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Many Congressmen may not have realized how elastic the concept of 'reasonable costs' could be, that it was as much an issue to be resolved by bargaining as by the data, complicated by the generally backward state of cost accounting in most hospitals. ... Important as the specific provisions of the reimbursement formula are, far more fun. damental is the question of whether the basic concept of individual cost reimbursement has long-term viability. In the tense controversial atmosphere that characterized the legislative struggle, Congress probably had little practical choice.... If, however, payment of costs, whatever they turn out to be, is virtually guaranteed (and Medicare, under present regulations, is practically open-ended in that respect). where are the financial incentives for cost control, difficult enough in any case, to come from? ... In no other realm of economic life are payments guaranteed for costs that are neither controlled by competition nor regulated by public authority, and in which no incentive for economy can be discerned. ... Clearly, Medicare faces stormy days ahead in the entire field of payments to providers. Present arrangements are so vulnerable that it seems unlikely that they can be lived with very long. . . . Yet any basic reforms will invite strident controversy. They will be slow in coming and the expense of delay will be high.''

I repeat: That paper was given in 1967 and published the next year. Red was correct in all his predictions, including the slowness of corrective action and the price of delay

Having emphasized the seriousness of the cost problem for nearly 25 years, having been repeatedly accused of crying "wolf" too often, having, in some quarters, suffered, at least figuratively, the fate of Cassandra; perhaps you will understand why-now that cost has become a Washington obsession feel justified in warning against repetition of the same basic error our apparent inability to concentrate on more than one problem at a time which marked the original Medicare legislation and related health programs.

Whereas they concentrated exclusively on increasing access and improving quality, with virtual disregard for cost, many of today's cost-targeted proposals appear to have totally lost sight of the continuing problems of access, quality, and appropriateness. The order of priority among these problems has changed over the years but none has disappeared. What is needed now is a balanced view of costs and benefits and a rational program for revitalization of Medicare, based on a clear understanding of its strengths and weaknesses.

Medicare and Related Programs:

Major Accomplishments

Part B. Nevertheless, the Part A ratio of administrative costs to total costs fell from 2.24 percent in 1967 to only 2.14 in 1979. Even under Part B. with its much larger number of smaller claims, the ratio fell from 8.42 in 1967 to 6.01 in 1979.

Despite initial provider and private-insurance opposition, within a couple of years this understandably changed to strong sup which continues to this day. Medicare has clearly demonstrated that some form of NHI is viable even in a country of this size, heterogeneity, and extreme emphasis on individual and interest group rights. Significantly, it has also demonstrated the desirability of intermeshing responsible public and private enterprise.

2. Positive effect on Health Care Resources

The quantitative expansion of health care resources is a matter of record. From 1960 to 1978, for example, the ratio of community hospital beds/1000 population rose from 3.6 to 4.6 and then began to decline, under planning constraints. From 1969 to 1978, the ratio of nursing home beds/1000 population rose from 44.5 to 60.0." In 1960, there were 142 professionally active physicians/100,000 population, the same ratio as in 1950." By 1980, the ratio had increased to 202/100,000.

It is, of course, far more difficult to measure qualitative changes. The very rapid expansion of sophisticated medical technology, during this period," is variously interpreted as an important qualitative advance or an expensive redundancy which may actually increase the risk of iatrogenic accidents Even allowing for some technological overkill, as additional investment in this area reaches the point of diminishing returns, or what has been called the "flat of the curve" point,' there can be no quarrel with the statement that, at this point at least, the average U.S. hospital and nursing home is a better place for patients than it was in 1966.

Are our doctors better today than they were in 1966? Some critics of current medical education complain of a decline in standards; perhaps there has been some leveling down along with the vast expansion of enrollment. However, the question here is more one of the appropriateness of the current spe cialty distribution rather than individual quality an oversup.

of tertiary specialists and a conti uing undersupply of primary physicians, a point to which I return under ''shortcom ings.

It is no more appropriate to credit Medicare for all the good things that took place in the health care area during the decade and a half following its enactment than to blame it for all the inflation and other cost problems. Still, as the national pattern-setter, it should carry a significant share of responsibility in both respects. The following list of achievements is presented in that spirit.

