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As I understand it, Mr. Chairman, your subcommittee has already heard from many medical experts and others who believe that older Americans are major victims of present deficiencies in our health services.

Medicare after all, merely helps pay for hospitalization. It has little to do with the fundamental organization of health services. And it is because of deficiencies in organization that costs continue to increase.

Isn't it wasteful, for example, to require individuals to cross entire cities by bus in order to get an X-ray or some kind of laboratory test, when neighborhood health centers could provide one-stop service more efficiently?

And who suffers most from shortages of physicians or other health professionals? Those with limited income, and we should know by now that the income of most persons past 65 is just about half of what they earned before they had to retire.

I am sure that the subcommittee has many other questions to ask, and I will not delay your deliberations any longer. Senator Smathers, you have begun a challenging and very worthy inquiry. I wish you well.

Senator SMATHERS. Thank you, Senator Williams. Before we have our first witnesses, I would like to say that we are pleased and honored to have with us as a consultant to the committee, Dr. Austin Chinn, previously the dean of the medical school at Cleveland, and who has a distinguished career in the Public Health Service. He is now a consultant for this committee.

We are delighted to have him and we want all you doctors to know that we Senators have somebody up here telling us what really is the truth, too. So be careful.

Our first witnesses will be a panel representing Secretary Gardner and the Department of Health, Education, and Welfare. Gentlemen, we are delighted to have you here this morning so early and looking so bright, intelligent, and alert. You may proceed.


Dr. Silver. We appreciate the opportunity to appear before you to discuss some of the aspects of costs of delivery of health services to older Americans.

Mr. David, the assistant commissioner, will discuss the progress of the medicare program and Dr. Wagner, director of the Bureau of Health Services, will comment on the role of the Public Health Service in improving the delivery of health services for the aging.

Dr, Jeffrey Weiss, operations research analyst, who was actively engaged in preparing the report to the President on medical care prices, is also available.


Mr. Chairman, the President in his message on older Americans in January of this year, stated, “One of the tests of a great civilization is the compassion and respect shown to its elders.” One of the ways that we can demonstrate this compassion and respect is by providing comprehensive, continuous, and personal health care to older Ameri

Prior to the enactment of medicare, millions of our older Americans were unable to obtain needed medical care. Now much of this care is being provided, but at the same time medicare has pointed up some of the very grave problems of cost and the delivery of health services which we were not, as a nation, so fully aware of before. The report to the President on medical care prices showed the serious problem we are facing in this matter.

As to delivery of services, a major thrust of the most important administration health bill this year is health services research—“how to bring a greater degree of coordination and efficiency and productivity into the whole health area” as Under Secretary Wilbur J. Cohen put it when he testified in the House Interstate and Foreign Commerce Committee on the partnership for health bill. He made the statement that though we are spending $43 billion annually for health and medical care, our system of providing health services is not operating as efficiently and effectively as it should, and though the public has an enormous stake in good health services the Government-wide total investment in health services research amounts to less than one-tenth of 1 percent of our total investment in health care.1

Mr. Chairman, you and your subcommittee, through these introductory hearings and those which will be held throughout the Nation, are performing a public service, alerting all of us to the potential dangers to the health of the whole public, not only to the aged, from rising costs and inefficient delivery of health services.

Now, Mr. Chairman, I would like to highlight for you the major point contained in a document before you updating the report on medical care prices.

In recent years medical care prices have been rising faster than consumer prices generally. However, the 1966 increases in medical prices were the largest in many years. In 1966 the index of medical prices increased 6.6 percent as

compared to an average increase of 2.5 percent in the period 1960–65. Hospital daily charges which have been rising about 6 percent per year between 1960 and 1965 went up 16.5 percent in 1966. Physicians fees which had been increasing about 3 percent per year in the period 1960-65 rose 7.8 percent in 1966. Drug prices have not been a major factor in rising medical prices.

In the first quarter of 1967 the rate of increase in medical care prices continued at about the same pace as in the last quarter of 1966. They rose 2 percent in the first quarter of 1967.

While physicians' fees continued to rise at about the same rate as in 1966, hospital daily room rates have continued to rise at a rapid rate, up 6.1 percent in the first quarter of 1967.

INCREASES IN PHYSICIANS' FEES The available evidence suggests that medicare has not had a significant effect upon the recent acceleration of the increase in physicians' fees. Although medicare will increase the use of physician services by the elderly, the impact of medicare upon the total demand for physician services is likely to be on the order of 2 percent.

