NATIONAL HEALTH INSURANCE MONDAY, NOVEMBER 10, 1975 U.S. HOUS OF REPRESENTATIVES, Washington, D.C. The subcommittee met, pursuant to notice, at 10 a.m., in the committee hearing room, Longworth Office Building, Hon. Dan Rostenkowski (chairman of the subcommittee) presiding. Mr. ROSTENKOWSKI. The committee will come to order. We welcome you this morning. It is a pleasure to see you here even in this inclement weather." Mr. McMahon, if you will identify yourself, your association and the gentleman with whom you are associated, you may proceed to your testimony. STATEMENT OF JOHN ALEXANDER MCMAHON, PRESIDENT, AMERICAN HOSPITAL ASSOCIATION, ACCOMPANIED BY LEO J. GEHRIG, M.D., SENIOR VICE PRESIDENT Mr. MCMAHON. Thank you, Mr. Chairman. I am John Alexander McMahon, president of the American Hospital Association. With me is Leo J. Gehrig, M.D., senior vice president of the association, who is in charge of our Washington office. The association's membership, which consists of some 7,000 member institutions including most of the hospitals of the country, extended long-term care institutions, mental health facilities, and hospital schools of nursing, is deeply committed to providing high quality health care to all people at a reasonable cost. We welcome this opportunity to testify before your Committee on National Health Insurance. and to express our views on the crucial issues of organizing, delivering, and financing the delivery of health care services to meet the Nation's health care needs. The American Hospital Association has developed a broad framework for a system of organizing, delivery, financing, and regulating health services that is embodied in the association's policy statement on provision of health services-1971-a copy of which is included with our testimony and I would request that our full statement which I shall summarize, be entered in the record. Mr. ROSTENKOWSKI. Without objection, that will be included in the record. Mr. MCMAHON. This statement is the product of efforts that began some 6 years ago with a detailed study and review of the Nation's health care system by a special committee named by the association's board of trustees to determine how the system might be made more effective and more comprehensive, and provide better health services for all people. On pages 2 to 4 of the full statement, Mr. Chairman, we have addressed ourselves to some goals and issues of a national health insurance plan. Before enumerating specific goals, let me say that the association in forming its recommendations sought to address the problems facing the health care system. The first problem is the uneven access to health care services that exists; second is rising health care costs and the third is regulatory fragmentation. While much has been accomplished by the health care system in recent years in striving to overcome these problems, and while the system has made a commendable response to the demands placed on its resources by the medicare and medicaid programs, we all know that the problems have not been solved. All these persistent health care problems must be carefully addressed in the development of a national health insurance program. Identification of the specific goals to be achieved by a national health insurance program is essential to set a basis for evaluating the specific proposals found in various bills. A program should: (1) Provide universality of coverage for all Americans through comprehensive health benefits, including inpatient and outpatient services and coverage for catastrophic illnesses; (2) Provide for equitable and adequate financing for multiple sources of funds: (3) Provide for integration and coordination of all key elements of the health care system, including the means for delivering health services, the mechanisms for financing and payment for services, and the regulatory and administrative structures; (4) Provide for preservation and encouragement of philanthropic giving for health care facilities and services; (5) Provide for a better organized, more productive health care delivery system to assure that care is available, accessible and acceptable to both consumers and providers; and (6) Provide appropriate means to insure the rendering of high-quality health care in the most economical manner. H.R. 1, the National Health Care Services Reorganization and Financing Act, introduced by Chairman Al Ullman of the House Committee on Ways and Means, incorporates provisions which appropriately address the key issues the American Hospital Association believes must be dealt with in any national health insurance program, and, of course, we strongly support this bill. If I may, Mr. Chairman, I would like to address myself to coverage and basic benefits summarizing material on pages 4 to 6 of our testimony. One of the most important objectives of a national health insurance program is to make a high level of comprehensive health care benefits available to all persons-the employed and the unemployed: the aged and the young; the disabled and the well; and persons of all income levels, including the poor and the near-poor. With national health insurance we can and should close the gaps in the current health insurance system through provisions for those who become unemployed, and through special means for coverage for the self-employed. small groups, and "uninsurable" segments of the population. The benefits package of any national health insurance should be comprehensive and include such components as are n maintain personal good health and to prevent illness; provide pr. specialty, restorative and health-related custodial care; cover a nesses including catastrophic; and make available health services both ambulatory and institutional settings depending on the needs of the patient. The imposition of a substantial cost-sharing requirement through deductibles and high copayments in the benefits package recommended in some national health insurance bills concerns us in two ways. First: There is too high an administrative cost in implementing a deductibles program. The cost of administering such a deductibles provision will be found to be substantial as compared to the dollars saved through the use of deductibles. Second: A high level of deductibles and copayments could become a barrier to individuals seeking or receiving needed health care services. The out-of-pocket expenditures required to meet the deductibles could well discourage some individuals from obtaining needed care, as could the relatively high copayment provisions in some proposals. We do not believe that deductibles or high copayments are the most effective means for controlling overuse of medical services since much of medical care use is not determined by the patient, but we believe that some cost sharing is both appropriate and desirable. The best approach to achieving equitable cost sharing would be through modest copayments, rather than deductibles, and properly constructed utilization reviews are the appropriate means for preventing overuse. We strongly support the "health card" approach that is included in H.R. 1 and a number of other NHI proposals as an important mechanism for reducing barriers to care and for increasing the administrative efficiency in the overall payment system. Now, I would like to address catastrophic benefits coverage that appears on pages 6 to 8 of our written testimony. We believe that any national health insurance program should provide coverage for the expenses of catastrophic illnesses. However, we firmly believe that catastrophic coverage must be made a part of a comprehensive benefits package that would be made available to all persons, rather than be a separately firanced and administered benefit because: At the present time, 80 