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effect of eliminating the initial $40 deductible and the $10 daily coinsurance for the 61st through 90th days was an increase in the level-cost of .14% of taxable payroll. This represents a relative increase in cost of 11%. In terms of dollars, on the basis of the present taxable payroll, .14% of taxable payroll represents about $425 million annually. It should be pointed out, however, that the cost estimates for the HI program are being revised upward so as to recognize the current trends in hospitalization costs. It would now appear that the revised cost estimates will show a level-cost that is about 20% higher than the original estimate and, accordingly, the figures given previously for this proposal to eliminate the deductibles and coinsurance provisions will be increased proportionately.

Next, considering the SMI program, the elimination of the $50 annual deductible and the 20% coinsurance provisions would result in the present cost of $6 per month (for the participant and the Government combined) being increased by about $8.25-a relative increase of almost 140%. Considering the fact that there are about 1742 million enrollees, the effect of an increase in the combined contribution rate of $8.25 per month would mean additional annual outgo from the General Fund of the Treasury amounting to about $860 million.


SIMPLIFICATION OF MEDICARE PROCEDURES FOR HOSPITALS H.R. 5710 would greatly simplify the medicare benefit structure and administration in two important areas of coverage: (1) services to outpatients of hospitals; and (2) X-ray and laboratory services to hospital inpatients and outpatients that are provided by physicians.

Hospital patients receive a broad range of services, including diagnostic and therapeutc supplies and services furnished by hospital presonnel and X-ray and laboratory services provided by or under the supervision of physicians. When the professional services are billed for by the hospital, they are customarily paid for by third parties on the same basis, and as part of the same claim, as the nonprofessional hospital services. The medicare law complicates reimbursement for hospital services and diagnostic specialty services by departing from this traditional billing and payment approach in two important respects :

a. Under the medicare law, payment for the nonprofessional services the hospital provides to outpatients is made to the hospital by the part A intermediary on a cost basis but the payment is divided between the two parts of the program: coverage is under part A subject to a $20 deductible, where the services are diagnostic in nature; and under part B, subject to the part B $50 annual deductible, if the services are therapeutic in nature. In both cases a 20-percent coinsurance applies after the deductible is met. Payments toward the $20 deductible under part A are counted as "expenses” of the patient covered by part B.

b. Payment for physicians' professional services direct to patients is covered only under part B. As a result, payment for diagnostic X-ray and laboratory procedures performed in hospitals is divided between parts A and B regardless of whether furnished to a hospital inpatient or outpatient. Under the law, the portion of the hospital's customary charges which is estimated to be attributable to a physician's services to the patient is covered under part B and subject to the $50 deductible and other part B limitations, whereas the hospital's expenses for nonphysician services to inpatients and for the physician's administrative services and his other services which benefit patients generally are covered under part A. The part B payments for the physician's services to the patient and the part A reim

bursement are made by different intermediaries. The present division of X-ray and pathology services between parts A and B makes it necessary for hospitals and physicians to agree, for medicare billing purposes, on a troublesome allocation of physicians' services into the so-called part A and part B components; and even where the hospital bills for both components, it must bill for and account for them separately under medicare. The additional work and complexity are a wholly additive administrative burden for bospitals since the charges which are established serve no purpose beyond medicare reimbursement. There are also the complications of having two separate intermediaries involved in the reimbursement of what other third parties treat as a single claim. Finally, inequities arise under present law when errors in estimating the data used in determining the charges for a hospital-based physician's service result in paying too much or too little.

H.R. 5710 would simplify administration by permitting payment for services to hospital outpatients to be handled as a single benefit, with a single rule for determining eligibility for payment, patient and medicare liability and fund accountability. Benefits for all services to hospital outpatients (including hospital diagnostic, hospital therapeutic, and physician X-ray and laboratory services) would be available to part B enrollees, subject to the limitations provided for under part B and paid from the part B trust fund.

X-ray and laboratory services to inpatients would also be handled as a single benefit. No deductible or coinsurance requirement would be applicable to these specialty services, so that where inpatient services are billed for in the form of a combined charge for physician and nonphysician services no breakdown would be required. The proposal would make it unnecessary to divide the responsibility for reimbursement for the services in question between two intermediaries where the hospital handles the billing for both the hospital and physician components. In these cases, a single intermediary could make all the required determinations on the basis of the compensation the physician receives and other costs the hospital incurs in making diagnostic services available.

