should be done by the private sector which is flexible and can easily be changed, if it does not work out. COST CONTROL By far one of the most critical of the problems facing Congress and the country in the healthcare area is, we think, the question of rapidly escalating costs and how to get some measure of control over them. The figures are frightening and well known to this Committee. Health care expenditures from $25.9 billion in February 1960 to $69.2 billion in February 1970, to $118.4 billion in February 1975-from 5.2% of gross national product to 8.3%. Cost increases at a rate of 13.1 percent per year since the medical price controls expired on April 30, 1974. (National Journal, 9/20/75). In addition to deductibles, coinsurance, review of unnecessary utilization, national and state planning to avoid duplication of facilities, prospective rate review of hospitals, clinics and healthcare providers-all of which are tools in the process of keeping a lid on cost in the future-the question still remains of how to get control of cost right now. Healthcare providers are affected by inflationary pressures on everything they buy, including services. Two states have passed hospital cost control legislation (Maryland and Connecticut) which give some indication of partial success. Every one of the major bills before you has some measure of cost control in this area. While it will, of course, not solve all the problems of inflationary pressures in the health care field, passage of a national health insurance bill of the type we recommend should go far in the right direction, especially through the planned transition from expensive hospital based in-patient care. MALPRACTICE The escalation of costs is further aggravated by the upswing in problems involving medical malpractice, with doctors being forced to pass on rapidly increasing premium costs to their patients as is true of any cost of doing business. It has also been charged that a great many unnecessary procedures are being ordered and paid for as a result of defensive medicine to protect the doctor from being held liable for malpractice. One of the figures cited is $2 billion a year cost for unnecessary and extra x-rays ordered. We do not think Congress at this time should take any other action than study with respect to the malpractice problem. It is limited to a few states and a few cities. It is a tough problem but it is not now necessary to have a federal solution. We need doctors and we need to encourage young people to go into the practice of medicine. As we have recommended that the Congress leave the regulation of health insurance at the state level, we continue to recommend also that malpractice be allowed to be solved at the state level. TAX INCENTIVE While we support the overall thrust of the Burleson bill (H.R. 5990), we continue to recommend a true tax incentive for this voluntary approach. Instead of denying the employer a full 100% tax deduction of his costs if his plan does not meet minimum standards, we urge that he be rewarded for meeting the minimum requirements. Let him deduct 125% of the cost the first year, scaled back down to 100% by the fifth year. In 1971 (page 1196 of Part 6 of the Hearings) we indicated the extra cost to the Treasury would be in the neighborhood of $1 billion. Obviously, it would be higher now. Even with a 125% deduction some employers would not upgrade their plans sufficiently to meet the minimum standards because of the cost increase. Since this would be the case whether the program was voluntary or mandatory, consideration might be given to use of general revenues to help these employers upgrade their plans. Now we would like to call on Dr. Reynolds to comment on the situation from a medical viewpoint. In conclusion: (Comments by Doctor Lloyd Reynolds) SUMMARY BY MR. ZUPKO 1. We support broad comprehensive coverage with deductibles and coinsurance to keep down costs and help prevent over-utilization. We are against a separate catastrophic-only plan. 2. We support use of a voluntary approach with tax incentives, holding off the mandatory coverage until it is clearly proved that such a step is necessary. We recommend tax incentives with 125% deductibility of costs of minimum benefits, phased down to 100% over 5 years. 3. The private sector should be used to the maximum possible extent. It is proved and time tested. Government participation should be limited to situations of need. 4. There should be no payroll tax financing. The financing of benefits for the poor and the near-poor should be from general revenues. 5. Healthcare availability and delivery should be improved by encouragement of ambulatory centers and loans and grants to the extent not already implemented by recently passed legislation. 