Mr. JARMAN. Mr. Rogers.

Mr. ROGERS. Thank you, Mr. Chairman.

Let me go into a few things that I am concerned with. All of us are here to try to provide the best health care we can for the American people. I know that. And I also realize that a new group has come and it takes time to get your feet on the ground, and I am amazed that you can grasp so many programs so quickly as you do.

I might start off asking the question I was going to ask earlier. Mr. Secretary, has there been any progress made on an Assistant Secretary for Health?

Mr. VENEMAN. There is progress, Mr. Rogers.

Mr. ROGERS. I don't want to embarrass you, but I am getting concerned, because when we questioned the Secretary the last time he hoped it would be about a week, he said, or 10 days. And this has now been some 3 weeks, I think, or four.

Mr.VENEMAN. Well, I think I had better repeat what the Secretary said. It is our hope that it will be within a week or 10 days.

Mr. ROGERS. Well, maybe we ought to abolish the position in a couple of weeks now, if something doesn't happen. This committee could do that, if that is what we need to do.

Mr. VENEMEN. I do not think that I would advise that. I think that we can commend those who are on the staff for filling a tremendous vacuum. We realize the importance of that position and we also realize that it is important to have a person in that position who would effectively carry out the needs.

Mr. ROGERS. Because it is essential, I think, for us to try to come to some determination.

Mr. CARTER. Mr. Chairman, I would hope that the chairman in his august greatness would certainly defer action on this and give the Secretary ample time for the selection of a man who could really fill this job adequately.

Mr. ROGERS. I agree.

Mr. VENEMAN. We would be pleased to have the recommendations of both of you gentlemen.

Mr. NELSEN. That is a good answer.

Mr. ROGERS. I don't know whether you want to get into that or not. But I am sure if the President can select such fine men as he has, as Secretary and Under Secretary, he can also find someone to be the Assistant Secretary for Health. And we would like to encourage that

movement.

That is all I was trying to do, Doctor.

Now, let me pursue this proposed change in the grant program. If you have $150 million, and 20 percent of which would be retained by the Department, as I understand, under your proposal, that would leave 80 percent. So it would probably average about $2 million per State, if it would be evenly divided.

I realize it isn't. Which means that some will get more and some even less than that per State, which is a considerable drop from what is now presently the amount of funds.

I wonder if it is wise for us to take a backward step in the HillBurton program, where we have made considerable gain, to start withdrawing now even though we are trying to go into modernization through a loan program?

Mr. VENEMAN. Mr. Rogers, I think we have to recognize it is not a backward step as it relates to the grants for these particular types of facilities that we have left. I think that in the $254 million presently scheduled for Hill-Burton as grants, approximately $100 million of the grant portion is for the other facilities. The balance is acute bed facilities in hospitals.

Now, we are suggesting a figure which in fact is higher than it was under the old grant program. We are up to $120 million in grant for these kinds of facilities, plus the $30 million that would be available for these special projects through the Secretary.

I think in both Mr. Stagger's bill and in your bill you recommend somewhere around $300 to $400 million guaranteed loans. We would increase that to $500 million, removing that from the grant portion and putting it on

Mr. ROGERS. I think you keep your $500 million at a level each year, don't you?

Mr. VENEMAN. I think that is what is proposed at the present time. Did we put an amendment in there to provide the Congress would set that? Do you know?

Mr. CAVANAUGH. There is a provision in the bill that this would be reviewed on an annual basis by the Appropriations Committee so that the Congress would have an annual review of the amount that they wanted to authorize for loan guarantees.

Mr. ROGERS. I understand that. But I mean the authorization from this committee. And you are requesting $500 million and that figure should be maintained for the 3 years.

Mr. CAVANAUGH. Yes. We will supply the figures you asked for earlier, for the record, for both the grant program and the loan program for succeeding years.

Mr. ROGERS. Because in the legislation there is suggested there be a progression of guaranteed loans, which would go to modernization of nonprofit hospitals.

Now, I don't see where you are taking care of any public hospitals. Tell me how you do that?

Mr. VENEMAN. We aren't taking care of them in the Hill-Burton area, to be honest with you.

Mr. ROGERS. In other words, we are not going to give any aid to any public hospital?

Mr. VENEMAN. The way you asked, how we take care of it?

First of all, I think the guaranteed loan program is just an assurance the thing isn't going to default and foreclose.

Local governments, public hospitals, have the benefit of obtaining revenues through local sources which are also backed up by the property taxpayer or by the public institution or entity that is involved. So then in a sense, when they borrow money for a facility, it is guaranteed, guaranteed by the people.

They also have the tax-exempt status as it relates to their borrowing. So although nothing in this program gives direct money to them other than these other facilities for acute bed care, they really aren't in any worse shape than the nonprofit hospitals. In fact, they have the benefit of the tax-exempt status.

Mr. ROGERS. Well, what are we doing now? Have we helped any public hospitals?

Mr. VENEMAN. Certainly. We have them on the grant matching formula.

Mr. ROGERS. So presently under the Hill-Burton program, this class of hospital has been encouraged and helped.

Now, we are shifting from that, as I understand it.

Mr. VENEMAN. Yes.

Mr. ROGERS. In your proposal.

Mr. VENEMAN. It is somewhat repetitive but I still think we have to take into consideration. You know it was only in the last 3 years that public hospitals were able to get full reimbursement for capital outlays.

Now, more than 50 percent of the patients in a public hospital even today are financed through other Government programs. So what we are really doing is giving it to them for capital construction purposes out of another Federal pocket, out of two other Federal pockets, title 18 and title 19.

We are still giving public hospitals Federal dollars for capital outlay. Mr. ROGERS. But they cannot recover what you give them in the grant, can they? In other words, you are not duplicating the program? Mr. VENEMAN. You are not duplicating.

Mr. KELLY. Mr. Rogers, serious consideration was given to that when the reimbursement formula was developed. And you may recall there was a medicare advisory committee that dealt with this issue, under Kermit Gordon's leadership. And the issue was whether depreciation should be allowed on those facilities that had been furnished with Federal aid. And the conclusion, after considerable discussion, was that it should, because you were using up this asset and you were going to have to replace it. So that in the reimbursement formula that allows for the depreciation of the capital asset, no distinction is made on the basis of who provided the facilities or what kinds of resources were used.

The concept is that it is an economic asset and that that asset is being used up and will have to be replaced and, therefore, the reimbursement formula should deal with it as a cost of patient care irrespective of whether it was provided with Federal assistance or without Federal assistance.

Mr. ROGERS. Well, then, as I understand it, you are saying we should simply take care of the hospital costs through the medicare program?

Mr. VENEMAN. We allow reimbursement for depreciation.

Mr. ROGERS. What is the point then of having the $170 million, if you are going to take care of some of the hospitals, the public hospitals, through your reimbursement? But your nonprofit hospitals also benefit from that.

Mr. KELLY. The $150 million is not available for that purpose either.

Mr. ROGERS. What is it available for?

Mr. KELLY. It is available for the kinds of facilities that have not yet evolved into nearly as effective a method of establishing fees which recover costs.

Mr. ROGERS. If they qualify to give service under medicare, what happens there? Do you give them depreciation?

Mr. KELLY. In terms of the long-term patient care facilities, yes.