er experiencing the cost escalation that occurred after the passage of Medicare, the catastrophic proposal would simply amplify the Medicare experience with its escalation in cost. The ineffective cost control provisions of Medicare would be continued. Hospitals would be reimbursed on a cost basis and physicians would be paid their usual and customary charges. Doctors would not have to accept their customary fees in full payment for their services except for those covered by the low-income plan. The catastrophic bill is an invitation for cost escalation, not cost control. The cost of administration of the bill would be horrendous. The cost of administering the income test to low-income individuals and families would be at least 25 percent of benefit payouts. The spend down provision is especially difficult to administer since it is impossible to know who is and is not eligible for the program at any given time. In fact, it is likely that Title II is unadministrable. Built into the catastrophic plan is a costly rip-off for the insurance industry. This results from the provision that the employer receives the same 50 percent tax credit against the 1 percent payroll tax whether or not he elects to be insured by the Social Security Administration or by a private carrier of his choosing. Because of this tax credit, the employer has no incentive to bargain with the carrier over premium rates. The only control would be an "actuarial" table of values which would be submitted by an Actuarial Committee in HEW. Health insurance benefits equal the premiums collected less administrative costs. Actuarial calculations are unnecessary. Insurance companies make their money by building actuarial risk factors into these premiums. These risk factors are just disguised profits. The bill accepts the present unstructured nonsystem of health care delivery and provides no incentives for rationalizing the delivery of health services. The bill would have no impact on alleviating the health manpower shortages nor about redistributing physicians from areas that are over-doctored to areas that are under-doctored. To the contrary by emphasizing the highest cost care, it is likely to have just the opposite effect. The catastrophic proposal does nothing to increase the supply of primary physicians (general practitioners, internists and pediatricians) who provide care for 90 percent of routine illnesses and nothing about the overabundance of superspecialists and surgeons to take care of rare conditions. In fact, the catastrophic insurance program will result in a neglect of preventive and day-to-day care, thereby guaranteeing more catastrophic illness and more superspecialists. Thus, the bill is the antithesis of what a good health program should be. All of us who believe in national health insurance because it is comprehensive, universal, fair and equitable are asked one question: "What will it cost; can we afford it?" Some really wonder, and we owe them an answer. But others are asking not because they really wonder but because they want to muddy the waters and cast doubt. They are not interested in an answer; their problem is they know the answer-and just don't like it. There is an element of dishonesty in some of the language, questions and issues raised by some who oppose national health insurance. Honest men and women can disagree about a number of issues involving national health insurance. We can and should debate matters relating to financing, to private and public mix of funds, to ways of paying for services. There is a lot, legitimately, to argue about. Nor do honest men and women all understand the issues of cost perfectly. But some who do understand the issues correctly use scare tactics about cost to confuse the public. They do not believe their own tes.imony before Congress, but they hope the public will believe it. We ought to recognize that for what it is and turn our attention to the real task before us-explaining the issues to the American people. What is the story of costs; what can we afford; what is national health insurance all about in dollars RASHI FEIN a professor at the Hariard Medical School. This article is excerpted from a paper be presented to a Washington, D.C., conference on Health Security and cents? It may be useful to remind ourselves of the situation as it is today and to consider the situation as it will be when national health insurance is enacted. We are spending over $100 billion a year in the health sector today. In fiscal 1974, the total was $104 billion, and $97 billion of that was for health care and supplies with the remainder for research and construction. That was money spent-dollars transferred from individuals, insurance companies or government to the health sector, to providers of goods and services. There is an ongoing health activity. It employs over 4 million persons, provides over a billion physician visits and about 250 million hospital inpatient days per annum. The health sector is alive and thrivingat least as measured by the dollars flowing into it, 7.7 percent of the gross national product. It is inefficient. It wastes resources. It fails to deliver care to large numbers of people who cannot afford to pay for services or who do not find services available when and where they need them. But it exists; it is financed; it utilizes resources. We feel the nation should be getting more than we are for the $100 billion. We should, but that is not my point. What is important for the moment is that there is a $100 billion industry out there. We are not talking of creating a new enterprise--a new health industry when we speak of national health insurance It is not as if we have nothing today and want to create 350.000 doctors, 1.5 million hospital beds and all the rest and pay for it. We are not an under developed country without a health care system engaged in a great debate over whether to invest scarce resources in developing personnel and facilities. We already have a system-a $100 billion enterprise. All that is important because it lies at the heart of one of the significant differences between national health insurance and other proposed government expenditures and programs. It is at the heart of the discussion about costs and what we can afford. When government spends money for new desks and chairs, for parks or dams, for the CIA, this represents a change in the way resources are allocated in the economy. In those cases, government pays for