3. Major advances in clinical medicine.

Progress during the past 15 years has been especially dramatic in terms of sophisticated diagnostic techniques, surgery, anesthesia, and pharmacology. Except for out-patient drugs, these are all areas covered by Medicare. The CAT scanner, open-heart surgery in cases of left-main-coronary disease and triple-vessel disease, drug treatment of angina and other cardiovascular conditions, and cimetidine for ulcers are illustrative of literally hundreds of new diagnostic and therapeutic techniques that have been made possible, in good part, by Medicare reimbursement and associated Great Society programs. 4. Major progress in lite expectancy for the elderly and disabled

Between 1940 and 1954, the death rate for men 65 and over tell by an average annual rate of 1.1 percent." Between 1955 and 1967, it rose by an average annual rate of 0.2 percent. However, between 1968 and 1978, there was an average annual drop of 1.5 percent about 15 percent for the decade. For men 85 + the improvement was even more dramatic. Between 1955 and 1967, their death rate rose by an average of 0.9 percent per year; between 1968 and 1978, it dropped by 2.2 percent-about 30 percent for the decade. In terms of life expectancy at 65, between 1950 and 1960, there was an addi

1. Creation of a manageable national health insurance program

For our elderly and most seriously disabled, Medicare now provides a form of national health insurance-inadequate to be sure in several respects (as will be pointed out below) but universal within its own definition of eligibility and, despite great complexity, administratively viable at surprisingly low management costs. In 1979, for example, 36.4 million bills were processed under Part A;' a much greater number under onset of chronic disabling conditions or to minimize their severity. It matters not to Medicare that an estimated one-half of all the elderly are edentulous and 10 percent have neither teeth nor dentures 2

tion of 0.4 years; between 1960 and 1978. a full two years." In 1978, the average woman could look forward to over 18 more years, the average man, 14.

The most dramatic improvement was in the cardiovascular area. While the U.S. continues to have one of the highest coronary death rates in the world, during the 1970s we obviously began to do something right. Between 1969 and 1977, our death rate for men 35-74 from coronary heart disease (CHD) tell by 23 percent, the best record of any of the industrialized countries, 6

Similar figures are not available for the disabled as a group. But for end-stage renal disease (ESRD) patients the increase in life expectancy has been dramatic. In the absence of dialysis, the annual death rate for such patients is estimated at about 98 percent."7.18 With dialysis, it varies from 8 to 20 percent, depending on other complications such as diabetes. For whatever reason, or combination of reasons, health outcomes as measured by mortality rates-improved dramatically under Medicare. 5. Improvement in quality of lite for the disabled.

The extent to which the two extra years of life for the average elderly person were associated with improvement in the quality of that life is debatable. However, for at least some of the chronically disabled, there was substantial progress. Dorothy Rice has pointed out the improvement implicit in their ability to have cataracts removed for many who previously could not afford such a relatively simple operation." In one five-year period, 1974-1979, the proportion of elderly who viewed themselves in "poor" or "fair" health, as opposed to "good" or "excellent," fell from 33.9 to 31.4 or 2.5 percentage points.20

Major Shortcomings and Problems

The anti-prevention bias appears particularly egregious in view of the recent success of preventive programs in reducing or controlling hypertension, strokes, and other cardiovascular conditions. In the words of the National Heart, Lung, and Blood Institute's 1981 Task Force Report on Arteriosclerosis:

"The marked and continuing decline in mortality rates from coronary heart disease and the other atherosclerotic diseases in the 1970s lends support to the concept that the epidemic onslaught of these diseases can be controlled and prevented.... 23

I am sure that both Secretary Schweiker and Secretary Califano agree with this view. Yet both Administrations have said that we cannot attord to provide preventive services under Medicare. How pennywise and poundfoolish can we get?

