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On the assumption that substantial expenditures will be made on behalf of the minority groups, we should examine the effects on the medical segment of our economy. There is increasing support for an anti-poverty program, which would be based on a negative income tax-i.e. guaranteeing all families a $3,000 income. It has been estimated that the cost would be $900 per capita, or about $200 billion. This is clearly out. But a subsidy to the roughly 10 million families with income below the poverty line would cost from $7-$49 billion."

For our problem, the significant point would be that recourse to a negative income tax, that is payments to the poor to get their income up to a minimum level, might well have the result of reducing outlays for medicine. The negative income tax generally suggests that the poor would get cash and they would determine how to spend it. Would not the result then be less spending by government on medicine, housing, etc. and more by the poor on television, sports, clothing, furniture, etc.?


In the New York hearings on Costs and Delivery of Health Services to Older Americans, the official witnesses leaned towards an explanation of required therapy that stressed especially improved organization, e.g. neighborhood health centers, rather than an increase in the supply of doctors. These experts doubted that it would be possible to entice doctors to move into the low income areas. They are concerned at the large proportion of the population in slum areas not serviced by doctors. Doctors prefer to practice in the high income areas. In their view, greater production of doctors would not yield a flow of doctors to the poor neighborhoods. The New York experts seemed to argue that the inducement of group practice and salary payments would attract and has attached able young doctors.

I find it a little difficult to accept this though surely there is some point at which the supply of doctors in the affluent areas becomes so large that the doctors will begin to desert the affluent areas. But it seems to me, we are far from this state now. Indeed, the income of doctors is already less in such cities as New York and Boston than in middle-sized towns. But this is explained in part by the penchant to practice where standards are high, research facilities good and cultural activities are attractive.

The Senators who seemed skeptical of the approach of Dr. H. Brown and others seemed to lean towards emphasizing the need of increased output of doctors rather than improved organization supported by some New York officials. I lean towards the views of the Senators.


An indication of the rising needs of minority groups is given by the Health Service Administration of New York City.5

"Our projections are based on 4,000,000 New Yorkers being Medicaid eligible. While projections indicate no increase in New York City's population over the next 15 or 20 years, these same projections indicate a continuance of trends prominent between 1950 and 1960, to wit: an increase in the population of individuals over 65 by 35%, an increase in the population under 15 by 13%, a decrease in the white population by 12%, an increase in the Puerto Rican population by 149% and an increase in the non-white population by 48%. While continued increases in these statistics might not be as great as in the previous decade, it seems fair to assume that New York City will have enough of a shift in these population groups to offset any changes in Medicaid eligibility which may be passed by the Congress.”

It is generally agreed that a shortage of physicians prevails and even if increased use were made of sub-professionals.

One expert would increase the output of physicians from 9,000 to 20,000. He would have the Federal Government finance the entire costs of $5,000 per physician to the School, $4,000 for upkeep of the student, and the additional con

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4 Tobin, Pechman and Mieszkowski, Is a Negative Income Tax Practical ? 1967. These are rough figures, with the estimated cost related to size of basic allowance, and the tax imposed on recipient on income beyond basic amount, and also savings on welfare programs.

5 Op. cit., p. 375.

struction costs. The total costs over a 10 year period would be about $5 billion. He would finance the upkeep of the student because now students predominately come from high income groups.

Though I am sympathetic with the general position, I find it difficult to accept this additional burden on the Federal budget at the present time. The case would be stronger in the post-Vietnam era.

But even then one may raise the following issues. Wny subsidize the medical student to this extent and not introduce similar programs for scientists and teachers who are equally scarce?

The case is especially weak for the future physician because the income of the practising physician is now $30,000 to $40,000 a year. Would it not be more equitable to finance the future doctors by a loan program? The physician would then finance it by paying a percentage of his life time income depending upon the amounts borrowed during his training period. So long as incomes are high the doctor will pay proportionately more. This program could easily be integrated with a loan program for all college students and financed over the life time of the students. In this manner, society will finance part of the cost of training in that as incomes rise as a result of inflation or rising productivity, the financial burden on the doctor will be reduced and society's contribution will be increased. Should doctors' income rise as much as incomes of all members of the labor market-doctor's income have been going up more rapidly—then in 50 years we might expect doctors' income to rise to about $300,000 a year.

