it is not understood by the public and is sometimes mistaken to mean payment in advance. It may also be argued that "prospective rates" really are more flexible, at least when applied to hospitals, in that they include "incentive schedules" which may vary up or down within a defined range, depending on the institution's performance. But this is not a good enough reason to use an ambiguous term. The question of incentive rates versus single rates is one to be determined as part of the suggested negotiations (see below). Even if a range were adopted, rather than a single rate, the range would have to be fixed. Any misunderstanding on the point of predictable prices must be avoided.

2. Fixed rate schedules could, of course, be drawn up in various ways: unilaterally by the consumers or payors, unilaterally by the providers, or through collective negotiations between the two groups. The latter is clearly the most equitable and in line with the general trend of decision-making in highly industrialized democratic societies. A negotiated approach to rate-setting was recommended by the author as early as 1977 and has recently received new support. The choice of Prof. John Dunlop of Harvard University, an internationally respected labor economist with a strong commitment to negotiations as a basis for decision-making, as chairman of a national health coalition, announced in January 1982,50 suggests an increasingly receptive atmosphere for such an approach.

Inevitably, there will be some thorny questions as to precisely who will represent the two groups for this purpose; what changes would be needed in current anti-trust legislation; what geographic areas would be served, etc. American experience with the gradual historical development of collective bargaining law and procedures, culminating in the National Labor Relations and Taft-Hartley Acts should be helpful, as well as the experience of many other Western democratic countries with respect to the health field. In many respects, however, the American situation is unique and participants in this development must be prepared to pioneer.

3. With a field as large and diverse as health care, it should be obvious that no one method of payment will prove most appropriate. Not only will there be differences between institutional and individual providers but within each of these groups, depending on the legal form of specialization, etc. For example, a case could be made for paying hospitals on the basis of per diem rates, per case rates, single rates, incentive rates within a range, etc. In the case of physicians, the schedules could be based on fee-for-service, using relative value scales for comparative weighting, salary, capitation, or some combination thereof.

In general, it would appear that fee-for-service is probably most appropriate for specialized episodic acute care; salary or capitation for continuing primary care. But these too should be matters for negotiation. There is no more basis for accusing fee-for-service of being the major cause of the current health care inflation than for fearing that capitation will result in inadequate care. Whatever the method of payment, professional self-regulation within a context of public accountability remains the ultimate guarantor of patient protection. One of the major goals of the negotiated approach to provider payments is reaffirmation of the necessity of professional selfregulation and the development of instrumentalities to make it effective.

Other points which should be explored under this heading include nondeterrent cost-sharing, especially for long-term care, possible limits on payroll tax deductions for health insurance benefits, possibly some limits on the use of exotic technology--an extremely difficult but impossible-to-ignore topic, and some administrative reforms such as consolidation of Parts A and B of Medicare.

Needless to say, any major changes of this magnitude would require careful study and public debate. Although the hour is late and the need for action urgent, it would still be wise to establish a top-level public/private bipartisan Medicare Commission, alongside the Social Security Commission, to come up with a specific legislative program in time for the next Congress.

It is a cliché to point out that the term crisis means both danger and opportunity. The danger in the present Medicare situation and the possibility of irreparable damage both to it and to the nation's health is clearly with us. But so is the opportunity for a whole new approach to health care and health care policy. For years we in the U.S. have been criticized for being the only advanced democratic nation on earth without some form of national health insurance or national health service. Perhaps there was some Providential reason for this seeming lag. Perhaps we can prove the truth of the Biblical proverb, "The first shall be last and the last shall be first."

As we meet here today and debate the future-not only of Medicare but of our national health policy in general-note that we are the first Western nation to do so in the wake of four historic developments: (1) after the genetic code has been broken, (2) after average life expectancy has passed the Biblical norm of "three score years and ten," (3) after chronic disease has taken the place of acute disease as the primary cause of morbidity, and (4) after medical science and technology have achieved the capability to give or to withhold life to specific patients in specific situations such as ESRD. These are developments no less important in terms of health care policy than the discovery of atomic fission and fusion in terms of international relations. Apropos that discovery, Albert Einstein said, "The splitting of the atom has changed everything save our mode of thinking, and thus we drift towards unparalleled catastrophe...."

