Mr. WORTMAN. As stated in the Program Regulation Guide, MSAPRG-31, part 7-71-20C, which is made mandatory as sighted in the Code of Federal Regulations, 45:250.90 (b):

Access to the system in all of its aspects, including design, development, and operation, including work performed by any source and including cost records of contractors and subcontractors shall be made available by the State at intervals deemed necessary by the service to determine whether the conditions for approval are being met and to determine its efficiency, economy, and effectiveness. Failure by the State to provide for full access to all parts of the system by State and Federal representatives shall result in termination of payment for 90 percent and 75 percent Federal Financial Participation for the system.

There is a staff within the Social and Rehabilitation Service that is responsible for continual review of State systems activities during the developmental stages.

TIGHTENING REIMBURSEMENT POLICY

Mr. MICHEL. In your testimony last month. Dr. Weikel, you said that HEW must "write stronger regulations if the inflated charges are to be forbidden under our reimbursement policy," and that "stronger legislation holding the States more accountable for compliance with regulations would help to enforce these new and more specific regulations." Are you going to write stronger regulations, and what specific legislation would be helpful in this regard?

Dr. WEIKEL. Regulations are being written, and the first draft is near completion.

TITLE XIX AND BLOCK GRANTS

Mr. MICHEL. What will the impact of the President's block grant proposal be on the medicaid program? For instance, would we be telling the States: "We will be giving you only so much for medicaid, so you better tighten up your administration of the program, because if you don't, you can't come running to us to bail you out"?

Dr. WEIKEL. Clearly one of the advantages of the present block grant proposal is to provide to the States an added incentive for increased managerial efficiency. It should be noted, however, that the present proposal does in fact call for increments of $500 million per year of the total block grant.

Mr. MICHEL. Conversely, if the States do act to tighten up, that could free up substantially more funds for other health services, could it not?

Dr. WEIKEL. That is correct. In a program such as medicaid, where considerable dollars are wasted due to overutilization, fraud, and abuse, and simply lack of management across the entire gamut of program activities, increased managerial efficiencies and more effective program direction might indeed lead to considerable savings which in turn could be applied to other health care needs.

Mr. MICHEL. This should be a pretty good incentive to induce the States to act, should it not?

Dr. WEIKEL. We would certainly hope so.

ILLINOIS MEDICAID PROGRAM

Mr. MICHEL. Where would you rank the Illinois Public Aid Department on a scale of 1 to 50 among all the States-is it one of the worst as far as performance is concerned?

Dr. WEIKEL. Since we do not have sufficient staff to make such an assessment of each State's relative performance in the multitude of areas relating to administration of the medicaid program, it is impossible for me to give you such a ranking. I think it is fair to say, however, that Illinois has had some problems, not the least of which has been the most recent revelation about the clinical labs done by the Sixty Minutes program a few weeks ago.

Mr. MICHEL. In January, Acting Regional Commissioner Clyde Downing rejected the Illinois Department of Public Aid proposal to revise medicaid reimbursement rates. There have been reports that the State is not complying with this rejection. Do you have any information in this regard?

Dr. WEIKEL. Actually, the issue regarding the Illinois Department. of Public Aid proposal is not one of rejection. The proposal could not be approved because it did not contain sufficient information on which Mr. Downing could make such a judgment.

On November 7, Mr. Downing asked Mr. Trainor for additional information regarding the proposal. Mr. Trainor replied on December 17. On January 8, Mr. Downing informed Mr. Trainor that the information supplied still was not sufficient and that the IDPA must continue to reimburse providers for inpatient hospital care, including the review of requests for interim rate adjustments under the provisions of the present approved State plan for title XIX.

Recently, Mr. Trainor filed suit against this Department requesting injunctive relief. We understand that the State has established the medicaid rate review commission. The Secretary has asked Mr. Downing to review the functions of the commission and inform the Secretary whether there is, in fact, a question of compliance to be resolved. Mr. Downing, at this time, does not believe that the establishment and the functions of the rate review commission raise a compliance issue. Mr. MICHEL. Is the State making any effort to revise its proposal to meet Federal objections?