6. The crucial question of cost control must be solved by impact of government at all levels. The following State Associations have endorsed this statement: Alabama Chamber of Commerce Montana Chamber of Commerce merce Empire State Chamber of Commerce Mr. ROSTENKOWSKI. Mr. Duncan will inquire. I welcome you to the committee, and for your excellent presentation. You recommend benefits be phased into the system. How long would that be? Mr. HALLETT. Until we see something better, sir, we are following Mr. Burleson's bill, and it would be about 10 years. The poor and the near-poor get it first, and then it is phased in over a period of time. Mr. DUNCAN. Thank you. Thank you, Mr. Chairman. Mr. ROSTENKOWSKI. Mr. Burleson? Mr. COTTER. Thank you very much. I would like to welcome the panel here, particularly Mr. Hallett, who is also from my State. It seems to be Connecticut day here. On page 9, you state that the Corman bill would impact on half a million jobs. Mr. HALLETT. This is the full impact estimated by the health association, Mr. Cotter, across the board in the country. The impact in Connecticut, I think, is around 35,000. This is a complete takeover on the payroll tax approach. Whether those people would move with the Government Mr. COTTER. That is my next question. This many people are involved in the health insurance business? Mr. HALLETT. Yes, sir, agents, company people, across the board. That is our best estimate. Mr. COTTER. Also, Mr. Hallett, on page 5 here you mention that 94 percent of the population are now covered for some form of health insurance, by major medical. How many of these plans in your estimation are adequate? Mr. HALLETT. It depends where you sit, sir. As you know from your experience as insurance commissioner, some of them are more than adequate. There are some plans that I think rubber workers and some of the others have, where the basic plan is such that there would be very little change made by the passage of Mr. Burleson's bill, which provides for catastrophic. Congress itself is insured. I don't know whether you have the $250,000 limit in your plan. It is probably unlimited. My own company plan is $250,000. Many are good, and many are not too good. It is the minimum standard that we think this committee should bring forth. so that all employers must have at least a minimum, including catastrophic. Mr. COTTER. You mention 250 million covered by some form of major medical. That would probably break out to about 60 percent of the population. Is that correct? Mr. HALLETT. I am taking the figures from the health association, and I will go back to Mr. Rathgeber's testimony again, and I am also using some National Journal figures. They are using the word "catastrophic" to include a very broad comprehensive plan. If you want the documentation, we will supply it. Mr. COTTER. I would. I am curious as to what coverage is being covered by the private industry and the nonprofits. This 94 percent is a high figure. I thought it was in the neighborhood of 65 to 70. Of course, I could be wrong. If possible, if there could be a breakdown of the type of coverage which various segments of the population are enjoying, that would be helpful. Mr. HALLETT. I know there is a dispute between the health association figures and HEW's figures. Mr. COTTER. Yes, there is, but I would like a comparative analysis. Mr. HALLETT. It is between 87 and 94 percent. Mr. COTTER. You are right. I was wondering how many of the programs could be considered as inadequate or inferior. Mr. ROSTENKOWSKI. Without objection, it will be made part of the record when supplied. [The following was submitted for the record :] COUNCIL OF STATE CHAMBERS OF COMMERCE, Mr. JOHN M. MARTIN, Chief Counsel, Committee on Ways and Means, DEAR SIR: On page 5 of the statement on national health insurance filed by the Council of State Chambers of Commerce with the Subcommittee on Health, House Committee on Ways and Means, November 7, 1975 this sentence appears: The Committee is well aware of the fact that 94% of the population are now covered for some form of health insurance and 150 million people are covered by major medical (including catastrophic) health insurance which is one of the most rapidly growing forms of coverage " At page 319 of the transcript Representative William R. Cotter of Connecticut asked about the 94% figure and the 150 million figure. Our reply is as follows: 1. As of 1973, 182,079,000 persons has hospital expense protection-170,256,000 who were under age 65; and 11,823,000, who were age 65 and over. (Source Book of Health Insurance Data 1974-75, page 20, Health Insurance Institute, NYC). The same chart shows that the 170,256,000 under age 65 were protected by private programs as follows: 103,918,000 by insurance companies; of which 82,272,000 were covered by group policies and 46,837,000 by individual and family policies; 72,715,000 by Blue Cross, Blue Shie'd and medical society plans; 8.876,000 by other plans. Eliminating the armed forces and their dependents and institutionalized persons from the 170 million figure, means that 94% of the balance have some form of health insurance. (Testimony of Lawrence Cathles before House Ways and Means Committee, July 17, 1975, page 4). 