will be helpful to the Congress in devising a national health plan that will be better than Medicare.

Medicare, unfortunately, has become less effective in meeting the medical costs of the elderly in recent years. In 1974 the proportion of older persons' medical expenses paid by Medicare was 38 per cent, compared with a high of 44 per cent in 1969. Direct, out-of-pocket expenses to the elderly have actually increased since the program began, from $237 in fiscal 1966, the last year before the start of Medicare, to $415 in fiscal 1974. The primary causes of this trend have been increases in the amounts paid in deductibles and coinsurance, the alarming decline in the number of physicians who accept assignment for "reasonable charges" under Medicare, and, of course, the extremely inflationary increases in the cost of medical care itself.

We have found that one of the major obstacles to adequate health care lies in the limitations of the insurance approach, an approach which Medicare shares with commercial health insurance. The insurance approach is designed to protect against the risk of certain types of costly medical treatment. It does not directly deal with people's actual health needs. This approach contributes to the excessive use of costly medical care, especially hospitalization and surgery, when this care is not warranted by people's real health needs. The mere fact that some types of care are covered by insurance encourages providers to use them, and this practice inflates unnecessarily the costs of care. On the other hand, entire areas vital to health care, particularly preventive care, are neglected. because they do not fall within the concept of "risk" upon which the insurance approach is based.

National Health Security, as contained in H.R. 21, takes an entirely different approach it begins with peoples' health needs themselves. Health Security allocates pre-existing medical resources on the basis of people's real needs, and it has the mechanisms necessary to generate new and innovative programs to fulfill needs that are now being met inadequately. It is not committed to the old idea of merely spreading the risk of costly treatment, the idea which provides the rationale for close relationships between medical providers and insurance carriers in which the health needs of the patients are too often neglected. Health Security promises, instead, to control unnecessary expensive care and, at the same time, to improve the quality of care by relating it directly to health needs. The use of coinsurance and deductibles, by both Medicare and commercial health insurance, is also an obstacle to an effective health care system. During recent years, there has been much debate over the real effect of such devices on the utilization of health services. There is considerable evidence that utilization is reduced only when coinsurance and deductible rates are high-that lower rates are nothing more than administrative nuisances that do not effectively control utilization. Regardless of diverse findings, one fact is quite clear: insofar as coinsurance and deductibles are effective in holding down costs, they deprive the very people whom the system should be designed to help. It is the poor, not the well-to-do, who will go without health care, thus increasing inequities and aggravating the health care problems of all but the more fortunate.

Based on our experience we submit there are six major criteria by which health care proposals should be evaluated.

These are:

(1) Universality of Coverage; Uniformity of Benefits.

(2) Reform of Health Care Delivery.

(3) Provision for Cost and Quality Controls.

(4) Provision for Consumer Representation.

(5) Adherence to Social Insurance principles in Administration and Financing.

(6) Comprehensiveness of Benefits.

Our position in support of National Health Security is a result of our measuring by these criteria the major proposals that have been brought forward. What follows is an analysis of that evaluation.

1. UNIVERSAL COVERAGE, SINGLE STANDARD BENEFITS

A single system wou'd assure the individual of the care needed for a particular condition regardless of age, income, residence, or employment status.

Most of the pending national health insurance proposals allege to support the ideal that good health care is not an ascribed privilege but an earned right, like police protection or education. Only National Health Security guarantees this right through a single universal system, without a means test and with the same benefits for everyone.

We may contrast this uniform coverage with the coverage provided by the Catastrophic Health Insurance and Medical Assistance Reform Act, sponsored in the House as H.R. 10028 by Mr. Waggonner of this Subcommittee, and in the Senate as S. 2470 by Mr. Long, Mr. Ribicoff, and others. The catastrophic bill would provide for at least three different types of coverage: the catastrophic health insurance itself, designed to provide benefits after a person has incurred $2000 in medical expenses and/or 60 days of hospital costs; a medical assistance plan for the poor and others who cannot afford to purchase protection against medical costs below the levels of catastrophic protection; and, a certification program for private health insurance policies to provide voluntary coverage for those who can afford it.

These divisions within the bill create at the very outset different classes of individuals who will be insured differently. Even the catastrophic part of this legislation the very heart of the bill-is split into a private catastrophic plan, in which employers provide protection to their employees through private insurance companies, and a public plan for those not protected as a condition of employment.