Let it not be said of us-as we scurry about thinking up vouchers, "indemnities," "Long-Term Care IRAS," and other gimmicks, that we were so preoccupied with rearranging the chairs on the Titanic that we missed altogether the great icebergs descending upon our health care system-chronic disease, chronic disability, and the costs related thereto. On the contrary, let us recognize chronic disease for the challenge it is and set about learning how to prevent it; how to postpone its disabling consequences; how to live and function with it, when it cannot be prevented; how to die from it— with as little suffering as possible; and how to pay for it.

Perhaps the most realistic diagnostician of our current health care problems is also the most optimistic as to future possibilities. Dr. James Fries of Stanford Medical School has coined the phrase "The Rectangular Society" to indicate one in which most people live, without much serious disease or premature death, to a ripe old age of about 85. I conclude with his words:

"As chronic diseases are postponed, and as physiological aging is slowed by research and lifestyle changes, natural life will become more prevalent. Personal choice will come to play an increasingly dominant role in health, in the prevention of premature disease, and in the favorable modification of those aspects of aging that are plastic..

"What will life be like in a rectangular society? There will not be an accumulation of debilitated elderly people exhausting the medical and social resources of the society. On the contrary, granting a stable birth rate, there will be comparable numbers of vigorous, healthy people in each of the first seven decades of life, followed by a decline in the number of individuals between 70 and 100. Although death and debility resulting from congential defects and accidents will always be present, and some will consciously choose not to live out a natural life through personal choice

of self-destructive behavior patterns, most persons in the rectangular society will succumb to relatively short-term illnesses in the final senescent period of life; natural death will occur at the end of natural life.

"The rectangular society does not present a utopian society free from problems. The medical care delivery system must undergo a fundamental upheaval-internists will become geriatricians, and acute care hospitals will be occupied primarily by geriatric patients. Costs of medical care can fall if heroic treatment methods are abandoned in favor of more rational therapeutic approaches at home, in hospice and respite care units, in convalescent facilities, and in modified nursing homes. When people develop cardiovascular or malignant diseases in their 80's and 90's instead of their 50's and 60's, therapeutic and diagnostic decisions should be more humane and less dramatic. Natural death cannot be avoided, no matter the expenditure....

"The integration of the older members of society into the mainstream of life is the challenge for the coming era. Free from the agony of lingering illness, filled with the vigor of natural life, the rectangular society represents a great hope for the fulfillment of human potential."51

In rethinking Medicare to meet future needs, I suggest we look to such a vision of the future, rather than retreat to the obsolete constraints of the pre-Medicare past.

References

1. U.S. Department of Health and Human Services, Health Care Financing Administration, unpublished data, June 10, 1982.

2. New York Times, April 20, 1982.

3. R. M. Gibson and D. R. Waldo, "National Health Expenditures, 1980, Health Care Financing Review 3 (September 1981).

4. Alan Gregg. Challenges to Contemporary Medicine (New York: Columbia University Press, 1956).

5. A. R. and H. M. Somers, "Coverage, Costs, and Controls in Voluntary Health Insurance," Public Health Reports 76 (January 1961), pp. 1-9, excerpted in Somers and Somers, Health and Health Care: Policies in Perspective (Germantown, MD: Aspen Systems Corp. 1977), pp. 125-126. 6. H. M. Somers, "Medicare and the Costs of Health Services," in W. G. Bowen et al., eds. The American System of Social Insurance (New York: McGraw-Hill, 1968), pp. 119-151; excerpted in Somers and Somers, Policies in Perspective, op. cit., pp. 170-177.

7. D. N. Muse and D. Sawyer, The Medicare and Medicaid Data Book, 1981 (Washington, DC: Department of Health and Human Services, Health Care Financing Administration, Publ. No. 03128, 1982), p. 61.

8. Ibid., p. 60.

9. Health-U.S. 1981 (Washington, DC: Department of Health and Human Services, Publ. No. (PHS) 82-1232, 1982), p. 184.

10. U.S. Department of Health and Human Services, National Center for Health Statistics, unpublished data, June 14, 1982.