Similarly, Sec. 1862 prohibits payment for "custodial" care, which, as a practical matter, means most long-term care, whether institutional or home-based. Again, this omission can be associated (I do not say causally, but I do believe more than coincidentally) with our failure to show any significant progress with respect to the treatment and/or rehabilitation of long-term stroke patients or those with Alzheimers, now estimated at nearly 10 percent of the elderly. 2*

Conceptually, the Medicare benefit package, like most private health insurance upon which it was largely modelled. was a product of the late 19th and early 20th centuries, when acute illness was the primary concern, and when most patients either got well or died in a relatively short period of time. The role of behavioral, environmental, and genetic risk-factors in the etiology of chronic disease and the importance of periodic screening, patient counselling, and early treatment in postponing the onset of disabling consequences were not understood. Nor was the frequent necessity of years of rehabilitation and long-term care for those who now survive an acute heart attack, stroke, or serious trauma, or the growing legions with neurological problems.

This is the historical paradox of medical progress: The more successful we are in controlling mortality, the more morbidity usually results!2This is not a good reason for letting people die untreated or for discontinuing health insurance. It is an urgent reason for adjusting our health care priorities and financing mechanisms to the new realities.

Medicare's major shortcomings, as an instrument of, and a pattern-setter for, national health policy, can be summed up briefly: (1) overemphasis on acute care and the "technological fix" at the expense of prevention, primary care, and long-term

re; and (2) failure to incorporate any reasonable cost controls. Like the accomplishments, these shortcomings cannot be blamed exclusively on Medicare. The program reflected the prevailing views of most Americans, both providers and consumers, in the mid-Sixties and early Seventies. Overemphasis on Acute Care

First, with respect to overemphasis on acute care, everyone knows that chronic conditions are now the dominant cause of morbidity in the U.S. According to the National Center for Health Statistics, 83 percent of all "restricted activity days" for those 65 and over and 87 percent of all deaths are now associated with chronic conditions.?' Needless to say, when a patient dies from a heart attack or cancer, there has been a very acute exacerbation of the underlying chronic condition! However, what distinguishes chronic disease from most acute disease and trauma is not the absence of such acute episodes but the usually slow and insidious onset and the frequent lengthy period of disability. The latter may, or may not be interrupted by acute episodes but, no matter how well such episodes are handled medically, by definition the condition is never "cured."

Medicare was simply never intended to deal with such chronic conditions, other than the acute episodes. Sec. 1862 of the law specifically prohibits payment for preventive services, including periodic screening and counselling as an essential aspect of ongoing primary care, eye or hearing examinations for eyeglasses or hearing aids, preventive dental care including dentures for those without teeth, and most podiatry services all of which can frequently help either to prevent the

Fallure to Incorporate Reasonable Cost Controls

It is unnecessary, before this audience, to go into detail with respect to the spiralling costs of Medicare. The figures have been repeated almost ad nauseum. As you know, the program started out in 1967, the first full year of operation, costing only $4.5 billion and grew at an average annual rate of 17 percent?? to an estimated $36 billion in 1980, a budgeted $60 billion in 1983,20.28 and a projected $76 billion by 1985. In one year, FY 1980-1981, the rise was 21 percent. It seems hardly necessary to point out that such a rate of growth cannot and will not be tolerated indefinitely.

Moreover, eventually the elderly themselves would probably revolt. For what we are now witnessing is not just an unacceptable rise in overall costs but a probable shrinkage in value.

Medicare's contribution, as a percentage of total health care expenditures of the elderly has changed somewhat over time, with the last published figure from HCFA, for 1978, put at 44 percent. 30 | Part B premiums had been included in the expense side of the equation as they should have been the figure would have been closer to 40. No one knows for sure what the ratio is today. But in view of the recent 25 percent rise in

There is, today, a growing tendency, especially in governmental and other third-party circles to question the appropriateness and the relation to health outcomes of much of the new technology and other intensity factors. Some skepticism is in order and suggests our gradual maturing past the "gee whiz" stage of technological progress. Still, there is a danger of overreaction, motivated too narrowly by cost considerations and with inadequate understanding of the basic problem, i.e. trying to deal with chronic disease on the same basis as acute conditions.

