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I think, to some extent, they have been successful. It may well be that the medical profession may be able to contain this themselves; if so, certainly that is a better approach to this.

Senator WILLIAMS. I am glad you raised this. I think that this would be most appropriate in our hearing-testimony-what you said. We report to the full Senate, and we will make a significant point of just what you concluded on that fee situation.

Mr. UNRUH. Yes. The one weakness of this approach that I see, Senator, is of course that usual customary fee business. So that the basis of ethics is placed upon a broad based group without too much concern for the escalation of costs. And that's a weakness of the peer group ethics question, as I see it.

As long as the overall costs escalate, there is no obligation, that I can see, to contain or to agitate more businesslike procedures—the handling of billing and other things. They are concerned with keeping the individual doctor from profiting at an exorbitant rate on an individual basis, but if the entire fee schedule escalates, there seems to me to be no obligation on the part of the profession as a whole to hold that down.

Now, I may say as a result of all this, and certainly I would not argue that all of this could have been escaped, that the additional costs of the past 2 years of this program has been in this area of $10 million.

I think that the administration's refusal to at least consider or to resort to this, refutes pretty well the claim that they want to control the program costs. I think the medical profession owes it to the State to control costs, not only to restrain those few doctors who are out of line with their peer group, but to exercise some self restraint insofar as managing overall costs is concerned and the escalation of those costs.

I don't know, Senator, whether you would like me to go I will skip the second part of my testimony at this point, if I may, which was on a program that the legislature devised some years ago for a relatively new total approach to this program, .

Senator WILLIAMs. Would you like that part to be included in our testimony?

Mr. UNRUH. I think that would be of interest to the committee. We still think it has a great deal of merit.

Senator WILLIAMS. Senator Randolph suggested that, and I think we will not object to that. It will be included.

Mr. Unruh. I will be very happy to discuss that, and answer questions on it.

It is on the basis of getting everyone into the program on the basis of need and also on the basis of what they can afford, or when they might get into situations where, no matter how affluent they are, the medical costs could reduce them to a poverty level.

We think it is a good program, but when the cut was adopted by Congress, we did not feel that we had developed this far enough to present it as a program in which they had to pick up the principal costs on.


Let me take several moments to outline to this committee, as you have asked me to do, the major features of the basic health care program which I suggested to the California Legislature in 1966. In keeping with the current practice of giving all new government programs catchy one-word names, we called this plan Cal-Med.

Cal-Med was suggested almost exactly 2 years ago. It was presented as an alternative to the proposal then before the legislature which was eventually to become the Medi-Cal program. It represented an attempt to break away from the past patterns of public medical care programs which were being advanced under title 19 and to avoid the copying of existing health insurance programs which were taking place under title 18. Like those programs, it was basically a method of financing health care, but unlike them, it also addressed itself to the problem of doing so as efficiently and economically as possible. It did not tackle the serious problems of health manpower, facilities or comprehensive health planning, but no financing mechanism can really do that directly.

Cal-Med would ideally include all citizens of the State within its protection although to differing degrees depending upon the basic variable of income and family size. There would not be any categories as there are under the present Medi-Cal program because of title 19 restrictions. There would be three basic classes of protection under Cal-Med.

The first would include those persons whose income is not adequate to provide health care services for them and their families. They would receive comprehensive health care services without cost as is now the case with cash grant recipients under Medi-Cal.

The second would include those persons who are now considered medically needy as well as those who are poor risks. These are persons who can pay for some but not all of their health care either because of low incomes or because their physical condition makes health care costly and insurance coverage prohibitive. These persons would have two alternatives; they could choose to make a monthly payment toward the purchase of a health care plan when they were either sick or well. This monthly payment would be supplemented by Cal-Med to the extent necessary to obtain comprehensive coverage. The other alternative would be for the person not to prepay for health care protection, but then be required to spend down a given amount when he required services, as at present.

The third class would be those persons who are able to afford complete and comprehensive health care protection but because of some catastrophic situation their coverage is exhausted and they are faced with continuing high health care costs. These three basic classes should include all the citizens of the State who would require assistance in order to have adequate health care services. It is the purpose of CalMed to provide some or all of that assistance depending upon its level of funding.

One of the basic theories behind Cal-Med is that it is desirable for individuals to obtain prepaid health care protection. Consequently, Cal-Med would offer incentives to those who do so. Instead of forcing people to obtain such coverage, they would receive more services or Cal-Med would participate to a greater extent in their catastrophic coverage if they had comprehensive health care coverage. This is designed to encourage the further development of such plans.



Another factor in the development of Cal-Med was the issue of rising health care costs. It was felt that one of the best ways of combating such rising costs was by the encouragement of efficiency and innovation in health care organization through the stimulus of some healthy competition. This would be entirely different than the present title 18 and 19 programs which basically make payments on the basis of a fee for each service or on reasonable costs through a fiscal intermediary which takes no financial risks. Cal-Med would develop a comprehensive set of benefits and ask health care plans such as Blue Cross, Blue Shield, Cal-West, Occidental, Kaiser, Ross-Loos, the county foundations, and others to bid on providing the benefits.

Even though the bids might vary considerably, it would be desirable to have wide participation, especially at first, so that all reasonable bids would be accepted. This would give each recipient a wide choice of plans to choose from. It is also desirable for the recipient to be aware of the financial nature of his choice of plan. This can be done quite easily for those with a share of cost because their share can be made to differ depending upon the cost of the plan.

