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2. Many physicians in California are not unequivocally tied to the concept of usual and customary fees which has been so vigorously advanced by the California Medical Association. A particular problem has been encountered by physicians in and around the Watts area of Los Angeles with whom I have discussed the problem. Because of the low economic status of their patients, the usual fee of these physicians has been relatively low. Thus the usual and customary concept, at least theoretically, requires that they receive the same low fee for Medi-Cal patients. This has a depressing effect in these areas, especially when physicians from other nearby areas receive higher fees for the same services. These physicians feel that payment should be on a reasonable basis for the service rendered and should not depend as much upon the desires of the individual physican regarding the fee he wishes to receive.

3. Title 19 does not allow states to require that children assume any responsibility for their parents. There are good reasons for this provision, but I merely wished to point out that it also has adverse effects. In California, under old age assistance, there is relative's responsibility. Thus if the children wish to keep the parent in their home or place him in a board and care facility, they must share in the cost. However, if the parent is placed in a nursing home under Medi-Cal there is no responsibility at all. This leads to inevitable pressures for placement in nursing homes which are the most expensive alternative. What I was proposing is that we develop a more flexible approach so that the least expensive alternative does not place a greater burden upon the responsible relatives.

4. The statement by Mr. Mulder appears to have a certain amount of validity. However, there is no evidence that physicians can't or won't raise their fees under the usual and customary concept; in fact, all the evidence would appear to be the contrary. It should also be noted that even now the state does not really know if the charge a physician makes to Medi-Cal is his “usual" charge. The best that is known is whether it falls within a range of fees which is "customary" in the community.

The observation that some physicians will be disinclined to participate under a fee schedule is undoubtedly true. We know that some do not participate today ur er th usual and customary concept at the sixtieth (60) percentile. The real question that Medi-Cal should ask is: What fee should we pay in order to get an adequate number of physicians to participate. I do not believe that question has really been asked. His answer should be the basis for establishing a fee.

5. (a) CAL-MED would provide supplementary coverage to Medicare depending upon the income and family size of the person involved.

(b) It would certainly be desirable for more emphasis to be placed upon health maintenance or preventive medicine, but I am not sure that such an approach would occur automatically under CAL-MED which is essentially a funding mechanism. However, to the extent that prepayment organizations accept the responsibility for providing comprehensive services to persons, it is hoped that they would develop such approaches as a means of reducing ultimate costs.

(c) Existing prepayment organizations would probably not have the capacity to provide CAL-MED coverage to all eligible persons. The incentive for organization will most likely be created by the demand for these services. This will occur, if it does, because of the lower cost in providing services. CAL-MED will operate on a competitive basis and only those organizations which can provide quality services at a reasonable cost will survive and grow.

Senator WILLIAMS. Congressman Reinecke has a time problem. Is Congressman Reinecke still here? Do you want to submit a statement ?

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STATEMENT OF HON. ED REINECKE, REPRESENTATIVE IN CON

GRESS, 27TH CONGRESSIONAL DISTRICT, CALIFORNIA Mr. REINECKE. Yes, Senators. I would ask the inclusion of a statement I have already delivered to the Secretary.

I would just like to express my appreciation for the care and time that you gentlemen are taking away from your schedules, when I am sure you have other requirements at this time of the year.

We appreciate that you would be here to concern yourselves about the health services for our citizens here in California.

Senator WILLIAMS. Well, we appreciate your time. I know we are working in a common purpose,

Mr. Reinecke. We are indeed.
(The complete statement of Congressman Reinecke follows:)

PREPARED STATEMENT OF THE HONORABLE ED REINECKE, REPRESENTATIVE IN

CONGRESS, 27TH CONGRESSIONAL DISTRICT, CALIFORNIA Mr. Chairman, I am deeply gratified to appear here today, and I welcome this opportunity to be able to participate in these Hearings. The fine work of this Subcommittee in probing the causes of the increase in the costs of health services has been widely recognized. Your impartial examination of present organization of services and present patterns of practice have shown that both human and financial resources are being wasted. Your investigations have also yielded valuable information as to how the deficiencies in our health services may be corrected so that public confidence in the programs of Medicare and Medicaid may be restored. I am pleased to be able to participate in these proceedings not only because of my deep interest in the subject, but also because of my longstanding concern for the well-being of those who have contributed so much to the growth of this Nation. We cannot afford to turn our backs on those of our elders, whether through no fault of their own, are no longer able to provide for themselves or whether they are able, at sacrifice, to pay their bills. Testimony given at previous hearings in Washington, D.C. and in New York City, certainly made this point clear. Hopefully, the hearings here in Los Angeles will prove equally valuable.

Los Angeles is a particularly appropriate place in which to continue your inquiry. Like any large city, it has its quota of problems. But it also has more than its quota of intelligent and innovative leaders and institutions. Their experience in dealing with the costs and delivery of health services in this area, will no doubt provide valuable lessons for the rest of the Nation.

