home health scandal among the non-profit providers—a history of abuses unearthed by Senator Chiles and now being followed up by the House Ways & Means Committee. Congress waited until clinical laboratories became deeply embroiled in fraud and abuse before it attempted to pass federal licensure standards. Is the Congress going to wait until there is a major scandal in home health before it mandates state licensure standards? Mr. Chairman, we all know of the hysterical overreaction and objection to the Social & Rehabilitation Service's proposed regulations that attempted to correct these problems. Yet, Mr. Chairman, you propose no legislative changes to correct them. It seems to us that it's high time Congress listened to the facts. For several years, we have been calling for preventive care as the key to maintenance of the health of the aged. It's time that Medicare took a look at what some of the States are doing with home health care in their Medicaid programs. If the Committee considers home health care when it revises S. 3205, I am sure it will find that a few simple administrative changes would have farreaching, healthy effects on institutional overutilization and costs. Our suggested legislative changes are enumerated elsewhere in this testimony. Homemakers Home and Health Care Services is submitting testimony for the record on S. 3205 because we also believe the Committee ought to know about the ramifications of current institutional problems with Medicare and Medicaid which affect non-institutional providers. Homemakers Home and Health Care Services is a wholly-owned subsidiary of The Upjohn Company, headquartered in Kalamazoo, Michigan. HomemakersUpjohn is the largest single supplier of home health care in the nation, presently operating 217 home health agencies located across the country. With over 53,000 employees nationally, Homemakers-Upjohn rendered in excess of twenty million hours of necessary services to people at home in 1975. All of the 2,209 Medicare-certified home health agencies combined employ fewer than 30,000 people. Homemakers-Upjohn can be certified for Medicare participation only in those states which license home health agencies. This is so by statute, solely on account of the company's tax-paying status. Only sixteen states currently license home health agencies. Consequently, Homemakers-Upjohn operates primarily in the private sector and provides health care without a license. Homemakers-Upjohn has, of necessity, established its own standards of performance and quality since both the federal government and the individual state governments have abrogated their responsibilities in this area. Homemakers-Upjohn operates a health care delivery system which provides supportive services to the home and to health care institutions at the lowest possible cost commensurate with quality. It is in the vanguard of organizations seeking to relieve the critical lack of qualified personnel which confront most hospitals and nursing homes, while also restoring personal dignity and care to the patient in his own home when appropriate. Over the long range, home health delivery can lower hospital and nursing home utilization by allowing for early release from the institution, or even preventing and delaying entry to it. Your concerns about the incredible upward push in hospital costs must not blind you to the fact that the other segments of the health care industry are also experiencing extreme cost problems. In the home health industry there is a wide disparity in cost-per-unit of home health services among agencies-$15.00 to $45.00 for a physical therapy visit, for example, in Florida. In fact, we are concerned that S. 3205 does not recognize long term care costs, especially with a rapidly increasing elderly population (currently at twenty-two million and going up by one thousand per day), bearing in mind that over one-third of Medicare and Medicaid expenditures go for nursing homes. Perhaps we ought to consider pulling long term care out of Medicare, Medicaid, and Title XX and build a separate program with its own legislation, funding, and regulations. The reforms outlined in S. 3205 attack the effects of the problems, not the causes. In reacting to current fraud and abuse problems, S. 3205 does not delineate reforms aimed at preventing future abuse and it ignores the structural reasons for the current fraud and abuse. It is time that Congress recognized that the real culprit in the Medicare and Medicaid programs is the reimbursement system created by the health industry's insurance structure. Certainly if S. 3205 recognized that and dealt with it, while mandating a significant expansion in home health preparatory to building a rational national health insurance structure, Senator Talmadge's bill could become landmark legislation. I. THE FUNDING MECHANISM Here's where the problem starts: the Webster definition of "insurance" is "a system of protecting against the risks of individual loss, by distributing according to the law of averages the burden of losses over a large number of individuals." Robert M. Ball, former Commissioner of the Social Security Administration, said, "When some form of universal coverage is enacted-and sooner or later it will be-we'll certainly draw on our experience in covering people over 65. If we don't use the time between now and then to correct what we've been doing wrong, we'll risk enlarging Medicare's mistakes. "Time's running out to correct its (Medicare's) flaws before they solidify in a comprehensive national health insurance