We have now come back for 1968 with some modest increases in the 1968 authorizations which we hoped you would endorse because we believe in the light of the review since that time that we ought to help the States a bit more with regard to the planning grants, and we are asking for $2 million more there for the comprehensive planning grants than what was already authorized and we are asking for $7.5 million each in the formula grants and in the health service project grants.

So that would be $17 million more in the section 314 for 1968 than you had already authorized.

Our general feeling is that the additional amounts in the formula and project grants are necessary to assist the States in developing their projects in accordance with the way they would have developed had the categorical grants been retained.

Taking into account the normal increase in projects and the increases in prices in this area, we think the $15 million for the formula grants and project grants is really only keeping pace with the present developments that have occurred since the funds in the categorical areas in those two fields were developed.

Now, when you come to 1969 and thereafter you will see by looking at our figures that we would hope the committee would authorize rather substantial increases in funds. We feel that, as I pointed out, if we are going to help the States in dealing with these very fundamental and very pervasive health problems, that we must put more Federal moneys in to strengthen the State health departments.

Quite frankly, Mr. Chairman, many of the State health departments are extremely weak, are very weakly staffed and in many cases the local health departments in many jurisdictions are also. I think one of the reasons many of us have been perhaps more slow in developing the kind of health services we think we need is that we realize that one foundation in the localities and the States needs to be greatly strengthened if they are to really take on all of these problems of medicaid, which is going to be increasing rapidly during the next 5 years in many States. and already has increased very rapidly in California and in New York, and will be extended to other States also, all of the problems of licensing and establishing standards for nursing homes and the whole question of being concerned about the modernization of facilities in this area and developing the trained manpower and womanpower, are of great concern to all of us, so that I hope you will look with favor upon our requests for 1969 and ensuing years which provide for a substantial increase in the Federal funds.

I would also like to point out to you that the States, of course, are spending far more of their own State and local funds in the whole public health field. We really think this partnership of Federal funds, State funds, and local funds is very important, and we think all three are going to have to increase their expenditures during the next decade if we are really going to deliver high quality health services to all of the American people.

The CHAIRMAN. Mr. Friedel.

Mr. FRIEDEL. I have a bad cold.

Mr. COHEN. The Surgeon General is right here if you need medical

care.

Mr. FRIEDEL. The question I want to ask does not relate to this bill, but under the medicare bill you take care of the doctor bills and hospital bills, but there is no provision to help cover the cost of drugs. I think that is one of the fallacies of the medicare bill. Has your department, or have you, Doctor, ever given any thought to including drugs under the medicare bill?

Mr. COHEN. Yes, sir. We have given very extensive thought to it, and if you recall the Senate passed Senator Long's amendment in 1965 to include drugs under the medicare program, and the President this year has indicated that we will be studying this entire problem. There is no question, and I would agree with you, Mr. Friedel, that drugs and the cost of drugs are an extremely important matter to the aged person and his family.

There are many older people who do not need hospitalization, do not need nursing home care and whose drug bills may be as much as $30, $10, $50 a month under present circumstances and with their limited social security and in the absence of coverage under medicare, the only recourse they have is to go to medicaid under the State programs to get that cost reimbursed.

There is no question that the cost of many drugs is prohibitive to many individuals, and the whole question of the cost of particular drugs and the matter of the use of generic drugs as against brand names is an extremely complex one and one that needs a good deal of study which we are now undertaking.

I think there should be methods found to enable individuals to have the drugs that the doctor prescribes at a cost that they can afford. Now, to turn to the medicare program, I would have to say this: I have studied the drug programs in most of the health insurance programs of foreign countries, and practically none of them have yet been able to discover how to control the use of prescribed drugs in a way that brings it within normal cost controls.

By that I mean that there is a natural human tendency for people when they go to a physician or go to a hospital and the doctor says to them, "I can't do anything for you today," to usually say, "Can't you give me something to take?" And the fact of the matter is that in most health insurance programs the cost of drugs has increased once they have been insured, and I would have to say to you in all honesty today we don't know the answer to the question of how to bring cost controls into prescribed drugs, and, at the same time benefiting the patient and not making it necessary to increase the Federal cost for either medicare or medicaid in a way that Congress would think is prohibitive.