EFFECT OF RISING COSTS ON MEDICARE PROGRAM

Mr. Chairman, perhaps the most important problem confronting Congress with respect to the medicare program is the effect that raising costs have had on the program and the older people it is designed to protect. As you will recall, last year Congress had to increase the payroll taxes which support the hospital insurance part of medicare, known as Part A, by more than one billion dollars a year—just to meet the increasing cost of hospital care. And I want to emphasize that this increase was not the result of greater use of hospitals by older people-it was solely the result of the increase in the costs of hospital care.

The American Hospital Association announced earlier this year that hospital costs will probably go up by 15% a year for at least three years. It is fortunate indeed that actual increases have not yet reached this level, but there is good chance that the AHA assessment may still prove correct. If Congress had been able to spend even half of the billion dollars for increased health benefits under the program, significant improvements affording additional protection to the elderly could have been made. Instead all of the increased taxes had to go for the higher costs of the existing program. In fact, the benefits under Part A were even slightly reduced.

As you know, Mr. Chairman, the premiums under the medical insurance part of medicare-the so-called Part B—had to be increased by one-third, from $3 each for the aged person and the government, to $4 each. This increase was caused largely by the fact that physicians' fees rose very rapidly during the year after the medicare program was enacted. Though earlier this year the aged were given a modest and much needed increase their cash benefits, a good part of that increase had to be paid out for increased premiums.

EFFECT ON MEDI-CAL

The increase in the costs of health care dramatically affected the medicaid program here in California, known as Medi-Cal. The Department of Health, Education, and Welfare estimated last December that the Federal share of the medicaid program for this fiscal year would be a little over $1.5 billion. The estimate now for this year is one billion dollars more! While not all of this change can be ascribed to increases in health care costs, probably a third of it can be so attributed.

Thus, Mr. Chairman, Congress is already painfully aware of the effect which increasing health costs have had on Federal programs designed to assist the aged in financing their health costs.

The effect of these increasing costs has been to bar countless numbers of older people from seeking the care they need under Medicare. This recently announced increase in the deductible under Part A of medicare from $40 to $44 is a straw in the wind-a sure sign that hospital costs will continue to rise. Next year the deductible may even go as high as $52, because of still higher hospital costs. The question of just when a deductible becomes a barrier to obtaining medical care is a question which cries out for an answer. I hope that the testimony before this committee will show, in more detail than is now available to us, the effects of the medicare deductibles and co-insurance provisions on the health of older people.

Those of us in Congress need to spur our efforts and the efforts of others to take the steps necessary to stem the swelling tide of increasing health costs. This is the bitterest form that inflation can take for our older citizens. Neither the Nation as a whole nor its older citizens as a group can bear indefinitely the, increasingly heavy burden inflicted by the runaway inflation of health costs.

The problem of rising medical costs is a compelling aspect of the most serious of all the problems facing older Americans—that of achieving and maintaining an adequate income. The massive loss of real income through inflation must be recognized for what it is : the Number One economic public enemy in this Nation today.

Americans who have reached the age of 65 now number almost 20 million. By 1980 there will be approximately 25 million in this age group. With such a rapidly growing aging population, we will be faced continually with the necessity to deal with new problems as they arise. To deal effectively with new problems, whatever they may be, we must first solve the most basic of them all—the economic problem.

ECONOMIC PLIGHT OF THE ELDERLY The bills that I have introduced during the 90th Congress seek to relieve the economic plight in which so many older people live, while yet preserving their independence and sense of dignity. To strive for one goal without the other would be shabby treatment indeed for all those who fought and survived two world wars, who weathered the great depression, and who have borne the brunt of entry into the atomic age. It is a matter of plain justice for this Nation to help protect its older citizens against the skyrocketing cost of living-amounting to nearly 20 percent in the last eight years alone. Periodic increases in social security benefit levels will not suffice of themselves. For no matter how great the benefit increases are, they always lag behind the increase in prices. Nearly all of us are hurt by inflation; but no single group suffers more than older Americans. One obvious way to protect the elderly is to provide an automatic cost-of-living increase in Social Security benefits every calendar quarter, to adjust benefits according to rises in the Consumer Price Index. H.R. 5347, which I introduced in February of last year, would do just that.

There are other ways in which the economic situation of older Americans can be protected, and I have introduced several measures accordingly. H.R. 5158, for example, would amend title II of the Social Security Act to increase the benefits of a surviving widow to 100% of her husband's allowance.

EARNINGS LIMITATION CAUSES PROBLEMS There is also injustice in the regulation that a Social Security recipient must keep his earnings below a certain level, or otherwise lose his benefits. I think that the limitation on allowable earnings should first be raised and then eventually done away with altogether. As a first step in this direction, I introduced H.R. 5157, which would permit those receiving Social Security to earn as much as $3,000 annually instead of the present $1,680 before their benefits are diminished.

From even the briefest review of the problems facing the majority of older Americans, we can see that new legislation to protect and assist them is essential. But legislation can only be as good as the architects who draft it. We must be sure that these architects are the best informed people available. They

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must have a thorough knowledge and understanding of the complexities of aging in the modern world.

