SELECTED MEDICARE ISSUES

FRIDAY, SEPTEMBER 19, 1975

U.S. HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON HEALTH, COMMITTEE ON WAYS AND MEANS, Washington, D.C.

The subcommittee met at 9 a.m., pursuant to notice, in the committee hearing room, Longworth House Office Building, Hon. Dan Rostenkowski (chairman of the subcommittee) presiding.

Mr. ROSTENKOWSKI. These hearings will begin after the Chair makes several announcements.

The witnesses have been allocated a certain amount of time. It certainly would serve the members of the committee and those people making arrangements for departure some time later in the day if the witnesses would confine their remarks to the allotted time.

I might say that excluding the administration witnesses, we expect 511⁄2 hours of direct testimony. This will mean that it is the intention of the Chair to carry the hearings through the lunch period.

In trying to expedite the hearings, there will be, on occasion, some questions submitted to the witnesses in writing so that the answers could be placed in the record. I would also like, without objection, for the press release announcing this hearing to be inserted in the record. [The press release follows:]

[Press release for Thursday, July 31, 1975]

SUBCOMMITTEE CHAIRMAN DAN ROSTENKOWSKI (D., ILL.), SUBCOMMITTEE ON HEALTH, COMMITTEE ON WAYS AND MEANS, ANNOUNCES A 1-DAY HEARING ON SPECIFIC MEDICARE ISSUES

Subcommittee Chairman Dan Rostenkowski (D., Ill.) of the Subcommittee on Health of the Committee on Ways and Means announced today that the Subcommittee will hold a one-day hearing on a limited number of specific medicare issues and problems, at 9:00 a.m. on September 19, 1975. A list of the medicare issues and problems to be the subject of the hearing is attached. The hearing will not cover any other subjects or issues.

In view of the heavy schedule of the Committee and the limited time available for this hearing, it will be necessary to allocate the amount of time available to each witness for the presentation of his direct oral testimony, and it will be mandatory on all witnesses not to exceed the time allocated for this purpose. All witnesses will be scheduled in panels by the staff according to subject matter. The witnesses' full statements will be included in the record of the hearing. Cutoff date for requests to be heard. Requests to be heard must be received by the Committee no later than the close of business Friday, August 26. Requests should be addressed to John M. Martin, Jr., Chief Counsel, Committee on Ways and Means, U.S. House of Representatives, 1102 Longworth House Office Building, Washington, D.C., 20515, telephone: (202) 225-3625, Notification as to the witness' scheduled date of appearance will be made as promptly as possible after the cutoff date. Once the witness has been advised of his date of appearance and

allocated time, it is not possible for the date or the time to be changed. If a witness finds that he cannot appear on that day, he may wish to either substitute another spokesman in his stead or file a written statement for the record of the hearing in lieu of a personal appearance, because under no circumstances will the date, or the time allocation, of an appearance be changed.

Requests to be heard must contain the following information:

(1) The name, full address, and capacity in which the witness will appear. (2) The list of persons or organizations the witness represents and in the case of associations and organizations, their address or addresses, their total membership and, where possible, a membership list.

(3) If a witness wishes to make a statement on his own behalf, he must still nevertheless indicate whether he has any specific clients who have an interest in the subject, or in the alternative, he must indicate that he does not represent any clients having an interest in the subject he will be discussing.

(4) A topical outline or summary of the comments and recommendations which the witness proposes to make, which will form the basis for staff-prepared summaries of the hearing.

As indicated above, the amount of time available to each witness for the presentation of his direct oral testimony will be strictly allocated. Witnesses are urged to verbally summarize their statements; the complete prepared statements submitted to the Committee will be included in the printed record of the hearing and will be reviewed and fully considered by the Members of the Committee.

It is requested that persons scheduled to appear before the Subcommittee to testify at this hearing submit 75 copies of their prepared statements to the Committee office no later than 48 hours prior to their scheduled appearance. An additional 75 copies may be furnished for distribution to the press and the interested public on the date of appearance.

Any interested person or organization may, in lieu of a personal appearance, file a written statement for inclusion in the printed record of the hearing. For this purpose, statements should be submitted in triplicate by the close of business Wednesday, September 25, 1975. Additional copies may be furnished for distribution to the press and the interested public during the course of the public hearing.