2. "Most people already have health insurance. Well over 172 million Americans (including 12 million with coverage supplementing Medicare) have private health insurance as a result of aggressive and innovative plan design, underwriting and marketing. Some 150 million have already been provided with sufficiently adequate coverage to ease the heavy financial burden of catastrophic illness, and high limit catastrophic coverage continues to grow rapidly.” (Page 5, oral testimony before Subcommittee on Health, House Committee on Ways and Means, Health Insurance Association of America, November 7, 1975). (See also "Private Health Insurance and the Health Care System: Problems and Solutions," September 15, 1975, The Government Research Corporation, Washington, D.C., R-359, being a memorandum furnished to Ways and Means Committee staff). It would be appreciated if this letter could be inserted at the appropriate portion of the transcript. Very truly yours, WILLIAM B. BROWN, Associate Research Director. Mr. ROSTENKOWSKI. Thank you, gentlemen. Mr. MAISONPIERRE. Good morning. Mr. ROSTENKOWSKI. Welcome to the committee again, Mr. Maisonpierre. It is nice to see you again. STATEMENT OF ANDRE MAISONPIERRE, VICE PRESIDENT, AMERICAN MUTUAL INSURANCE ALLIANCE Mr. MAISON PIERRE. My name is Andre Maisonpierre. We have a fairly extensive statement, Mr. Chairman, and would appreciate it if the statement could be made part of the record, and at this time we will proceed to summarize the statement. Mr. ROSTENKOWSKI. Without objection, so ordered. Mr. MAISONPIERRE. As property and health insurers, we have played a significant role in health care, but our role is different from that played by government in health insurance. Whereas they have been concerned with the broad spectrum of health, we have had the opportunity of specializing in trauma medicine. It is in the role of such managers that we address ourselves to you. We would urge the adoption of a plan based on the broadest possible access to health care as can reasonably be supported by our medical care delivery system, and to insure that such benefits are in fact made available, we would support a forcing mechanism. Our natural distrust compulsion would lead us to suggest a voluntary program. However, we must recognize the limitations inherent in any voluntary approach. Our companies have for many years administered a variety of compulsory insurance programs, and no major complications are foreseen with a compulsory national health insurance program. As spokesman for an important segment of the private health insurance industry, we urge a major role for private health insurers in the administration of a total health insurance program. We recognize there are certain limitations to the private system, and that considerations might have to be given to some governmental involvement, but we are unalterably opposed to the federalization of the health insurance field. As casualty insurers, we are concerned over potential rise in costs which could be precipitated by national health insurance. We are concerned because it will in all probability have adverse impact on our ability to exert some measure of cost control in the trauma care subsystem, our major area of responsibility in the overall health care system. We recognize that the Health Planning and Development Act passed by the 93d Congress is intended to improve the availability and efficiency of health care services. This should reduce the pressure for cost increases in the health sector. But it will not occur overnight. In prior appearances before the subcommittee, we have stressed support for the adoption of comprehensive health insurance, as against catastrophic health insurance programs. This position is predicated on the belief that the enactment of catastrophic health legislation would seriously fragment the health-care financing system by overemphasizing the high cost end of the health-care spectrum. Yet, we must recognize that the failure to enact any national health insurance program is beginning to have similar effects. We are witnessing more and more pressures in Congress to develop categorical health programs such as a kidney dialysis program. These programs are not only very costly, but they also have the effect of diverting from the mainstream of health care considerable manpower and facility resources. While we continue to support the concept of comprehensive national health insurance, and would hope that the economy would soon be able to absorb such legislation, we recognize that any further undue delay in its enactment will necessarily lead to more thoughtful consideration of legislation along the lines of H.R. 10028, which we believe would remove the need and pressures for such categorical health programs. We believe that any national health insurance plan needs to recog nize other insurance systems, to the extent that such other system play a major role as medical benefit distributors. One such system is the casualty insurance business which pays billions in medical benefits annually. These benefits finance the cost of trauma care for the industrially disabled, the automobile accident victim, the care of those who have been injured as a result of someone else's negligence. Recognizing the inherent waste and inefficiency arising in duplication, we believe any mandatory health insurance benefits should not duplicate other Government mandated medical benefits. To eliminate. such duplication, insurance benefits coverage must be made mutually exclusive of each other. |