11. Health-U.S. 1981, p. 177.

12. L. B. Russell, Technology in Hospitals: Medical Advances and Their Diffusion (Washington, DC: Brookings Institution, 1979).

13. S. A. Schroeder, "Medical Technology and Academic Medicine: The Doctor-Producer's Dilemma," Journal of Medical Education 56 (August 1981), p. 636.

14. L. A. Fingerhut, "Mortality Among the Elderly," in HealthU.S. 1981, p. 17.

15. Health-US. 1981, p. 111.

16. U.S. Department of Health and Human Services, Arteriosclerosis 1981, Report of the Working Group on Arteriosclerosis of the National Heart, Lung, and Blood Institute, (Bethesda, MD: NIH Publ. No. 81-2034, 1981), p. 4. 17. Richard Freeman, President, National Kidney Foundation, Written communication, June 8, 1982.

18. G. Hirshman, Acting Director, Chronic Renal Disease Program, National Institutes of Health, Bethesda, MD, Oral communication, June 16, 1982.

19. J. K. Iglehart, "Medicare's Uncertain Future," New England Journal of Medicine 306 (May 27, 1982), p. 1311. 20. Health-U.S. 1981, p. 148.

21. D. P. Rice, Director, U.S. Department of Health and Human Services, National Center for Health Statistics, Written communication, February 8, 1982.

22. James Marshall, American Dental Association, Oral communication, May 20, 1982.

23. Arteriosclerosis 1981, op. cit., p. 31.

24. M. B. Breckenridge, "The Senile Dementias: A Dual Perspective on Their Epidemiology," in A. R. Somers and D. R. Fabian, The Geriatric Imperative: An Introduction to Gerontology and Clinical Geriatrics (New York City: Appleton-Century-Crofts, 1981), p. 156.

25. Somers and Somers, Doctors, Patients, and Health Insurance (Washington, DC: Brookings Institution, 1961), Chap. I., "The Paradox of Medical Progress."

26. Health-U.S. 1981, p. 212.

27. Medicare and Medicaid Data Book, op. cit., p. 15. 28. Medicare Hospital Insurance and Supplementary Medical Insurance Trust Funds, 1982 Annual Trustees Report. 29. Health Care Financing Administration, unpublished data, June 10, 1982.

30. C. P. Fisher, "Differences by Age Groups in Health Care Spending," Health Care Financing Review 1 (Spring 1980), p. 76.

31. Ibid., p. 87.

32. Medicare and Medicaid Data Book, op. cit., p. 13. 33. U.S. Department of Commerce, Bureau of the Census, Statistical Abstract of the U.S. 1980 (Washington, DC: 1980), p. 6.

34. Medicare and Medicaid Data Book, op. cit., p. 27. 35. J. Lubitz and R. Deacon, "The Rise in the Incidence of Hospitalization for the Aged, 1967-1979, Health Care Financing Review 3 (March 1982), p. 25.

36. American Hospital Association, Hospital Statistics, annual editions (Chicago: The Association).

37. A. A. Scitovsky, "Changes in the Use of Ancillary Services for Common Illness." in S. H. Altman and B. Blendon, Eds., Medical Technology: The Culprit Behind Health Care Costs? (Washington, DC: U.S. Department of Health, Education, and Welfare, DHEW Publ. No. 79-3216, 1979), pp. 39-56.

38. T. W. Maloney and D. E. Rogers, "Medical TechnologyA. Different View of the Contentious Debate Over Costs," New England Journal of Medicine 301 (December 27, 1979). pp. 1413-1419.

39. Lubitz and Deacon, op. cit., pp. 37-38. 40. Gibson and Waldo, op. cit., p. 8.

41. U.S. Bureau of Labor Statistics, CPI Index for All Urban Consumers, April 1982, Table 2.

42. 1981 White House Conference on Aging. Report of Technical Committee on Health Services. J. C. Beck, Ch. (Washington, DC: Government Printing Office: 1981-720019/6963), p. 41.

43. A. R. Somers, "Social, Economic, and Health Aspects of Mandatory Retirement," Journal of Health Politics, Policy, and Law 6 (Fall 1981), pp. 542-557.