MEDICARE ISSUES TO BE SUBJECT OF SEPTEMBER 19, 1975, PUBLIC HEARING BEFORE SUBCOMMITTEE ON HEALTH

1. Consideration of possible legislative changes relating to HEW regulations that were the subject of a Subcommittee hearing on June 12, 1975:

(a) termination of the 8%% nursing differential in hospital costs;

(b) redefinition of reasonable cost level for hospitals (90th to 80th percentile and revised hospital classification system);

(c) utilization review requirements for institutions participating in medicare; and

(d) economic index applied to the 75th percentile for determining reasonable charges under medicare for physicians' services.

2. Nurse staffing requirements in rural hospitals (authority to waive certain requirements with respect to nurse staffing requirements in rural hospitals expires on January 1, 1976).

3. Medicare relationship to Federal Employee Health Program (no payment may be made under medicare, beginning January 1, 1976, for services provided to members of federal employee plan unless system of coordination between two programs is developed).

4. Revisions in hemodialysis and kidney transplant provision to improve administration and enhance cost effectiveness.

5. Revisions in Professional Standards Review Organization provisions.

6. Revisions in home health care provisions.

7. Part B premium increase provision-correction of technical error in present law which precludes increasing the premiums.

8. Institutional services reimbursement-possible basic changes from the present retroactive reasonable cost reimbursement.

9. Physicians' services reimbursement-possible basic changes in present "reasonable charge" system.

10. Possible revisions in hearings and appeals provisions under part B program. 11. Consideration of specific proposal, with respect to malpractice, to permit hospitals to self-insure and charge medicare currently.

12. Revisions in current coverage of ambulance services.

13. Coverage of Pap smears under part B.

14. Possible changes in payment methods for physicians' services when patient is deceased.

Mr. ROSTENKOWSKI. I am certain that I can expect cooperation. I want to again remind you that the time allocation does not include the questions that will be asked by the members of the Subcommittee on Health.

It is my pleasure at this time to welcome Dr. Cooper and Mr. Tierney to the hearings of the Subcommittee on Health of the Ways and Means Committee. I look forward to your testimony, Doctor. If you would please begin your testimony, we would appreciate it very much. STATEMENT OF THEODORE COOPER, M.D., DEPUTY ASSISTANT SECRETARY FOR HEALTH, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, ACCOMPANIED BY THOMAS M. TIERNEY, DIRECTOR, BUREAU OF HEALTH INSURANCE, SOCIAL SECURITY ADMINISTRATION, DHEW; DR. ROBERT VAN HOEK, ACTING ADMINISTRATOR, HEALTH SERVICES ADMINISTRATION, DHEW, DR. PETER FOX, DIRECTOR, OFFICE OF HEALTH ANALYSIS, OFFICE OF PLANNING AND EVALUATION, DHEW; AND DALE SOPPER, ACTING DEPUTY ASSISTANT SECRETARY FOR LEGISLATION (HEALTH), DHEW

Dr. COOPER. Thank you, Mr. Chairman. I am pleased to appear before you today. I have with me, beside Mr. Tierney, Dr. Van Hoek, Health Services Administration; Mr. Sopper and Dr. Fox, from the Office of the Secretary.

Essentially, I am here today to expand on the testimony on a similar set of issues presented to this subcommittee on June 12 by former Secretary Weinberger.

In view of your schedule and your concerns for covering that schedule today, I would propose that I not read the entire statement but would ask that it be submitted for the record in its entirety.

Mr. ROSTENKOWSKI. Thank you, Doctor. All full statements, if summarized by the witness, will be placed in the record without objection. Dr. COOPER. In essence, I would like to summarize in several categories. Of the issues which are being reviewed here, the most important is the escalation of costs, and the escalation of costs continues. It is clear that it is not a temporary bulge.

If you consider the accumulated experience for the first seven months of this year, you will see that the medical care component of the Consumer Price Index has increased at an annualized rate of 11.9 percent, as compared to a 7.3 percent in the overall CPI.

So in a nutshell, we believe the issue remains a very serious one. We have not effectively dealth with the issue of cost containment, and of course that continues to affect many of the other considerations that arise in health policy development and the allocation of health

resources.

At this point I would like to identify the legislative initiatives the department has taken.

In February, the administration submitted the social security cost control amendments, H.R. 4820. The proposal would subject part A medicare services to a 10 percent coinsurance; allow automatic increases in the annual $60 deductible in proportion to future increases in cash benefits; and institute a cost-sharing liability limit of $750 per spell of illness under part A and part B of medicare.

The bill is designed to discourage unnecessary utilization of services and provide protection against the catastrophic costs of illness.