It is essential that we pause from time to time, to take stock of present programs and policies concerning the elderly, and to consider what directions our future efforts should take. The 1961 White House Conference on Aging is widely recognized for the vital role it played in stimulating significant new programs for older Americans. I am confident that the 1971 White House Conference will prove equally fruitful.

In summary then—we have a problem today—we will have a larger one tomorrow. Our attention today must be to reducing costs. Law generated requirements (red tape) must be reviewed and reduced. Private industry handles credit at a profit—so government could well learn from private industry.

Second, let us ask the Medical Profession for its recommendations for implementing the law without comprising quality or quantity of health services.

And finally let's ask the Hospital to recommend solutions to reducing costs. Legislation, subsidies, and political polemics are not the sole solution.

Thank you for your interest.

Mr. REINECKE. Rather than to summarize what is in the statement, because it is already in the statement-I would simply say that we hope it is recognized that the law alone will not solve the problems. We need a great deal of cooperation from the citizens, from the State and county governments, from the medical profession, and the hospital people.

I would hope that we could recognize, too, that perhaps a reduction in some of our own paper work that we have generated through our legislation and I supported medicare when it came on the floor a few years ago, so I do support this program—but I recognize also the financial risk and the problems that have developed since that time.

It was not my intention to make any political comments, but in view of some of the statements that have been made by the previous witness, and in view of the fact that you gentlemen are vitally interested in getting an objective story, and further, in view of the Senator from West Virginia's statement that some of Mr. Unruh's statements called for further study, I would hope that part of that further study would come from a rebuttal statement from our own Governor's office.

I sincerely question several statements made—but I do not want to get involved in a political debate—it is unfortunate that politics does get into health problems. Certainly that is no place for it, but it is here, and you just heard it a few minutes ago.

I would hope very sincerely that you would submit Mr. Unruh's statement to the Governor's office and ask him for his comments, so that you, in your judgment, could find from that the statements that would affect the future legislation of our country.

Gentlemen, I won't take any further time. I am most grateful to you, and happy that you did find a good day here in Los Angeles. And I say thank you, again.

Senator WILLIAMS. Well, I have just conferred with Senator Randolph. We feel that it would be appropriate to do exactly what you just suggested.

Mr. REINECKE. I thank you kindly, Senator. Thank you also for allowing me to appear here out of order.

Senator WILLIAMS. Of course we do have the Governor's representatives here, but we certainly will give the Governor an opportunity to submit a statement.

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1 Statement by representatives of the Governor appears on p. 675.

24–798—69—pt. 3-3

Senator RANDOLPH. What is your district?

Mr. REINECKE. Twenty-seventh Congressional District. It is part of Los Angeles. Most of the constituents do live in Los Angeles, or Los Los Angeles County. We have about 50,000 up in Kern County.

Senator WILLIAMS. The metropolitan area ?

Mr. REINECKE. Yes, metropolitan. Many senior citizens projects are very much concerned. I have sponsored a great deal of legislation concerning benefits that are necessary to allow our senior citizens to remain their prideful selves and productive citizens of our community.

Senator WILLIAMS. Thank you very much.
What term are you in, by the way?
Mr. REINECKE. This is my third term-coming up.
Senator WILLIAMS. Confidence will get you everywhere.
Who is next here?

Dr. Lester Breslow. Where is Professor Breslow? There he is— from the UCLA health services.

STATEMENT OF LESTER BRESLOW, M.D., M.P.H., PROFESSOR OF

HEALTH SERVICES ADMINISTRATION, SCHOOL OF PUBLIC HEALTH, UNIVERSITY OF CALIFORNIA AT LOS ANGELES

Dr. BRESLOW. Mr. Chairman and members of the committee, I am pleased to have this opportunity of appearing before you to discuss à subject of great consequence to the American people.

I am conscious of the fact that your committee has already covered a good deal of the subject in previous hearings, so I will confine my remarks to three points:

(1) Are the medicare and medicaid programs raising or lowering the quality of health care ?

(2) What can the Federal Government do to favor higher quality of care?

(3). Can and should preventive medicine in the form of multiphasic screening be incorporated into federally supported health care?

One must carefully differentiate medicare and medicaid in considering their impact on quality because they have had opposite effects.

Part A of medicare, because the legislation specifically provided for it, has tended to raise the quality of hospital and related care. The legislative requirements of standards for hospitals, utilization review, agreements between hospitals and extended care facilities, standards for home care agencies, have encouraged nationwide attention to the problems of quality of care.

The impact of part A of medicare on the quality of institutional health services in this country has been favorable. It has been good not only for older persons but for the entire population receiving hospital and related care.

IMPACT OF MEDICAID

Medicaid on the other hand, the welfare medical care program, has tended to bolster the poorest kind of medical care. This has occurred because the basic legislation gave no attention to the matter of quality. Contrary to the medicare legislation which established a framework for quality standards, especially in part A, the medicaid legislation ignored this critical problem.

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