Senator SMATHERS. Now, who else is to testify!

Dr. SILVER. I would like to introduce Dr. Čarruth J. Wagner, Director of the Bureau of Health Services.

Senator SMATHERS. All right, go right ahead.


I am pleased to appear before you to discuss the important questions of cost and delivery of health services to older Americans.

The Public Health Service is charged with assisting the development of quality medical care for all our citizens. Meeting that responsibility takes us into every aspect of medical care—from manpower development to facilities construction, from basic biomedical research to studies in the delivery of health services.

The health needs of the elderly are essentially the same as those of the rest of the population. But as the chairman has pointed out, age creates special social and psychological problems that frequently stand between the elderly and good health care.

My purpose this morning is to review the Public Health Service programs devoted to finding solutions to those problems.

At the outset, I would like to emphasize one major contribution of medicare to the entire health field and to the aged in particular, and that has to do with raising the quality of care provided older patients.

Providers of service have been required to meet specified standards. For extended care facilities and home health agencies, these standards were the first to be nationally recognized.

Professional organizations such as the Joint Commission on Accreditation of Hospitals and the American Osteopathic Hospital Association have been stimulated to reconsider their own standards with the aim of raising them.

States are reviewing and strengthening their licensure programs in ways closely akin to the certification process under medicare.

A special effort is being made by the Social Security Administration to assure the quality of performances by independent clinical laboratories through raising their personnel standards.

Medicare standards have provided benchmarks for determining the adequacy of care now provided by our health resources.

For example, the survey of hospitals—including both participants and those denied participation-showed that 46 percent had some deficiency and that 89 percent of the extended care facilities needed to improve their operations to meet medicare's quality goals.

With this information in hand, we developed a program of consultation and training for State health departments to assist them in their facility certification process and to equip them with sufficient technical and program know-how so they can, in turn, assist the operators of facilities in their efforts to achieve the standards.

For the elderly patient and his family, these standards and our efforts to improve them mean a growing confidence in the quality of care purchased.

MAJOR ISSUES ON CARE Beyond questions of quality lie the major issues of whether care is available, can older people afford the care, and will they use the services they need?

Central to these issues is the adequacy of our medical manpower supply. There are, as this committee knows, serious shortages in all the medical specialties. Perhaps the most significant for the elderly is the nursing shortage, where we estimate a current deficit of 125,000 nurses just to fill existing vacancies.

With the Office of Education, the Vocational Rehabilitation Administration, the Department of Labor, and with the assistance of such legislation as the Allied Health Professions Act adopted by the Congress last year, we hope to gain somewhat in the race to match medical manpower supply with the demands.

Last year, more than 35,000 nurses were graduated. More than 24,000 nurses came out of post high school programs. And approximately 20,000 hospital aides, orderlies, and attendants received entering training.

We have begun to develop another important resource in the nursing field by attempting to bring back into nursing a portion of the 300,000 licensed professional nurses in this country who are not practicing nursing

Through contracts with States, we are supporting efforts to recruit these nurses, find employment for them, and through cooperation with the Manpower Development and Training Act, offer refresher courses. Our goal is to increase the number of nurses returning to active practice by 30,000 in the coming fiscal year.

Senator SMATHERS. Doctor, let me ask you a couple of questions right there. Has there been a decline in the hospital school of nursing?

Dr. WAGNER. No, sir.
Senator SMATHERS. There has not been a decline?
Dr. Weiss. There has been a slight decline this year.

Senator SMATHERS. A rather substantial decline according to information on this side of the table.

Dr. WEISS. In terms of total number of schools there has been a substantial number.

Senator SMATHERS. Can we have you identified for the record.
Dr. Weiss. I am sorry.

My name is Dr. Jeffrey Weiss and I am an economist employed by the office for the Assistant Secretary for Program Coordination.

The total number of diploma schools has declined considerably in recent years but total output has not, that is number of graduates. However, this year, for the first time that is this fall of this academic year—there was a perceptible decline in the number of first-year entering students, a decline of about 8, 9, 10 percent, something in that range.