The administration's bill, H.R. 4822, which would permit increases in the SMI premium-now frozen at $6.70 per month due to a technicality was introduced earlier this year. Your subcommittee reported. out similar legislation as part of H.R. 5970. The concepts are similar and we urge enactment of this proposal.

The administration also has sent to the Congress draft legislation to coordinate medicare and the FEHB program. The Civil Service portion of this joint legislation has been introduced as H.R. 1978 by Representative White of Texas. The administration bill has not yet been introduced. Enactment of this legislation is necessary by January of 1976.

The temporary waiver for a 24-hour nursing requirment for rural hospitals expires at the end of this year. Representative Burleson's bill, H.R. 1792, would extend the waiver authority for 5 more years. The department opposes this bill, and is transmitting legislation to extend the waiver authority for 1 year.

Draft legislation submitted in July would repeal the requirement that proprietary home health agencies be licensed under State law and would subject them to the same licensing requirements as public and private nonprofit agencies.

Several efforts to implement cost control provisions of the 1972 Social Security Amendments were reviewed in June and I think these are of interest to this committee.

The first of these is utilization review and the PSRO program. The Department is drafting revised UR regulations for publication under a notice of proposed rulemaking in the near future. The revised regulations will clarify those sections which were the subject of the suit by the American Medical Association, and which dealt with the review of hospital admissions, structure of the review committee and role of positions in that process. The notice to this effect was published in the Federal Register on September 10.

There is growing evidence of physician support of the PSRO program. Over 86,000 physicians have joined PSRO's in their area. That means one in every four physicians is now a PSRO member.

A number of bills have been introduced to repeal or amend UR and PSRO. Among the bills to amend PSRO are the AMA-sponsored proposals which contain a number of revisions. The Department feels that, although changes will no doubt be necessary at a later date, until further experience is gained, the laws should be implemented as

enacted.

UR legislation is not addressed in the testimony today due to the delay in implementation of the two sections of the regulations mentioned earlier. Considerable interest has been expressed with respect to the Department's plan on how to deal with the problems of rural hospitals.

With respect to the issue of eliminating the 8.5 percent nursing differential, the Department reasoned that the application of this differential was no longer appropriate and published regulations on May 23, terminating this inpatient routine nursing salary cost differential. When the American Hospital Association filed suit to enjoin the Department from enforcing the regulations, the U.S. district court favored their petition. The Department will not appeal and will study the issue further.

Another item discussed here on June 12 was the limits on reasonable costs of hospital inpatient services. The June 6 regulations establish 70 groups of hospitals with prospective limits set at the 80 percentile, plus 10 percent of the median of routine per diem costs. The Association of American Medical Colleges filed a suit for permanent injunction, which was denied. A proposed schedule of limits applicable to skilled nursing facilities is now being developed.

The economic index limitation on increases in prevailing charges for physician services was also an issue that was discussed in our previous testimony. Final regulations implementing the economic index provisions were published June 16. We are now considering a technical amendment because of an unpredicted rollback. In other words, some doctors who agree to take assignment are being paid less this year for certain selected procedures than they were last year. We recognize that this was not the intent of that provision.

On the subject of home health care, under section 222 of the 1972 amendments, the Department is funding research and demonstration projects to determine the costs and efficiency of certain types of home health care. Proposed regulations recently were published to allow home health agencies to contract with proprietary providers.

The proprietary home health care provider licensing requirements were part of the social security amendments transmitted to the Congress in July. Another proposed regulation would guarantee minimum coverage in service.

The Department recognizes a large number of bills have been introduced to expand home health services. We believe, however, effectiveness is possible only if there is professional control in this area to prevent misutilization or overutilization.

On the question of prospective reimbursement, the Social Security Administration is currently conducting a broad and comprehensive research and experimentation program to test the prospective methods. I have no specific results to report at this time. The study is still in a preliminary stage.

On the question of physicians' services reimbursement, the rate of physician acceptance of assignment under the current so-called reasonable charge system is declining. The Department is studying alternative reimbursement methods.

Bills with over 100 cosponsors have been introduced to include the coverage of Pap tests under part B. While medicare does not cover preventive services, Pap smears are covered when viewed as necessary and in the diagnosis and treatment of a specific case.

Payment for physician services when the beneficiary is deceased is another issue which arose. Representative Burke's bill, H.R. 6022, would require medicare to pay the physician ahead of all other credi