Surprisingly, there are no studies that attempt to isolate the role of price in the Medicare cost rise. However, such an effort is made annually by the Department of Health and Human Services (HHS) for all personal health care expenditures. The latest reports the contribution of price inflation to the overall rise, at five year intervals, as follows: 1965-197049 percent; 1970-75-59 percent; 1975-1980—73 percent." Needless to say these growing proportions incorporate the general price inflation as well as the additional inflation in health care. The relation between general inflation and health care prices has changed over the past 15 years; but, in general, the rise in medical care prices has led general prices throughout, usually by a substantial margin of difference. With 1967 as 100, for example, the Consumer Price Index (CPI) for all items reached 284 in April 1982; for all medical care, 322; and for a hospital room, 542, almost twice the general inflation rate.***

Corrective action with respect to hospital costs in general and Medicare costs in particular needs to focus: (1) on prices; and (2) on service intensity. Note that these are precisely the factors over which consumers or patients have virtually no control.


the Part B deductible, the declining ratio of allowable physicians fees to actual fees, and the rising costs of uncovered long-term care, it is unlikely that there could have been any significant improvement.

Medicare's inadequacy in this respect is underscored by the large sums that government at all levels is having to spend for the health care of the elderly, in addition to Medicare. In 1978, for example, the addition represented nearly 20 percent of their total personal health expenditures. Thus, we arrive at a second paradox: The higher the costs of Medicare, the less beneficiaries are getting from it!

Before attempting to define the missing "reasonable cost controls," it is essential to clarify the major causes of the cost escalation. First, several theoretical possibilities can be ruled out immediately. There has been no significant expansion of benefit coverage since the beginning. Administrative costs, as already noted, have been moderate from the beginning and are still declining. In contrast to Medicaid, there has never been any evidence of significant fraud.

What then are the major causes? They are, as I am sure most of you already know, the same five factors which are generally blamed for the overall rise in health care costs, although the relative role they play in Medicare is not precisely the same as for younger persons. They are: increase in the covered populations; increased utilization per capita; quality improvements; greater "intensity" of care; and price inflation.

The number of Medicare enrollees rose from just over 19 million in 1966 to nearly 28 million in 1979, an average increase of 2.9 percent per year. The largest single year increase-10 percent--came in 1973, when the disabled and ESRD patients were added. Despite the conservative definition of "disability": for the purpose of Medicare eligibility-30 months after the first full month of actual disability—this category of enrollees has continued to grow at a much faster average annual rate 9.6 percent--than the elderlyer 1.9 percent, while the ESRD category exploded by an average rate of 21 percent per year. Even the 1.9 percent may be compared with an average growth rate for the general population of less than 1 percent. Within the ranks of the elderly, the rise in the "old-old"-those 75 and over-was nearly twice that of the young old those 65742.7 percent compared to 1.5 percent. And nonwhite enrollment grew twice as fast as white. Clearly, Medicare is producing the hoped-for effect--the elderly, the poor, and many of the chronically disabled are being helped and are living longer.

Utilization of most Medicare benefits has increased moderately; but not all. For example, the use of SNFs by the elderly actually declined. The picture with respect to short-stay hospital use is particularly significant. In the decade 1967-1977, the discharge rate for Medicare enrollees 65+ rose 28 percent but, thanks to a 21 percent drop in average length of stay, days of care were virtually unchanged-up 2 percent. 35

The higher rate of admission and discharge, combined with shorter length-of-stay, the striking rise in the proportion of hospitals with specialized high-technology services, and the continuing rise in the number of procedures and/or medications per admission, 37.39 all add up to the well-known phenomenon of increased "intensity" of care. As already noted, the relationship between quality and intensity is complex: Clearly they are related; but they are not identical.

For example, it is widely recognized that the current practice of ordering blood chemistries in batches of 12, 18, or 24 has very little relation to diagnostic precision, i.e. quality, but is primarily a technological artifact. Similarly, it is well known that some hospital procedures are performed not for the sake of a surer diagnosis but as a theoretical protection against a malpractice suit or as a teaching device.

Strengthening Medicare for

Future Needs

In summary, then, in terms of its own objectives, Medicare and its related Great Society health programs have been a real success. Two years have been added to the life expec. tancy of the average 65 year old American; slightly more to that of the average older Black. For millions of younger disabled, the quality of life has improved; some, such as ESRD patients, have, quite literally, been given years of reprieve from an otherwise unappealable death sentence.