These divisions can do nothing but perpetuate the administrative snarls which now handicap the good provision of care. Instead of a single standard of protection administered uniformly, we would continue with the present patchwork network of protection. There would be excessive and unnecessary confusion in trying to keep track of all the different types of coverage available and in attempting to determine which persons are eligible for which types of coverage.

The catastrophic portion of this bill, whether public or private, is simply inadequate to protect persons against the medical costs which are most commonly incurred. Individuals and families can easily be damaged financially by incurring medical expenses well below the levels of catstrophic protection. The possibility of such financial damage is not adequately prevented by the other portions of the bill.

We strenuously object to the concept of income testing upon which the medical assistance plan is based. Income testing runs counter to the basic social insurance concepts currently exemplified in Medicare. Lost entirely under this plan is the concept of medical benefits as an earned right. Instead, the medical assistance plan would be financed entirely from general revenues, and would in reality become a giant medical welfare program for the poor, larger even than Medicaid, which it would absorb. Such a plan represents a real step backwards from the progress that was made under Medicare toward uniformity of benefits. The use of a means test creates an inherent distinction between the poor and the more well-to-do which invariably must lead to different standards of care. Moreover, a means test-no matter how palatably introduced-represents a humiliating form of condescension which no person should be forced to endure in order to receive such a basic service as medical care. Its use will inevitably discourage and prevent the poor from seeking and receiving adequate care.

The program of H.R. 10028 for certification of health insurance policies allows too much possibility for gaps in. and for different levels of, coverage. The fact that the program is voluntary means that some persons will be without coverage through default, not necessarily their own. Especially vulnerable would be those persons whose incomes fall just above the low-income requirements of the medical assistance plan. Un'ess they were fortunate enough to receive protection through their employer, they would have to purchase a certified policy at a price which could easily be prohibitive. And even through the certification program would require each policy to conform to certain standards, there would remain considerable space for these policies to contain different benefit levels. It is quite clear that persons with higher incomes, or with better conditions of employment, will be able to have better insurance protection.

As we view it. then, the Catastrophic Insurance bill, from top to bottom, would rerpetuate different levels of care. In contrast. Health Security provides a single standard of comprehensive benefits, uniformly administered. Health Security represents a unifying force for our nation, much as the introduction over 100 years ago of public education, by overcoming basic social and income divisions in providing a very basic service to everyone.

2. REFORMS OF HEALTH CARE DELIVERY

The National Council of Senior Citizens cannot support a national health insurance proposal which does not make health care reform a primary objective. An acceptable proposal must have the financial muscle to make major improvements in the organization and delivery of health care.

It is insufficient to provide simply a method of payment that will greatly increase the effective demand for a limited supply of health services. Measures must also be included to provide some control over the economic processes of the health care industry and to stimulate an increase in the supply of health services. Our health system needs corrective surgery, not "band aid" reforms.

When Medicare was being formulated all of us-proponents of the plan and our representatives in Congress—were constantly assuring the medical profession, the hospita's, and, indeed, the public, that we were not proposing to alter the system in any way. We were simply proposing a method of payment for health services within the existing system. I'm convinced the public as well as health care providers wanted, even demanded, such assurances in 1965. But times have changed. Public opinion has changed.

In the light of our present experience, not only wtih Medicare, but with Medicaid, and with a multitude of private health insurance schemes, the public is now convinced that there must be some major alterations in our health care system.

The demands of the public in the 1970s in this respect are just the reverse of what they were in the early 1960s. This change in attitude has been prompted by such factors as inflationary increases in the cost of health care, fragmented health care delivery, and uncoordinated development of health facilities.

National Health Security would provide integrated, nationwide reform on the health care delivery system. Health Security would not scrap the existing system. as has been charged. It would, however, transform the present delivery system from one dedicated to the financial interests of health care providers to one dedicated to meeting the health needs of the consumer.

In other words, Health Security would give the American people confidence that their health care do'lar buys a dollar's worth of health care.

Unlike most other proposals, the Kennedy-Corman bill would establish a special fund, a Health Resources Development Fund, set aside to provide financial incentives for the system to reform itself.

Before benefits started, the Fund would begin to have an impact on three crucial areas-availability of manpower, distribution of services, and the system of delivery.