Senator SMATHERS. Our information is that there are 4,000 vacancies in these schools and many hospitals that had previously been running nursing schools are now closing them because there is nobody coming to school.

Dr. Weiss. That information I would say is a general trend; it is substantially correct.

Senator SMATHERS. Why is that?

Dr. Silver. There has been an increase in places in the associate degree programs; that is, the junior college programs, and in the baccalaureate programs. The total number of nurses graduating is not declining. The decline is wholly in the area of the diploma school graduates. You see, the diploma schools have very special problems.

Senator SMATHERS. Like what?

Dr. SILVER. I think young people want a college degree or they want training that will compare with college training. The people who would be teaching nurses want to be associated with teaching institutions so that hospital schools have problems in recruiting faculty and in recruiting students.

The vacancies that you describe in diploma schools are there and the fact is that hospitals are closing their schools because they cannot recruit faculty or students.

Senator SMATHERS. Is it a fair generalization to say that it is a little better status symbol to be able to say that you have graduated from a

Dr. SILVER. You have a college degree.

Senator SMATHERS. That is right, rather than having graduated from the hospital nursing school where you get a certificate, but it does not look good on the wall.

Dr. Silver. Yes. You can go 2 years to an associate degree school and become an RN or you can go 4 years and get a college degree so that it sort of preempts the 3-year schools.

Senator SMATHERS. But you can state, as the good doctor over here stated, that there is an increase in those young ladies and men who are studying to be nurses and we can expect a greater increase in nurses?

Dr. Silver. This past fall the largest number of student nurses ever entered into nurses training, about 48,000 or 49,000 students entered into training this past fall.

Senator SMATHERS. Now, even with the fact that you are increasing the number of students who are attending courses calculated to lead to a nursing degree, would you not agree that in the light of the enormous shortage of 120,000 nurses that we somehow should try to get more of the girls and boys to go to the hospital nursing schools, too?

Dr. Silver. Senator, we are not trying to keep nurses out of training, We are trying to do everything possible to get them into training. I think that one of the points that Dr. Wagner made, for example, was that by means of the nurse refresher program, which is a combined operation between the Public Health Service and Department of Labor and the Office of Education, we are trying to bring back 30,000 nurses this year, inactive-but licensed nurses which would be the equivalent of 1 whole year's graduating class.

If the Congress would give us the ceiling of the opportunity grants that were voted in the legislation last year—no money was provided, only an authority that with those opportunity grants we might provide stipends for students which might encourage more students to go into nursing. We have the authority but we didn't get the appropriation.

Senator SMATHERS. How much of the authority was allowed you? Dr. SILVER. $5 million is the ceiling. Senator SMATHERS. Passed both Houses? Dr. SILVER. The authority, yes. Senator SMATHERS. All right, sir. You go ahead, Doctor. Let me ask you one other question. I notice you talk an awful lot about nurses here. Do you get anybody to talk about the shortage of doctors!

Dr. SILVER. What should we talk about?

Senator SMATHERS. Well, I notice the American Medical Association stated yesterday, was it not, that they were alarmed by the fact that there is now a considerable shortage of doctors and they recognized it. .


Dr. SILVER. I think that there is and has been for some time a significant shortage in physicians which is ascribable to a number of factors only part of which has been the very slow increase in the total number graduated. The shortage is much more acute in some parts of the country. For example, there are almost twice as many physicians per 100,000 population in the Northeast as there are in the Southeast. Some of the conditions of life and conditions of professional life are less attractive in some areas than in others.

Most of the students now graduating from medical school go into specialty training so that the differential shortage is more in the areas of family practice and pediatrics than it is in some of the specialties.

We have to do many things to overcome the shortage and I would not consider simply producing more physicians as the essential answer. What we need to do is use the physicians more effectively to increase the productivity of doctors and to multiply their activity by providing physician assistants.

Now you mentioned, of course, sir, that more doctors are beginning to cluster together in groups which increases their efficiency and productivity. We think that this is something to be encouraged very strongly. We know that if you increase the productivity of the physicians in this country by only 5 percent it would be the equivalent of two graduating classes. This is one of the many things that we want to talk about at this conference next week; what things we are going to do to provide incentives and stimulus for more physicians to go into group practice.

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