Medicare is now the victim of its own success. The benefit package is not only deficient in specific areas but obsolete in its basic orientation. The program costs too much, not just in dollars, but in its declining value to enrollees, meeting less than 40 percent of their health care costs whereas it should be meeting at least 60 percent. This is clear from the fact that other public programs are paying nearly 20 percent of their costs resulting in fragmentation, considerable duplication, and unnecessary administrative costs.

Don't jump to an erroneous conclusion, however. Medicare should not be repealed! It is the best thing indeed the only sure thing that we elderly have to insure us not only against the high costs of care but equally serious against loss of professional interest, a loss which could rapidly condemn

"It is important, however, not to overstate the Medicare contribution to medical price intlation, which was evident long before 1965. Between 1950 and 1965, for example, the general CPI rose at an average annual rate of 1.8 percent; medical care prices, 3.5 percent. From 1965 to 1981, the CPI rate was 6.8 percent; the medical care rate, 7.7 percent.

millions of the poor and near-poor to the same fate which already faces those whose condition is beyond Medicare coverage, and which faced most of the elderly, even those with acute illness, prior to 1966. No! The challenge is not to dismantle but to reform and strengthen. The former would be easy; the latter will be difficult as difficult as it was to enact Medicare in the first place.

In my view, reform should take two major directions, corresponding to the two major problems: (1) The existing overemphasis on acute institutional care should be corrected by a new commitment to prevention, primary care, and longterm care; and (2) The destructive cost escalation must be moderated through introduction of meaningful cost controls. I am not suggesting that there is anything economically and or morally wrong about spending 10 percent or more of the GNP for health care, or even X percent of the federal budget. As our population continues to age, at least for another 40-50 years, we will inevitably spend more for health. The real question relates to what we are, or are not getting for our money.

Fortunately, the two thrusts are complementary and should be pursued simultaneously. Limitations of time prevent anything more than a few suggestions as to specific actions that could or should be pursued under each of these headings. For example, specific measures to implement Point 1-Benefit Reorientation might include:

1. Redefine Medicare's basic benefit package to emphasize primary care and to include appropriate preventive services, including periodic health maintenance visits, and a reasonable amount of dental. podiatry, and other allied health services; also long-term care for disabling chronic conditionsboth institutional and home-based

The latter could be financed, in part, by transfer to Medicare, from Medicaid, Title XX, and perhaps other public health programs, of the substantial funds---now probably more than $12 billion a year-budgeted for long-term care for the elderly and disabled under those programs. Also varying degrees of cost-sharing should be included, along with essential quality and cost controls. (More on the latter below.) Probably most of the essential new preventive services, as well as portions of the long-term benefits could be financed by gradually postponing the normal Social Security retirement age from 65 to 68, as suggested by the Technical Committee on Health Services to the 1981 White House Conference on Aging." a development in line with considerations of individual health as well as financial needs. Gradual introduction of the new benefits might be synchronized with the gradual postponement of the retirement age and corresponding adjustment of Social Security and other pensions.

2. Require all Medicare patients to register with a qualified primary care practitioner or primary care group and to obtain a referral before consulting a specialist, as a condition of benefit payment.

If the new primary care benefits are to be effectively utilized, there must be assurance that personnel are available and appropriately used. The requirement that all enrollees register with a primary care practitioner (PCP) or primary care group (PCG) is in line with long-standing professional emphasis on the importance of continuity of care and a personal doctorpatient relationship. Provision for referral for short-term specialized care is, of course, essential but the patient should always return to his or her PCP or PCG for the long-term management of any continuing chronic condition, thus assuring: (a) that the patient will not be "abandoned" when the specialized treatment has ended but will continue to receive good quality care; and (b) that such care will be rendered in the least expensive appropriate setting.

This emphasis on primary care is in line with current interest in HMOs but, unlike the traditional HMO, this proposal does

not involve "closed panel" practice or necessarily the capitation method of provider payment. It is the same formula successfully followed for 20 years by the Hunterdon Medical Center in New Jersey, and variations thereon have been explored by several large health insurance carriers.