Funds would be used both to expand the productivity of physicians and to provide a comprehensive range of services by training additional health personnel, especially primary care physicians, paraprofessionals, and allied health workers. The problem of the maldistribution of hea'th manpower and facilities would be attacked on both fronts. Special financial "rewards" would be used to attract needed personnel to practice in such health-short areas as inner cities and small towns as well as to issue grants for upgrading health facilities in these areas.

In addition, Health Security would provide support for demonstrations and development of promising methods of organizing health services, such as prepaid group practice, expanded outpatient services, alternatives to institutionalization. and sharing of services among health institutions.

Essentially the Fund would be used for the development of services to meet the changing needs of people in the most effective and efficient manner, not merely to build on already overburdened and often wastefully expensive services. This Fund, in addition to the assured purchasing power of a national health program, wou'd help to overcome many of the present barriers to a balanced and coordinated health care delivery system.

In contrast, H.R. 10028, the Long-Ribicoff-Waggonner bill, has virtually no provisions to reform the health care delivery system. Almost as an afterthought, the bill contains a provision to encourage philanthropic support for changes in the health care delivery system-a provision that is clearly inadequate. Nowhere does the bill commit the public funds necessary for such reform.

The only real answer which the Catastrophic Insurance bill gives to the problem of reform is to leave regulation of the medical industry in the hands of those who presently regulate it--the medical providers and the insurance carriers. The fragmented nature of the Long-Ribicoff-Waggonner proposal would perpetuate the present waste and misallocation of our health care resources.

It provides neither the structure nor the incentives for reform. It suffers from the basic limitations of the insurance approach to health care, because it has no means to deal directly with people's actual health needs.

3. COST AND QUALITY CONTROLS

One of the most important lessons we should have learned from eight years of Medicare is that national health care must be more than a bill-paying mechanism. It is largely self-defeating to make payments to health care providers without

demanding quality and efficiency in return. Pouring money into the present health system without controls simply results in inflationary increases in charges and overloads health care providers.

National standards for both individal and institutional providers are needed to upgrade the quality of care, encourage efficient use of manpower, and promote rational planning of facilities.

Qualified health professionals should be reimbursed for services on the basis of established fee schedules, with no billing to the patient. Institutional providers should be paid on a prospective budget basis. The fee schedules and budgets should be negotiated at the local levels by representatives of consumers, health care providers, and the administering agency.

We believe the reimbursement to physicians should be adequate and even generous, considering the value of the services performed and the investment in education that physicians have made. But we do not believe they should be exorbitant or unreasonable as so many of the charges now are.

Under such an arrangement, doctors would know the rates under which they are to be paid for their services. Beneficiaries would know exactly what was covered under the program and the many inequities and causes of confusion existing in the present program would be removed.

National Health Security provides health care with the cost controls of provider reimbursement being made on the basis of negotiated fee schedules and prospective budgeting.

In addition, it establishes a Quality Control Commission, national quality standards for participating providers, and requirements for professional continuing education. A notable example of quality controls is the requirement that covered surgeries be performed by surgeons who are certified by their medical specialty boards.

But National Health Security goes beyond these essential controls by providing health care protection directly to the consumer at the lowest cost, with no waste of the health dollars on parasitic "middlemen," the private insurance carriers.

One of the major arguments given by the supporters of the Catastrophic Insurance bill is that it is less costly than other national health insurance proposals. Such arguments, however, are defective because they include only the costs to be met from public funds and fail to include the total cost met from all sources. When the Catastrophic Insurance bill is examined in the context of total medical costs, it shows no promise of controlling these costs and it may even cause them to increase more rapidly.

The Long-Ribicoff-Waggonner bill does not go beyond the cost-control provisions currently in Medicare. It continues the archaic fee-for-service system without substantial modification. It retains the use of private insurance companies as fiscal intermediaries in the publically financed portion of the bill, and it grants these firms a wide scope of operation in the privately financed provisions. Yet, the private health insurance industry has traditionally shown far greater interest in wealth than health.

Health insurance companies, including Blue Cross and Blue Shield, have done little to bring about coordination of health services, improved quality, or greater efficiency. Instead, they have played a passive function, being middlemen (with a "cut off the top," of course,) between patients and providers.