Such a loan program would enable all students of quality to get a medical education, to choose any school where he is acceptable, and he would finance his education over his active life instead of being burdened exclusively during his years of training.

ADEQUACY OF MEDICARE Medicare of course marks a great advance: in funds going into medicare; in providing additional help to the group that needed it most—the aged; in accepting the principle that compulsory health insurance for a large segment of the population.

But there are still many reservations. Under Medicare, benefits are still restricted in the payment of doctors' bills. Expert estimate coverage once allowance is made for corridors, co-insurance, exclusion of dental and other benefits—at only about 50 per cent of doctors' services. Moreover, the doctors seek to avoid assignments, which means higher charges to the patient, and are frequently criticized for charging in excess of usual charges. To get an increase, a requirement of Blue Shield of New York is that the rise apply to all patients, not merely those covered under Medicare. Much unhappiness also prevails because the doctor is compensated on the basis of fees for services thus increasing the difficulties of those (notably hospitals and group plans) where payment is on a capitation basis. Yet som

ing can be said for the limited coverage and benefits. Had coverage been complete, the pressure on resources would have been much greater, and prices risen even more than they have. Moreover, under these more generous conditions, the pressure for universal compulsory insurance would have increased greatly. Ultimately the country is likely to accept compulsory insurance. But there is something to be said for experimentation on a restricted basis at first and also for the avoidance of another inflationary pressure in the midst of general inflationary trends. Medical shortages and bottlenecks have contributed much to the inflation of the last few years. The contributions to inflation comes from Medicaid, and private insurance as well as Medicare. The price of medical services and especially of hospital services has especially soared. But we should observe that in some areas, the quality of service on the introduction of new and costly procedures raise prices. In part these increases may be described as non-inflationary. That is to say, the quality of services has improved—an offset to higher prices.

6 Dr. Cherkasky pointed out that 50 percent of physicians come from those in the top 12% of income levels.



NOVEMBER 18, 1968. DEAR SENATOR WILLIAMS: In 1965, before Medicare was available, the California State Department of Public Health studied all admissions for a 6-month period to 35 home health agencies in California. The Bureau of Chronic Diseases has furnished me with the following evaluation of the replies :

“One question on the discharge form asked the private physician, "After observing this patient in a program of home nursing care would you please answer the following question: If home nursing care had not been available would you have had to: Send the patient to the hospital? Send (or keep) the patient in a nursing home?" (For patients referred from a hospital the question was: “Would a longer hospital stay been required ?") A majority of the physicians did not see these two choices as alternatives but physicians did indicate that one out of every five patients would have had to be in a hospital if home nursing services had not been available. One out of every six patients would have been sent to a nursing home. So for over one third of the patients (33.9 percent) a much more expensive form of care would have been imperative if these services had not been available to the private physician.

“There was considerable variation in alternate care needed depending upon the diagnostic condition which brought the patient under care. For example, 35 percent of the cancer patients would have had to be hospitalized and another 14 percent would have had to go to a nursing home. Twenty-six percent of the stroke patients would have been sent to nursing homes while an additional fifteen percent would have been in hospitals. An entirely different picture appears for patients with arthritis where 20 percent would have been sent to nursing homes and for only 6 percent would a hospital have been the alternative.

“This study was conducted before home health services were made available under Medicare and many physicians were not aware of this type of service. It seems reasonable to assume that early referral of patients was not always made. For example, agencies with liaison nurses in hospitals or some other similar arrangements had a much higher percent of their admissions made directly from a hospital. Nine agencies had at least 30 percent of their admissions made directly from a hospital while ten agencies had less than 10 percent of their admissions referred directly. Obviously, with a good referral system cases can be evaluated early and sent home as soon as feasible. Home nursing services would then be substituted for more expensive hospital care."