things that were not going to be paid for by the private sector. When government builds or pays for a dam, it does not ask whether government should pay for a dam or whether individuals should buy it on their own. It asks, instead, whether we should have a dam at all. And it adds a constraint: if we say "yes," it means we will have to do without something else. To ask "should we have a dam" is to ask a meaningful question-for, if government authorizes a dam, it is a new dam that is created. If government puts new money into new programs that deliver services previously not available or delivered, we are talking about new services: parks, roads, inspection, regulation and so forth. New services require new resources -resources that could have been used for other things in the public or private sector. If, on the other hand, government talks of assuming the costs of services already being delivered and paid for by the citizenry-as is the case with health services there are no new total dollars or total resources involved. Every dollar government spends on health relieves us, the public, of dollars that we would have spent on health. There is, of course, a new and different financing mechanism, a new way of spending old dollars, but that is not the same as new dollars. New parks, roads or bombers represent money for things the people would otherwise not have. But medical care is different: we are already spending $104 billion, and private expenditures account for $63 billion of that otal. So the issue is a non-issue. The question can we, as a people, afford national health insurance really means can we afford to spend what we are already spending -and surely the answer is "yes." The issue is not whether we are spending more than we can. The issues are whether we are getting what we should for our money and whether the present arrangements which make health expenditures depend on a family's income are fair, just and humane. But, the critics say, what about those people who today cannot afford to purchase medical care. Won't national health insurance cost more than we are now spending when it attempts to provide care to those who today find price a barrier? They ask whether we can really afford a universal national health insurance program that brings health care to the forgotten and the rejected Americans? What does that really mean? Anyone who asks those questions apparently believes that we do not have enough and cannot produce enough medical care services-and that is untrueand, rather than alter, modify and improve the health care system, prefers to continue rationing health care on the basis of ability to pay-and that is unjust. In part. of course, the critics say they agree, and that is why they contribute to charity and "support" Medicaid. But, of course, to the extent that charity and Medicaid do purchase health care we are back at square one, talking about dollars that are already being spent. In our view, national health insurance is fiscally a substitute for, not an addition to Medicaid, but it is also different from and better than Medicaid. It is a better way of spending the dollars that are already being spent. No, the reason some of our critics may prefer even Medicaid to national health insurance does not relate to the total dollars going for care. The real reason is some people like the Medicaid system-not because it is efficient, just, humane and decent-but because they feel it is an appropriate system for those whom they consider undeserving. Their chief complaint about it is not that it is a demeaning system in which people are required to trade their dignity for some health care. Their chief complaint is that we are spending too much on it. And when they say, "we are spending too much." they do not mean America cannot afford it. They really mean, "why spend that much on people who aren't making it on their own?" The fact is that even with Medicaid and other programs, too many Americans still receive inadequate care. National health insurance will permit them to enter the medical care system and will require resources for their care. That is good. That is what we want. That is one of the important reasons we favor the Health Security Act. I am not ashamed of being in favor of decency, humaneness and justice. I am willing to spend dollars, new dollars, to achieve it. In fact, however, I am convinced that we can have a well run system of health care that, by eliminating present waste and inefficiency, can provide care for all the people with fewer resources than are now providing care for only some of the people. For $100 billion we can provide for all 213 million Americans. But even if our critics disagree, even if they argue it will cost more than we are now spending, what would they have us do, continue to deny care to those who need it but cannot pay? Do they really mean we cannot afford it, or do they mean that they prefer not to concern themselves with the problems of the less fortunate? Unemployment is costing our economy billions upon billions in dollars-aside from the human suffering. Yet we are told the nation cannot provide health care for its people. If we did not have public education, they would tell us we could not afford that either. If we did not have unemployment compensation, they would tell us we could not afford that or social security or higher education or workers' compensation. Their economic policies cost the nation tens of billions of dollars in lost wages and products and untold human suffering, yet they ask us whether the nation can afford national health insurance. Yet another argument is used. if government pays for medical care, it is said, you and I will attempt to get more care than we need. We will flood the hospitals and the doctors' offices, inundate the system and bankrupt the economy. But where is the evidence that we are all so in love with medical care that we will face waiting time, travel costs, absence from work, fear and concern to behave that way? The evidence is not found in prepaid group practices where monetary barriers to care have been eliminated or reduced. It is not found in outpatient departments because they have to mount outreach and follow-up programs to get people to use the services. It is not found in the experience of other nations. Canada can manage to meet its commitments but we, presumably, would be unable to meet ours. This is the rationale offered for coinsurance and deductibles--for that which