Other points which should be explored in connection with Benefit Redefinition include the special and difficult problem of administering long-term care benefits and special provisions for terminal care.

Under Point 2, Cost Controls, the following are suggested:

1. Firm budgetary ceilings should be established on overall Medicare expenditures, perhaps on a biennial or triennial basis. Whether such ceilings should be established by Congress or the various Fund trustees is perhaps debatable. What is not debatable is that there should be some such overall caps. The "blank check" now extends downward from the Congress, the Secretary of Health and Human Services, and Fund trustees, through the intermediaries and carriers, to the hospitals and their employees, and ends up with the orderly saying to his department head, "Why should you object to my getting another raise? It won't come out of your pocket!" This must be reversed and some fiscal discipline built into the whole system of reimbursement. And I don't mean just on the patient!

2. Establish fixed prices, negotiated and periodically rene gotiated, for all categories of provider services and goods.

Any effort to replace the reimbursement "blank check" with fixed fees has, for the past few years, been viewed by the leading provider organizations as excessive "regulation" or government interference." This is hard to understand. As my husband pointed out in 1967, health care is virtually the only industry or even profession in which the major suppliers of services have refused to accept even the concept of fixed prices. While this unique situation can be largely explained in historical terms, continued opposition, especially on the part of the medical profession, will almost surely have tragic consequences, not only for the public but for the profession itself.

Fixed fees are essential not only to effective cost control but to rational resource allocation, to responsible institutional and group management, and equally important-to the preservation of professional independence. The current desperate effort, in some quarters, to transform the medical profession into a business may appear to some-both in the profession and in government--as a clever and even desirable way of attacking the present untenable situation but it would, almost certainly, lead to near-commercialization of the practice of medicine and this in turn could mean eventual near-total domination by external financial pressures.46.47

There are some signs that this threat is beginning to be appreciated. The President of the American Hospital Association recently stated that "the traditional system of insurors paying hositals retrospectively for patient costs has 'outlived its usefulness, and the AHA has now suggested its own version of "prospective rates.'"48

So what now? The answer does not appear either mysterious or frightening. But it does involve some important decisions with respect to three interrelated but separate points: (1) payment of physicians, hospitals, and other providers on the basis of fixed rate schedules; (2) determination of such schedules through periodic collective negotiations between the major third-party payors and the major provider organizations; and (3) determination of the most appropriate method of payment for different categories of provider. A few words on each of these points.

1. It appears advisable to adopt the term "fixed rate schedule" rather than the phrase that has recently become popular in health care circles, "prospective rates." While the latter has certain professional appeal in that it does not seem so rigid. Needless to say, any major changes of this magnitude would require careful study and public debate. Although the hour is late and the need for action urgent it would still be wise to establish a top-level public private bipartisan Medicare com mission, alongside the Social Security Commission to come up with a specific legislative program in time for the next Congress.

it is not understood by the public and is sometimes mistaken to mean payment in advance. It may also be argued that "prospective rates" really are more flexible, at least when applied to hospitals, in that they include incentive schedules which may vary up or down within a defined range, depending on the institution's performance. But this is not a good enough reason to use an ambiguous term. The question of incentive rates versus single rates is one to be determined as part of the suggested negotiations (see below) Even if a range were adopted, rather than a single rate, the range would have to be fixed. Any misunderstanding on the point of predictable prices must be avoided

2. Fixed rate schedules could, of course, be drawn up in various ways: unilaterally by the consumers or payors, unilaterally by the providers, or through collective negotiations between the two groups. The latter is clearly the most equitable and in line with the general trend of decision-making in highly industrialized democratic societies. A negotiated approach to rate-setting was recommended by the author as early as 1977" and has recently received new support The choice of Prof. John Dunlop of Harvard University, an internationally respected labor economist with a strong commitment to negotiations as a basis for decision-making, as chairman of a national health coalition, announced in January 1982,50 suggests an increasingly receptive atmosphere for such an approach

inevitably, there will be some thorny questions as to precisely who will represent the two groups for this purpose: what changes would be needed in current anti-trust legislation; what geographic areas would be served, etc American experience with the gradual historical development of collective bargaining law and procedures, culminating in the National Labor Relations and Taft-Hartley Acts should be helpful, as well as the experience of many other Western democratic countries with respect to the health field. In many respects, however, the American situation is unique and participants in this development must be prepared to pioneer