Dr. WEIKEL. Not to our knowledge.

Mr. MICHEL. The President of the American Medical Association claims that the State of Illinois is dragging its feet in investigating fraud in the medicaid program. Is he right in that observation?

Dr. WEIKEL. Many of the States have just begun to develop medicaid fraud control programs. This developmental process may be the basis for the charge of "foot-dragging" in Illinois. In addition, there have been a number of audits of the medicaid program done in Illinois. In some cases the State has been slow to implement audit recommendations.

Mr. MICHEL. Apparently the State refuses to reveal the names of the physicians involved in the lab kickback scandals. Do you have any ideas as to the reasons for this apparent coverup?

Dr. WEIKEL. The only reason we could understand is the protection of the confidentiality of the names during an investigation for law enforcement purposes.

NEW YORK CITY HOSPITAL CORP.

Mr. MICHEL. The New York City hospital system was recently criticized by the State of New York as being a "maze of bureaucratic inefficiencies from which there is no exit." How much Federal medicaid money goes to that hospital system?

70-159 - 76 - 4

Dr. WEIKEL. The Health and Hospital Corp. handles municipal hospitals in New York City. In fiscal year 1974, $170,605,000 of Federal dollars went into the hospital system. In fiscal year 1975, the amount was $203,700,000. In the first 7 months of fiscal year 1976, $115,100,000 of Federal money has been spent.

HOME HEALTH AGENCIES

Mr. MICHEL. You have developed a set of regulations that would basically allow profitmaking home health care agencies to operate and receive medicaid payments without a State license. Where do they stand at present?

Dr. WEIKEL. The regulations are being reviewed in the Office of the Secretary.

Mr. MICHEL. Do your regulations also provide guarantees that these agencies will provide good care and will not seek to rip off the Government? The word I get is that the regulations are silent on reimbursement controls, certificates of need, staffing patterns, and supervision requirements.

Dr. WEIKEL. The Department recognizes a very legitimate concern among a number of interested parties, particularly in light of the abuses perpetrated by some profitmaking agencies in the nursing home field. To lessen the possibility that these results will ensue, the Social and Rehabilitation Service would make home health services one of its four top priorities for monitoring against fraud and abuse and would assist States in establishing effective systems for this purpose.

As a result of the large volume and degree of interest expressed in the proposed regulations, the Social and Rehabilitation Service convened a meeting in November of the major home health groups, State representatives, consumer organizations and staff of the Senate and House Committee on Aging. Fourteen representatives attended and participated in a thorough review of all of the issues and concerns expressed during the public comment period.

Final regulations with respect to home health services are still under discussion and review in the Department and you may be assured that the proprietary agency issue, and questions with respect to staff supervision, utilization control, review and evaluation controls and procedures for provider certification will be thoroughly addressed and considered before any final decisions are made.

Mr. MICHEL. What is the justification for making it easier for these agencies to get medicaid payments? I have long been an advocate of free enterprise in this country, but there have been experiences when the profit makers rely on Government benefits for much of their income and abuses have occurred. We have seen some of this with respect to nursing homes and also with regard to proprietary schools and the guaranteed loan program.

Dr. WEIKEL. A Notice of Proposed Rule Making for home health services under the medicaid program was published in the Federal Register of August 21, 1975 (40 FR 36702), revising existing regulations on the provision of home health services under State plan for medical assistance title XIX. Social Security Act. The purpose of the proposed revisions was to remove certain restrictions and ambigui

ties which prevented full realization of the benefits of such services. The basis for the proposal was the Department's desire to increase the availability of home health services to medicaid recipients and to encourage their use in appropriate cases as one alternative to institutionalization.

In the summary, the proposed revisions would:

Permit certain types of qualified health service agencies, in addition to those which meet medicare standards, to provide home health services under medicaid programs;

Prescribe the standards which those agencies must meet, which parallel those for medicare but are appropriately adjusted for differing needs under medicaid;

Permit proprietary agencies to participate if they meet the standards, subject to any licensing law of the State;

Clarify that States must make available under the State plan the three main types of services needed in home care: nursing, home health aid, and supplies and equipment, and also permit them to provide various therapies as home health services; and

Clarify the medicaid recipients to whom home health services must be available, specify the requirements for a physician's determination of medical needs recorded in a plan of care and periodically reviewed, and clarify that medicare requirements relating to need for "skilled" care or to post-hospitalization do not apply under medicaid.