1 Statement by Under Secretary Wilbur J. Cohen on p. 193.

In the past physicians' fees have tended to increase faster when other prices in the economy were increasing rapidly as they did in 1966. If the anticipation of medicare was a factor underlying fee increases, it would be expected that the fees charged the elderly would move up faster than fees charged younger patients in the period before July 1, 1966.

A special analysis by the Social Security Administration showed, however, that the price indexes for child and adult care moved up more rapidly during the 6-month period before medicare went into effect than the five special indexes of surgical and medical procedures particularly applicable to aging persons. In the absence of medicare the 1966 acceleration in hospital costs would not have been surprising. Rising prices in tight labor markets were bound to exert pressure on those costs.

Further collective action on the part of nurses became more predominant in 1966. Several nurses' strikes took place in major cities throughout the country. Thus hospital payroll per employee went up 9 percent in 1966 in contrast to an average of 4.7 percent per year between 1960 and 1965.

The influence of medicare on hospital charges probably came primarily through the impetus it provided hospitals to reexamine their cost and charges. It is likely that many hospitals decided to increase their charges sooner than they otherwise would have in the absence of medicare.

After an initial upsurge in hospital admissions in July and August of 1966 the number of hospital admissions for the balance of 1966 was not significantly different for the comparable months of 1965. Higher occupancy rates and numbers of admissions to hospitals would be expected to lower, not raise, hospital costs per patient day, although average hospital cost per patient day increased from about $45 in January of 1966 to $52 in June 1966, hospital costs per patient day actually declined slightly during the period from June to November 1966.

Therefore, the increase in the demand for hospital services attributable to medicare was probably not the most important causative factor influencing the recent acceleration in hospital charges.

CONFERENCE ON MEDICAL Costs In that document that you have before you there is also a brief description of the forthcoming conference on medical care costs to be held next week which will examine this and many other problems.

I have in my hand also a copy of the report 2 of medical care prices which you have before you, I believe, and you may insert whatever

1 portions you choose in the record.

Senator SMATHERS. The Department prepared this report?
Dr. SILVER. Yes, sir.

Senator SMATHERS. All right. We will insert it into the record as part of the appendix.

* The report begins on p. 319 of the appendis.

(Subsequent to the hearing Senator Smathers wrote to Dr. Silver for additional views. The reply follows:)


Washington, D.C. DEAR SENATOR SMATHERS : The questions raised in your letter of June 30, 1967, have been carefully reviewed. The conference summary, and a few sig ficant papers presented there are attached.

in reply to question #2, although specific plans for the operation of the Center are not yet fully developed, the National Center for Health Services Research and Development will be concerned with the whole spectrum of health services to all patient population groups. As such, the Center will necessarily de vote substantial attention to the specific health needs of the aged and to patterns of health services necessary to meet those needs.

It is well known that the health needs of the aged are essentially the same as those of the general population. But specific social and psychological circumstances associated with aging mean that the delivery of services to the aged must take special forms. The Center will explore possibilities in the development of specialized health personnel-as well as sufficient personnel of traditional types—the organization of services, and rearrangement of institutional settings for the aged.

In reply to question #3, Under Secretary Cohen's testimony on H.R. 6418 is attached.

In response to question #4 in your letter of June 30, 1967, I should point out that my statement of June 22, 1967, to the Subcommittee on Health of the Elderly did not explicitly discuss the effect of the 1966 rise in physicians' fees upon total medical expenditures. Instead, I addressed my comments to the question of the impact of the recent rise in physicians' fees upon the elderly. With respect to that, I stated as follows:

“The recent acceleration of the rate of increase in physicians' fees has not significantly affected the elderly. The coinsurance provisions of Medicare have blunted the impact of these price rises.

"However, this conclusion relates to physicians' customary charges—the fees the physician charges to most of his patients for his services. As of July 1, the average fees of physicians, and their incomes, have increased because of the payments of customary charges under Medicare. Many elderly persons previously were paying charges lower than the customary charges of physicians.

“Therefore, many aged persons, although the exact number is not known, will now find that they are being charged more for a given service, since their physician is now charging them the same fee he charges to the majority of his patients. This anticipated development will primarily affect those elderly persons who spend less than $50 on the medical and other health services covered by Part B. of Medicare."

The 6.6% rise in physicians' fees in 1966 will have a significant effect on total medical expenditures. Since consumer expenditures on physician services account for nearly 30% of total consumer expenditures on health care, the rise in physicians' fees in 1966 has resulted in about a 2% rise in total medical expenditures.