Those with no share of cost present a more difficult problem. One solution would be to provide more benefits for those who choose lowcost plans than for those who choose high-cost plans, but this would appear to conflict with title 19's comparability of services requirement.

This entire area is one which is vitally important as far as the future of public health care programs are concerned. In any vendor-type program there would appear to be two basic approaches to the problem of costs. One is to impose external controls upon cost and utilization and the other is to develop a program which will create its own internal controls. To date, most programs have followed the former pattern.

Even with all these controls there are still not very good means of knowing what Medi-Cal is purchasing and whether the price is right. How much better to use the competitive model which rewards efficiency, economy, and innovation which produces services at reasonable costs. Those plans which can produce will grow and those which cannot will wither and die. We know that there is a ready market for quality services at reasonable costs from the phenomenal growth of Kaiser in California. What is needed is the type of competition which is paid such lip service, but is really so feared and is a major reason why there is often such hostility to proposals like Cal-Med. Those who have been able to merely pass the costs of their decisions on to the patient or the insurance company, and at the same time make substantial incomes do not look kindly upon the suggestion that they bear some financial responsibility for the way they provide health care, but it is past time they did so.

Let me comment for a moment on the specific medical and health needs of California's aged and the coverage of the programs now available to them.

Theoretically, the elderly are being served very well by the MediCal program. They have a wide range of benefits available to them as supplements to medicare. However, since Medi-Cal is basically a financing program, it has developed within the existing system which appears to leave a great deal to be desired as far as the elderly are concerned.


Medicare, and to a lesser extent Medi-Cal, place primary emphasis upon fairly short term acute care although the greatest need of the elderly would appear to be for long-term chronic care. They also place a great deal of emphasis upon medical care as contrasted with health care which has a much broader meaning.

For example, medicare institutionalized the extended care facility as a halfway stop between acute hospital care and home. At the same time, title 19 allowed for skilled nursing home care which in California was seen as long-term care. Then HEW required all skilled nursing homes to meet ECF standards which place major emphasis upon medical and nursing services.

However, not all nursing homes in California can meet ECF standards and not all persons in California nursing homes need such a high level of care so that such a requirement is unrealistic and we think needs to be met by more flexible and understanding programs.

Congress evidently realized this and invented the intermediate care facility which will be much the same as California's nursing homes but will not be paid for under the medical care program. In addition to the almost complete lack of coordination which has occurred at the Federal level as to the decertification of nursing homes and the implementation of intermediate care facilities, this episode illustrates the arbitrariness of the distinctions that are made.

And I think that, more than anything else, what is needed is an effort to provide care for the elderly with little regard to whether it is called medical or not. The primary objective ought to be to assist elder Americans to remain as healthy and as independent as possible. This is in their best interests and it also makes sense from a fiscal standpoint. It is much less expensive to maintain an older person in his own home than to place them in an institution—and it is far, far better for him—whether it be nursing home or State mental hospital.

However, in order to do that we must develop flexible strategies which are directed to that end. An older person may need someone to assist with his housekeeping or taking a bath, bringing him groceries, drugs, or hot meals.

Even though these may not be medical services, they certainly have a direct bearing upon a person's health and whether he is going to require institutional care. It may be in many cases preventive. It is far cheaper, we feel, than the steps that have to be taken if we institutionalize him.

We also need to reexamine the impact of our policies upon the families of the elderly. The way our modern society has developed has made it increasingly difficult for children to care for their elderly parents. This fact has evidently been reflected in the relatives' responsibility section of title 19.


One effect of that provision is to make it financially easy for children to place their parents in nursing homes. We could once again require relative responsibility as a deterrent to that action, but this might create added hardships for families of the elderly.

Let me illustrate, if I can, what I mean in regard to another program which the legislature developed in California in the treatment of our mentally retarded children.

For many, many years California had a mentally retarded program. That program provided simply that if you had å mentally retarded child, you would place him in an institution.

Now, the progress in institutions even of the best kind is generally slow for those children. In addition to that, it is very, very expensive, with the result that almost every 2 years we had to increase the facilities and even then we had a long waiting list.

We developed a flexible program which allows a family to acquire State financial aid for children, if they desired to keep that child in the home. We developed a system of foster homes and also local, private facilities, so that we now have alternatives.

We found, after conducting a very intensive survey, that the parents of these children, many times, did not want to institutionalize them. The financial burden, in addition to the emotional and physical difficulties in keeping this child in the home were just too much for the parent, particularly with other children, to bear.

If they could get a little help so that they once in a while can have a day or two rest from that, they still prefer to keep the child in the family. We think this would be the case with the elderly.

A more flexible system was devised so that instead of simply encouraging them, as the program now does to some extent, to institutionalize these people, many young people would keep the elderly, even those with some problems in the home, if they had some help.

And I think that is the general thrust that the program ought to take. A program would have to be devised in this area that is flexible enough to allow this. I think the program that needs to be devised ought also to be flexible enough to allow those who wish to resort to this kind of flexible approach, and other innovative ways of treating the elderly, or helping the elderly, to proceed with it.

I believe all Federal programs should provide floors, as I am flatly convinced that they must, because of the niggardliness of some of our States, and at the same time they ought not to comprise ceilings beyond which those States who wish to proceed with better care and more imaginative programs cannot proceed.

Senator WILLIAMS. I wonder if an idea that we have been advancing, but has not been enacted, fits in at this point. We call it the community service corps volunteers of older people in retirement, and one of the ideas that we thought could be incorporated into the program would be for older people who are active, energetic, and understanding could help in this home service situation that you are indicating.

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