is so pleasantly called "cost sharing." Cost sharing is supposed to make you and me behave responsibly, but the real issue is how to induce the system to behave responsibly. You and I do not decide to order unnecessary lab tests; we don't really make the decision that we would like to enter or stay in hospital an extra few days; we are not out there balancing prices and satisfaction and deciding whether we prefer another $10 worth of care or something else. The bulk of those decisions are made for us. High cost sharing is not consistent with the goals and aims of a comprehensive, universal and equitable national health program. Low cost sharing -and that which is low for some is high for othersis not worth the administrative costs. Those who are so concerned about costs might want to join us in eliminating the unnecessary costs involved in administering a system of deductibles and coinsurance. Moving billions of pieces of paper around is expensive-that is waste and, therefore, is something we cannot afford. At the margin, and for the poor the margin is narrow indeed, price does make a difference. But will the system go bankrupt without price barriers? The U.S. Department of Health, Education and Welfarea department not known for its support of Health Security--has estimated that the difference in total expenditures-total dollars spent on health, whatever the source of the expenditure -between the Health Security Act and the Administration bill introduced in the last Congress was $6.5 billion on a total estimated expenditure of about $123 billion. We believe that is a substantial overestimation of the costs of the Health Security Act. Among other things, it fails to take account of the very real savings that will come about because of system changes that are part and parcel of the Health Security Act. The HEW estimates assume that the Health Security Act will only finance care and not change the delivery system, and that is not what Health Security is all about. Nevertheless, even HEW admits that the Health Security Act-even without system savings-would add only 10 percent to what the nation will spend if no legislation were enacted and only 5 percent to what the inadequate Administration bill with cost sharing would cost. Consequently, we are prepared to argue we can afford a Health Security Act and to argue further that with system change the Health Security Act will save, not cost the nation money. There is surely more than 10 percent waste and inefficiency in the present system. Is the argument really about going bankrupt because of an additional expenditure of some $6 billion? Can anyone say that a trillion dollar economy cannot afford the Health Security Act? The argument is not really about total dollars and total costs but about where the dollars come from and where they will go. That is the real explanation for the cost sharing and also for the mandating proposals that have been offered by the previous Administration. Requiring that patients pay out of pocket or that employers make health insurance available to their employees is not really cheaper-it only looks that way in terms of federal funds. The dollars all stay in the private sector with mandating, and government does not enter the picture. The dollars are not greener nor are they fewer. But they are private; not public. That is the real issue, and that issue is real because the Health Security Act has a social insurance approach-and it is there for a reason. The fact of the matter is that in health care private financing, operating with privateinsurance principles, has not met the problems of the people. We needed social security. We needed Medicare. We got them because those who fought for those programs understood the basic issues involved. The same issues lie at the heart of the fight for national health insurance. Keeping things substantially as they are or building upon a weak foundation will not lead to universality or equity. The Administration's bill, after all, would transfer only about 5 percent of total costs from the private to the public sector. This is what they call national health insurance-the Federal Trade Commission ought to look into that kind of mislabeling. Is it not equitable to have low-income employees spend a higher proportion of their income on health care via coinsurance, deductibles and premiums that are fixed amounts and do not vary with income or with payroll. It is not universal to have a multiplicity of plans into which people must be sorted. And in dollar-cost terms all this would increase administrative costs. Whatever they may say about the Health Security Act, at least they must admit that its dollars would go for health care and to the health systemnot on paper work and to accountants. In a March 1975 editorial, the Washington Post suggested Congress should examine the true costs of government programs-not just the costs to government, but the real costs. It said: "The argument over health care provides a classic example of the way the present system works. Health insurance plans before Congress are usually discussed in terms of how much they will cost federal or state governments in tax money. While these figures are of obvious importance, the true cost of any such plan must include the additional expenses the plan will impose on employers and employees. If those additional expenses are paid by the employers, they will be reflected, sooner or later, in prices. If they are paid by the employees. they will be reflected in a loss of buying power. In either case, they are real costs, just as tax increases are real costs. "In order to get a true picture of the full costs of a health plan or noise reduction regulation or any other federal program, Congress needs an 'economic impact' statement not unlike the environmental impact statements now required of many construction programs. Then it could know how much a particular program or set of regulations really costs." It surely would be advisable if the Administration prepared economic impact statements such as the Washington Post calls for. We who support the Health Security Act would welcome honest analyseswe have nothing to fear and much to gain from public information and understanding. Social legislationMedicare, national health insurance-is never harmed by public understanding. It is misinformation that is harmful. Actually, since the federal Office of Management and Budget (OMB) has not been doing what the Post |