3. With a field as large and diverse as health care, it should be obvious that no one method of payment will prove most appropriate. Not only will there be differences between institutional and individual providers but within each of these groups, depending on the legal form of specialization, etc. For example, a case could be made for paying hospitals on the basis of per diem rates, per case rates, single rates, incentive rates within a range, etc. In the case of physicians, the schedules could be based on tee-for-service, using relative value scales for comparative weighting, salary, capitation, or some combination thereof.

In general, it would appear that fee-for-service is probably most appropriate for specialized episodic acute care; salary or capitation for continuing primary care. But these too should be matters for negotiation. There is no more basis for accusing fee-for-service of being the major cause of the current health care inflation than for fearing that capitation will result in inadequate care. Whatever the method of payment, professional self-regulation within a context of public accountability remains the ultimate guarantor of patient protection. One of the major goals of the negotiated approach to provider payments is reaffirmation of the necessity of professional selfregulation and the development of instrumentalities to make it effective

Other points which should be explored under this heading include nondeterrent cost-sharing, especially for long-term care, possible limits on payroll tax deductions for health insurance benefits, possibly some limits on the use of exotic technology- an extremely difficult but impossible-to-ignore topic, and some administrative reforms such as consolidation of Parts A and B of Medicare.

It is a cliché to point out that the term crisis means both danger and opportunity. The danger in the present Medicare situation and the possibility of irreparable damage both to it and to the nation's health is clearly with us. But so is the opportunity for a whole new approach to health care and health care policy. For years we in the US have been criticized for being the only advanced democratic nation on earth without some form of national health insurance or national health service. Perhaps there was some Providential reason for this seeming lag. Perhaps we can prove the truth of the Biblical proverb. "The first shall be last and the last shall be first."

As we meet here today and debate the future not only of Medicare but of our national health policy in generalnote that we are the first Western nation to do so in the wake of four historic developments: (1) after the genetic code has been broken. (2) after average life expectancy has passed the Biblical norm of three score years and ten.“ (3) after chronic disease has taken the place of acute disease as the primary cause of morbidity, and (4) after medical science and technology have achieved the capability to give or to withhold life to specific patients in specific situations such as ESRD. These are developments no less important in terms of health care policy than the discovery of atomic fission and fusion in terms of international relations. Apropos that discovery. Albert Einstein said, "The splitting of the atom has changed everything save our mode of thinking, and thus we drift towards unparalleled catastrophe.

Let it not be said of us as we scurry about thinking up vouchers, "indemnities, "Long-Term Care IRAs," and other gimmicks, that we were so preoccupied with rearranging the chairs on the Titanic that we missed altogether the great icebergs descending upon our health care system chronic disease, chronic disability, and the costs related thereto. On the contrary, let us recognize chronic disease for the challenge it is and set about learning how to prevent it; how to postpone its disabling consequences, how to live and function with it, when it cannot be prevented; how to die from itwith as little suffering as possible, and how to pay for it.

Perhaps the most realistic diagnostician of our current health care problems is also the most optimistic as to future possibilities. Dr. James Fries of Stanford Medical School has coined the phrase "The Rectangular Society" to indicate one in which most people live, without much serious disease or premature death, to a ripe old age of about 85. I conclude with his words:

1 "As chronic diseases are postponed, and as physiological aging is slowed by research and lifestyle changes, natural life will become more prevalent. Personal choice will come to play an increasingly dominant role in health, in the pre vention of premature disease, and in the favorable modification of those aspects of aging that are plastic....

"What will life be like in a rectangular society? There will not be an accumulation of debilitated elderly people exhausting the medical and social resources of the society. On the contrary, granting a stable birth rate, there will be comparable numbers of vigorous, healthy people in each of the first seven decades of life, followed by a decline in the number of individuals between 70 and 100. Although death and debility resulting from congential defects and accidents will always be present, and some will consciously choose not to live out a natural life through personal choice

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