Nearly 1,300 comments were received from a broad range of interested parties: Members of Congress, private citizens, national health and welfare organizations, consumer and senior citizen groups, public and private providers and provider organizations, State and local agencies, et cetera. The comments themselves represented a broad range of opinion from approval of the changes to strong objections in whole or in part. Evidence of widespread interest was also presented by holding of public hearings on October 28, 1975, by subcommittees of the Senate and House Committees on Aging, and by the convening of an all-day session on the major issues to which the Department invited State, congressional, consumer and provider representatives.

The greatest controversy arose over the proposal to drop from medicaid the restrictions on proprietary agency participation applied by statute under medicare, thus allowing their participation in the medicaid program on the same basis and under the same standards as nonprofit agencies.

Under medicare, for profit agences may qualify as home health providers only if licensed by the State, however if the State does not have a licensing law, they may not be certified under the program. This provision, statutory for medicare, has been adopted by regulation for medicaid. The Department's proposal would allow proprietary agencies to qualify as medicaid providers if they met the standards prescribed in the regulations; however, States could still require licensing if they wished. Comments indicated primarily (a) a misunderstanding that States could not continue to regulate home health agencies, and (b) a strong concern that proprietary agencies would not provide quality services, since their overriding interest is in returning a profit to their owners or stockholders: that they would employ inadequately trained and supervised staff, which might lead to patient abuse; and

that they would "corner the market" of paying patients, thus driving out of business voluntary agencies which depend on payment from some percentage of patients the net result leaving poor persons refused services by the profitmaking agencies and deprived of any other source of help. Also, some of those basically in favor of allowing for-profit agencies to participate expressed concern about the Federal and State capacity for monitoring and standards enforcement.

With respect to State licensing laws, the regulations do not limit State action-States are free to require licensing and to establish standards higher than the Federal requirements. They may also impose certificate-of-need requirements and other procedures designed to control the establishment and operation of home health agencies. What the regulations do is to establish Federal standards which all agencies must meet. Additional requirements are then properly a matter of State legislative and regulatory action.

Mr. FLOOD. Mr. Michel.

MEDICAID AND OTHER SRS ISSUES

Mr. MICHEL. I understand that SRS recently paid an Illinois claim of $240 million, which it is now seeking to get back. Is that true, and if so, what is it for and what is the problem?

Mr. WORTMAN. We deferred payment of claims for expenditures under title IV-A Social Services in the amount of about $57 million for the period January 1, 1975, through the effective date of title XX, October 1, 1975. These claims are questionable in terms of whether the services provided were in accordance with the law and regulations. These deferred claims are similar to claims which were paid for the period prior to January 1, 1975, totaling about $188 million, which are also under consideration.

Mr. MICHEL. I am happy to yield at this juncture.

GAO SURVEY ON MEDICAID-MEDICARE COSTS

Mr. FLOOD. Mr. Shriver?

Mr. SHRIVER. The human resources task force of the Budget Committee, on which I also serve, received a GAO report on the rising costs of medicaid and medicare, and the Department's efforts to control those costs over the last decade.

Are you familiar with that report?

Dr. WEIKEL. Yes, sir.

Mr. SHRIVER. There were some 83 recommendations in the report, some to the Congress and some to the Secretary of HEW. The general observation of GAO was that HEW has often been slow in implementing by regulation laws passed by the Congress to help control medicare and medicaid costs.

Would you comment on that?

Dr. WEIKEL. I think there clearly have been situations where the Department has been slow to implement various recommendations. I think in the area of medicaid, in general, that there is need for a great deal more management expertise, tighter control of the program at both the Federal level and State level. I think we are proceeding to do that, but not nearly as rapidly as some of us would like.