percent of the people in this country have insurance coverage for hospitals services. A separate catastrophic coverage program could duplicate much of this coverage. The catastrophic coverage programs that have been proposed do not incorporate support for improvements in the health care delivery system that are needed if any national health insurance is to be successful. Finally, the separation of catastrophic coverage from the basic benefits coverage would create additional administrative expense in the health insurance system. There would be duplicative recordkeeping and claims processing requirements if a substantial portion of the population had basic coverage underwritten by private insurance carriers through employer-employee groups and catastrophic coverage under a government program. When a national health insurance program providing comprehensive benefits to all is enacted. there is certain to be an increased demand on health care facilities and services. To meet this added demand, the health care delivery system will need a greater capability, especially for providing outpatient or ambulatory care services. Authorized benefits must be matched with available and accessible services. A program should not be enacted that promises more than it can deliver. Some of the added services can be provided by using our resources more effectively rather than through an expansion of resources. To this end, support will be required for the development of more effective forms of health care delivery and to encourage the growth of existing effective delivery organizations. It is essential that national health insurance legislation include provision for health resources development in such areas as health systems, manpower, facilities, communications, and transportation. Further, such provision should be coordinated with other programs to assist in the development of health resources. H.R. 1 seeks to do this and calls for a special study for the development of a program to provide other funds for resources to meet high-priority health service needs in underserved rural or urban areas. Let me address myself to problems in the health delivery system as we see them today as set forth in our statement at pages 9 through 11. To meet health care needs, existing institutional and professional providers of health care services will need to improve greatly the coordination of and access to comprehensive health care services. We believe that the AHA in its policy statement has developed an innovative approach to resolving these issues through the health care corporation (HCC) concept. This concept is incorporated in H.R. 1. Health care corporations would be community-based, not-for-profit. private or governmental organizations that would synthesize local health resources for the delivery of comprehensive health services to defined population groups to better meet the health care needs of the community. These HCC's would serve specified geographic areas and provide comprehensive health services through their own facilities and/or through affiliations with other providers, not-for-profit and for profit. Every HCC would have to make available high-quality comprehensive health services to all persons residing in its service area who wish to be HCC registrants. HCC's could span political boundaries where necessary to assure that all persons have access to care. They would extend services into underserved areas, both rural and urban, thus providing an important link to a comprehensive health care system for individuals residing in these areas and also for health care professionals presently isolated from the mainstream of the system. The goal of the HCC concept as contained in H.R. 1 is to bring about the establishment of HCC's in all areas of the country. This would provide the public an opportunity to choose between the services of these comprehensive health delivery organizations and the traditional patterns of care. In many areas there would be the further possibility of selection among several HCC's. This concept offers an opportunity to take significant steps toward solving two major problems of the health care delivery system-the need for assured access to a comprehensive level of health care for all persons, and the need for greater coordination of services. Access to care may become a more critical problem when benefits are extended by national health insurance to the entire population. We believe that geographic responsibility of the HCC is. approach with substantial promise for assuring that services available to all. HCC's, like health maintenance organizations, would be re for providing a comprehensive range of services for all of its registrants, so that from the consumer's viewpoint, a single, identifiable and accountable organization would be responsible for meeting all of his health care needs. Thus, an important element for coordinating for the patient appropriate modalities of care, including both physician and institutional services, would be established. Moreover, coordination and planning of services on a local, State, and national basis, can be improved through implementation of this concept. The HCC approach through its responsibility for a specified geographic area would result in nationwide system for the delivery of comprehensive services, a matter the HMO concept does not address. Now, I would like to address financing of health care services which we have addressed beginning at page 11 in our statement. We believe that all persons should be assured of financial access to health care and that no person should be denied health care because of inability to pay. We also believe that there should be adherence to the principle that every person who is able to do so should contribute to the cost of this health care. To achieve the dual objective of equity in the distribution of the financial burden and effectiveness in the raising of funds, multiple sources of funds should be utilized to finance a national health insurance program, including general Federal tax revenues, Federal taxes collected through the social security mechanism, premium payments by employers and employees, and individual out-of-pocket expenditures. Some national health insurance proposals would rely primarily on a single financing mechanism-a new Federal trust fund supported by payroll taxes and general tax revenues. Other bills would utilize the existing medicare trust fund and expand on its base. We have several concerns with the reliance on a trust fund approach in whatever form: One. It would create inflexibility in the development and underwriting of health insurance benefits by sharply reducing the savings that accrue from competition by carriers for employer group health insurance business, and it would restrict the opportunities for savings which are possible in the tailoring of a health insurance package to the specific needs of a particular group. Two. The manpower, facilities, and equipment that would be required to administer a national health insurance program through one governmental agency for over 200 million persons staggers the imagination. There is no conclusive evidence to suggest that the Federal Government can do a more efficient job than private carriers in administering a broad scale program. In fact, in a study ordered by this House Ways and Means Committee, the General Accounting Office has found it costs the Government more than private insurance carriers to process each medicare claim. To dismantle a substantial portion of the existing machinery in the private market to no productive purpose makes no sense to us. Three. The trust fund approach would require the assessment of the needs of the group served, a difficult, if not impossible, task when |