So that we are in the process right now of studying this entire problem. I am very hopeful that in the course of time we might come up with something that is practical and feasible, but as of today I would have to say that I agree with your hypothesis, but honestly I don't know how to solve the practical problems of administering it under a nationwide system.

Perhaps the Surgeon General would like to say something.

Mr. CARTER. It is quite a problem, the cost of medicine, particularly for an older patient. I would recommend to the distinguished gentleman, however, that this would have been taken care of under elder

care. All of these medical payments for prescriptions and so on would have been paid for, would they not?

Mr. COHEN. Yes, it would, Dr. Carter, but I would say that at the time I testified before the Ways and Means Committee, I had to quite honestly point out to them that I think the cost estimates for eldercare at that time would have been even far more grossly underestimated than they were for medicaid had it been enacted because the cost controls on prescription drugs have not seemed to be adequate in any country that has tried it.

I can't give you the answer for that and perhaps you can speak on it better than I can as a physician, but there just seems to be an element in the drug problem that makes it completely impossible to control. Whether it is possible to devise a system where you would only deal with very high cost drugs or certain classes of drugs that are very essential for people rather than, let's say, aspirin or bufferin or cold tablets or cough sirup, I don't know. That is one of the things we would like to look into.

Mr. CARTER. Thank you. Certainly we see that in retrospect eldercare was not such a bad bill after all because it would have taken care of a lot of the costs which are not taken care of by medicare today. I vield back to the gentleman.

Mr. FRIEDEL. Personally, I really feel that it would be cheaper in the long run for the person to use medicine rather than to go to a hospital.

Mr. COHEN. One of the things, for instance, that we would have to look into is whether a higher amount of deductible and a higher amount of coinsurance that is paid by the patient might have the necessary balancing effect between the need for the prescribed drug and their paying part of the cost.

If we could undertake some kind of experiments and demonstrations with that, we might find the place where the sharing between the individual and the insurance system might balance those considerations off.

The CHAIRMAN. Mr. Devine?

Mr. DEVINE. Thank you, Mr. Chairman.

Mr. Cohen, in listening to your testimony here and reading over this bill, I am reminded of the President telling the housewives of this country now is the time to tighten up their belts and buy the cheaper grade of meats, and so forth. Is this an example of reduction in domestic spending?

Mr. COHEN. No, this is not.

Mr. DEVINE. It's an increase?

Mr. COHEN. It is an increase and, as I explained, I think that it is a justifiable increase.

Mr. DEVINE. The chairman asked you earlier to provide us with the figures which you agreed to do on this open-end business and "such sums as may be necessary in the next 4 fiscal years." I can anticipate that these can be astronomical. Do you have any figures off the top of your head right now that you can suggest to us on what this could cost in the next 4 years.

Mr. COHEN. Well, the estimated cost when we look at the figures that I will put in the record would show that the program for section 314 that we are talking about instead of the $157 million

Mr. DEVINE. You are going to provide the figures to the chairman anyway, but I want to know: Is this not going to be a substantial amount of money?

Mr. COHEN. Yes, I think you have to increase this program in the nature of something more than $100 million more per year. You have to increase it in order to provide for the expansion in the population and the prices that are occurring in this health area and to take account of these very serious health problems we have, Mr. Devine.

Mr. DEVINE. Under the terms of this bill, wouldn't you encompass almost every clinical laboratory in the country the way it is worded? Mr. COHEN. With regard to the regulation under section 5, yes. Only those of course engaged in interstate commerce which are a significant segment of the group.

Mr. DEVINE. I am talking about the jurisdictional language on page 10 of sections (a) and (b), pages 9 and 10. That seems to be allencompassing.

Dr. SENCER. We only estimate that about 10 percent of the clinical laboratories in this country are in interstate commerce.

Mr. DEVINE. That is all you would expect to come under the provisions of this bill?

Dr. SENCER. Yes, sir.