plan." Commissioner Ball's admonition must be heeded much more urgently today than when first made in 1974, this being an election year when anything could happen on the national health insurance scene. Since hospital costs have risen more rapidly than any other segment of total medical costs, it is only natural that the Committee's primary attention should be focused here in an attempt to uncover the flaws in the nation's health care delivery system's payment mechanism. The first clues to unravelling this tangle come from the very people who performed on an out-patient basis. That means it can be done in a doctor's office or in a clinical lab-not just solely in the hospital. This experimental coverage is being offered to two-thirds of the Blue's eighty million subscribers.1 It is 1 April 19, 1976 Medical Economics, page 14. coupled with coverage for another "patient benefit" (not a "provider benefit")— second and third consultations when surgery is indicated. This represents another potential saving of hospital days and unnecessary surgery. If we can save four days of hospitalization because of one small change in coverage, imagine what could be done if we got rid of barriers to "coverage by location" entirely. The coverage should read that the insurance will pay for whatever care is needed in the most economical location that can deliver it. There should be no restrictions on where a service can be delivered; that's a provider benefit. Let's make health insurance real insurance. Let's go beyond pre-admission testing and go for the most economical modality that fits the situation. Let's get out from under the shackles of institutionalization. Three or four years ago it was estimated that if we could save one day of hospitalization for every patient we could save the health economy $100 million a year. It is estimated today that if we could save one day of hospitalization for every patient we would save the health economy $300 million. Artificial barriers to delivery are not just artificial but also expensive! What we need is a comprehensive benefit package covering human ailment. We must remind you that we have been talking all this time about acute care. Again, this is what the Blues pay for it's what the private insurance companies pay for-and it's what Medicare and Medicaid pay for. In that sense, the demand for services has been created by the supply of funding. We will discuss long term care later in this testimony. 2. THE REIMBURSEMENT STRUCTURE From page 21 of the Council on Wage and Price Stability report, "Most advanced medical technological change is centered in the hospitals-where ninetytwo percent of expenses are paid by third parties, who usually pay on a cost reimbursement basis. Decisions as to the purchase and utilization of advanced technology thus need not turn on considerations of cost and efficiency." (Emphasis added.) With third party payors covering 67.4% of personal health care expenditures, 92.0% of hospital expenditures, and 65.5% of doctors' charges, it is fair to say that "decisions as to the purchase and utilization of services thus need not turn on considerations of cost and efficiency." The Council's report questions incentives for efficiency. Here's the nub of it. THE COST-PLUS METHOD of REIMBURSEMENT IS THE GREATEST INCENTIVE TO INEFFICIENCY EVER PERPETRATED ON ANY INDUSTRY! It is the single most important reason for the high costs of health care. The cost-plus method is based upon the "bricks and mortar" philosophy of institutional care. Again, the institutional bias has inappropriately influenced all of the health field. A lot is being said these days about prospective reimbursement methodologies. We don't believe that it makes any difference other than in the cash flow of the institution which method you use-retrospective or prospective. The central issue is still going to be what you factor in as reimbursable items; in other words, costs. A prospective reimbursement system might save dollars for a couple of years until the institutions learn to play the "budget game," and then we'll be right back where we started. For example, in 1954 the IRS, in response to several court decisions, determined that contributed assets to a profit-making institution were non-tax deductible. Here's what this means. If $10 million is donated to a proprietary facility: 1. The donor may not deduct the contribution from his taxable income; 2. The facility may depreciate the $10 million asset as a cost factor that would be reimbursable for services delivered under the Medicare program;' 3. The facility may not deduct this depreciation from its taxable income: and 4. As a result of the income generated by the depreciation cost factor rendered, the facility would pay the United States government approximately $4.8 million in corporate taxation over the life of the asset. If $10 million is donated to a non-profit facility. 1. The individual donor can take a tax deduction. On a $10 million donation, it is more than fair to say that approximately 50% would be deductible (that is a mean between the 70% tax bracket donors and the 0-20% individual donors with corporate contributions in the middle at 48%). In other words, the government, right off the top, is losing $5 million in taxes or, in effect, is contributing $5 million of the original $10 million donation. 2 The Bureau of Health Insurance's cost reimbursement formula allows depreciation expense to be included for both not-for-profit and for-profit institutions regardless of how the asset was acquired. |