The history of commercial insurance in the health field began as early as 1908 in state Workmen's Compensation laws. It has continued through the era of negotiated health and welfare plans. Anyone acquainted with this history knows that commercial insurance has been a major barrier to positive health planning and, despite the massive PR campaign, the "Blues" are little better than the commercial insurers who are admittedly in the business for profit.

It is easy to talk about a pluralistic approach to the problem and about building on the "existing foundations" of our present system of commercial health insurance; but this is an unsound and futile approach. What is supposedly one of the pillars of the existing health system is in fact the shakiest part of the whole structure.

Particularly alarming in the catastrophic approach is the incentive which this plan gives to medical providers to push medical expenses above the catastrophic deductible level. As a patient's expenses approach the 60-day and/or $2,000 medical expenses level, medical providers will be encouraged to push these expenses well into the range of catastrophic coverage, especially if the

patient's coverage for expenses below the catastrophic level is not fully comprehensive.

Deductible and copayments will be used in both the medical assistance plan and in the voluntary certification insurance program. Under the latter, patients will be liable to a $100 deductible for hospital services and to a copayment of 20 per cent for medical services. Especially objectionable to us is a special copayment requirement under the medical assistance plan whereby a patient who is not a member of a family, must pay all of his or her monthly income, except $50, after the sixtieth continuous day spent in a long-term facility. This provision is, of course, aimed at the poor elderly; and it would have a most humilitating effect on them, besides being a real barrier to care.

Another serious defect in the Long-Ribicoff-Waggonner bill is that it would require providers and practitioners to accept the fee schedule (or "assignment") as full payment only for persons covered under the medical assistance portion of the bill. There is no mandatory assignment under either the catastrophic provisions or under the voluntary certification program. Under these circumstances. many providers could be expected to decline to treat persons under the medical assistance plan, since they would be free to charge other patients more, even though the patient and not his insurance might have to pay the excess beyond a "reasonable cost" determination. This approach would inevitably establish different levels of medical care. A fee schedule is equitable only if it is negotiated in concert with consumers and if it is applied uniformly-not just to the poor and the elderly.

In fact, the lack of any mandatory cost controls in the catastrophic and voluntary certification programs of H.R. 10028 means that persons have no real assurance that their protection under these programs will meet their expenses. Providers remain essentially free to charge whatever they think they can get, there is no way to force providers to conform to "reasonable cost" standards, and the patients themselves will undoubtedly have to make up the difference out of their own pockets whenever the actual charges exceed those deemed to be "reasonable" by the carriers.

There is a basic unsoundness in the heavy reliance, by the Catastrophic Insurance bill, on the physician-controlled Professional Standards Review Organizations (PSROs) for quality control. As presently charged, PSROs are not involved with questions concerning the reasonableness of charges or quality of care. Instead, the area of responsibility for PSROS is to determine whether institutional services are medically necessary and in accordance with professional standards. There is already difficulty in getting the medical profession to participate in PSROS. The limited cooperation that has been secured results from the tacit agreement that PSROS will not become involved in the whole issue of reimbursement. It is, therefore, extremely unlikely that PSROS could be the appropriate organization for a quality control effort.

4. CONSUMER REPRESENTATION

The National Council believes that public accountability, so lacking today, should be assured through consumer representation at all levels of program administration.

The countless pleas we receive from our members on this score were concisely summed up by Dr. S. J. Axelrod, noted University of Michigan health economist, before the Senate Special Committee on Aging as part of their "Economics of Aging" hearings during the last Congress. "I would say," said Dr. Axelrod, "that our American medical care system is characterized by the fact that there is no identifiable point of public accountability. To whom can the older patient go and say 'I don't like what is going on; who is going to do something about it?"

Health Security would provide a significant role for consumers at all levels of the development and administration of the nation's health care delivery. It would establish a local office in each community charged with responsibility for serving as the "ombudsman" for the consumer. For too long these decisions have been made by doctors, hospital administrators, and insurance company executives. It is time the people had an opportunity to say what they needed and how it should be provided. We have allowed the system to operate primarily for the advantage of those who provide the services, rather than for the benefit of those who receive the services. Yet, it is the consumer who has the greatest stake in the quality of the health system.

The Catastrophic Health Insurance bill contains no substantive commitment to reform the nation's health care system. Consumers would have no direct voice at any point in the new program.