Mr. DEVINE. You have already set guidelines for laboratories qualified for reimbursement under medicare. Do you intend a completely different set of standards for these?

Dr. SENCER. No, sir. Many of the standards would be very equivalent to medicare standards.

Mr. DEVINE. Would be equivalent to?

Dr. SENCER. Many of the standards would, yes, sir.

Mr. DEVINE. On page 10 at the bottom under section (c), it is contemplated that a laboratory performing a variety of procedures or having several departments would be licensed separately as to such procedures of the department and if a license were to be suspended or revoked for such a laboratory, would such license only affect that particular activity or the entire laboratory?

Dr. SENCER. It would only affect the activity for which the license was issued. We would anticipate that laboratories would be licensed to provide a wide gamut of different services depending on the capabilities of the laboratory and that if we found that they would not live up to the standards for one section, they would be prohibited then from practicing in that section.

Mr. DEVINE. How about the fees set forth here under the jurisdiction of the Secretary that could be charged under this section? Since the licensing of the laboratories is in the public welfare, should the Government pay the cost of the activity and the amount of the license fee be set by statute as customary?

Dr. SENCER. I think the problem of fees is something that is being considered in the Secretary's office at the present time. I think it is important to remember that the title of this provision is "Laboratories' Improvement" and not just licensure. We are concerned about developing better laboratory services rather than just the licensure side of it. Mr. COHEN. Mr. Devine, the fee provision in paragraph (3), line 16, is a permissive one as it now reads, and we have made no decision on this matter as to whether to charge the fees or what amount to

charge them in terms of this authority, but we felt that the authority ought to be there in case the experience showed that it was warranted. However, I want to stress very strongly that I consider this whole area of laboratory performance an important public health service rather than one which the consumer should necessarily pay for. There ought to be a situation in the United States that when you go to your physician and a laboratory examination is taken, that you and your family have absolute assurance that that laboratory performance is up to the highest medical standards that the country can perform. Mr. DEVINE. One other question, Mr. Chairman, if I may.

I am a little concerned about this authority vested in you to suspend for a period of 60 days without notice, without anything, just kind of a czarist type of authority placed in you. That is on the top of page 13 of the bill. Would you consider that similar procedures as under the Federal Food and Drug and Cosmetic Act should be had, where prompt notice should be given, and opportunity for hearings and things like that?

Dr. SENCER. I would envision that this provision would only be used where the health of the Nation would be imperiled if we found that the laboratory was making gross errors that would endanger life.

Mr. DEVINE. We would assume that you wouldn't act arbitrarily, but you could put a laboratory out of business by mistakenly stopping them.

Dr. SENCER. I would hope our system would be such that we would not be mistaken in our actions, sir.

Mr. DEVINE. Thank you, Mr. Chairman.

The CHAIRMAN. Mr. Jarman?

Mr. JARMAN. Mr. Cohen, I am very much interested in your statement this morning. I have several questions which occur to me.

One in particular I would like to ask would be in reference to the provisions of section 2(d) (2), on page 4, which refers to funds allotted to the State mental health authorities requiring 70 percent of the funds allotted to these authorities to be available only for providing services to the communities. We, in this committee, as you know, have been holding hearings on extension of legislation dealing with community health centers and with mental retardation provisions.

I simply wanted a comment from you or Dr. Stewart on how it fits into this comprehensive program.

Dr. STEWART. Mr. Jarman, in the act as it now exists, the law provides that 15 percent of the funds will be allocated for mental health. This was done because in many, many States the mental health authority is different than the State health agency.

The present bill before you adds the provision that 70 percent of the funds after this 15 percent allotment has been made must be spent for services in local communities. So that if a State is allotted $100, 15 percent of that must go to the mental health authority, 85 percent will Stay with the State health department, and then 70 percent of 85 percent would be spent in local communities and 70 percent of 15 percent would be spent in local communities, so that this is really a requirement that 70 percent of the already existing 15 percent must be used for local community services.

In the bill we had before the Congress last year which was enacted, the original bill, has the 70-percent provision included. The whole