Further, I would like to take this opportunity to comment on several of the points raised by Dr. Nolen of Minnesota in his testimony before the Subcommittee on Health of the Elderly.

Dr. Nolen believes that Medicare will result in some unnecessary utilization of medical services, as well as significant fee increases by physicians since the Government is paying the bill.

These problems exist with private insurance plans and there is no reason to believe that they will be more severe under Medicare. When a patient has already paid for a substantial proportion of his potential medical bills via the private insurance mechanism, this reduces the financial disincentives associated with utilizing services which are needed. However, one of the major functions of both private insurance plans and Medicare is to insure that the cost of health services will not impinge upon the patient's decision to utilize necessary medical services.

Moreover, under both private insurance and Medicare, since the physician and his patient will not be very concerned about the immediate impact of a rise in fee

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levels, there will be a tendency upon the part of some physicians to raise their fees. As Dr. Nolen points out, however, the Medicare carriers have the responsibility for reviewing the services of physicians to Medicare patients to insure that the fees of individual physicians do not substantially deviate from their usual and customary charges to non-Medicare patients.

In summary, I believe that Medicare is fulfilling its major objectives. It has removed the financial barrier which prevented many elderly persons from seeking necessary medical services and it has resulted in an upgrading of the quality of medical services received by the elderly. Although some Medicare patients may seek unnecessary medical services and a few physicians may charge unreasonable fees, we must be careful not to impugn the ethical standards of the whole profession.

Now as to question #5, on physician assistants, even before the advent of Medicare the rapid growth of population, increasing affluence and rising expectations increased demands for medical care. The Department of Health, Education and Welfare is convinced that beside an increase in traditional professional health workers, there is a need for significant increase in the number and kinds of health workers who can assist physicians and other health professionals in providing health care. A variety of proposals have been made and a number of informal and some formal methods have been used to produce a group of health workers who are able to carry out functions which were formerly performed only by physicians. The training of health workers has been done in a variety of settings: physicians' offices, clinics, group practices, hospitals and other health agencies. Methods of training auxiliary medical workers have ranged from preparing them to carry out technical procedures to preparing such persons to carry out the more general functions of the physician including the medical interview and a screening physical examination.

At one level is the consideration of specialized physicians assistants: pediatric, obstetric, orthopedic, and so on. Several programs to train assistants to physicians have been planned or undertaken by the Department. The following are examples of such programs:

The Public Health Service is supporting, through its Bureau of Health Manpower, a program for the development of an orthopedic technician. The Presbyterian Medical Hospital and Center at San Francisco has received approximately $100,000 for a 2-year period to develop this physicians' assistant. Six trainees per year, for this 2-year period, are being trained to assist orthopedic surgeons in surgery, on the ward, in the plaster room, and in the physician's private practice. These trainees are all ex-medical corpsmen. They will be taught the mechanics and the uses of orthopedic tables, to set suspension equipment for physical therapy work, to assist in applying and removing plaster casts, etc. This is the first of at least two or more planned variations to evolve an approved and standand curriculum for replication and the training of orthopedic technicians in educational institutions.

A second example is the 2-year program being conducted at the University of Florida for the training of a psychology assistant. The estimated cost of this program is $115,000. These students, who are college graduates, are provided with work experience and study in inpatient and outpatient pediatric service, community psychology, neurology, and obstetric and gynecology. Areas of student activities which are being studied include general and administrative activities; conducting, scoring and some interpreting of charts and graphs; assistance with library research and manuscript presentation; etc.

Thirdly, the Bureau of Health Manpower is developing with Johns Hopkins University, a 1-year project to develop a master's degree program in public health with a specialization in nurse-midwifery. Many physicians feel that more of the care of the uncomplicated maternity patients could and should be delegated to the nurse-midwife.

Consideration is being given to the development of an anesthesiologist assistant at the master's degree level. This person would work under the direct supervision of the M.D. anesthesiologist. Discussions are currently underway with Emory University, the University of Florida, and the Medical College of Georgia, regarding a cooperative arrangement for the possible development of this program.

In addition, there is a wide variety of technicians who have emerged, particularly in the hospital and clinical setting in highly specialized and specific fields. Such programs have trained auxiliaries for clearly defined specialized technical duties in institutional settings which have been successful in extending the range of the physician. This has been true of such groups as inhalation therapists and technicians, orthopedic technicians and assistants, nurses in intensive and

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