In 1961 I was project director of a comparative study of 15 home care programs, using the coordinated (comprehensive) home care program of the Jewish Hospital of Saint Louis, where I was then executive director, as the base. The answers to several of the questions posed in your letter are found in the report of this study, which was published as Monograph #9, Hospital Monograph Series, by American Hospital Association, Chicago, publication no. G164. A copy of this monograph is enclosed. The evaluation of benefits to patients is as valid today as it was then. I refer you particularly to the Critique (pp. 65–70), which I hope your staff will extract as a part of my comments as needed.

In September, 1967, the Division of Medical Care Administration of the Health Services and Mental Health Administration of the U.S. Public Health Service held an invitational conference on Home Health Agencies after one year of Medicare. I had the privilege of participating in this conference and of collaborating in the preparation of the final report: "Home Health Agencies After One Year of Medicare”, published in mid-1968. (Since I have only one copy of the report in my possession, I cannot send it, but I am sure copies are available on application to the appropriate office of the Public Health Service).

It was the consensus of the conference group that ways must be found to bring home health services into the main stream of community health for patients of all ages and economic levels; home health services should be made a part of voluntary individual and group health insurance plans as well as of government programs. Home health services should be included by State and community planning agencies under the provisions of P.L. 89–749 (Comprehensive Health Services) and P.L. 89–239 (Regional Medical Programs). Both rural and urban areas need networks of home health agencies capable of furnishing comprehensive services. The recommendations of this conference include:

Formation of a national organization for Home Health Services to facilitate continuing communication on a group basis among State agencies, providers of service, fiscal intermediaries and community leaders with the Federal agencies. (In California we recently organized the first state association, California Association of Home Health Agencies, of which I have the honor to be the first President).

Representatives of the medical profession should be invited to suggest ways in which physicians can be involved in planning and administering home health agencies.

The Social Security Administration should provide analyses of information that is accumulating regarding kinds of services being used by various types of patients.

Task Forces should recommend solutions to specific short-range and longrange problems.

The Public Health Service and the Social Security Administration should study home health services on a continuing basis as an appropriate health

entity within the health service system. I hope the above comments will be helpful to the deliberations of the Special Committee on Aging. If I can be of further assistance, please let me know. Sincerely yours,


Executive Director.


1. What, if any, action by the Federal government would you recommend to reduce the number of unnecessary tests and examinations, thus saving money for both its medical care programs and for their beneficiaries?

2. Is any governmental action on this problem possible without interfering with and overriding the exercise of private medical discretion?

3. Your article seems to infer that utilization review procedures have thus far been ineffective to prevent unnecessary tests and examinations. Is that a valid conclusion? If so, why do you believe utilization review has been ineffective? Can anything be done to make utilization review more effective to prevent unnecessary procedures?

4. To what extent do you believe the ordering of unnecessary tests and examinations is caused by fears of malpractice suits? What, if any, solution do you believe there is to this problem?

5. Your article in Medical Economics points out that some physicians defend a liberal policy in ordering tests and examinations on the grounds that they have some value in early detection and prevention of unrelated conditions. To the extent that unnecessary tests cannot be eliminated, what, if anything, do you think can be done so enhance the preventive value of such procedures?

(The following reply was received :)

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NOVEMBER 8, 1968. DEAR SENATOR SMATHERS : Where I stand-on the front line of medical care in a moderate sized community-I can give your committee a perspective that will be different from the one you get from medical school deans and big medical center authorities. These men see all the complicated cases and the rare difficult cases, and really don't appreciate that the great bulk of medical problems are really quite ordinary and can be handled by ordinary means by ordinary doctors on the community level. If doctors would seek to be practical, we would cut costs considerably.

The article you refer to in Medical Economics Sept. 30, was published in slightly changed form in Hospital Physician in June 28. As I don't have reprints on the former, I enclose a reprint of the letter.

Another patient had two toes crushed by a mine car. He needed bed rest, with elevation of his leg, frequent medication for pain, and observation for possible infection or gangrene. Though hospitalization was indicated, I saw no need for a complete examination, since he didn't require a general anesthetic. I didn't do a rectal exam, and I ordered no lab work. Of course, the work was done anywayand I was the recipient of a little billet-doux from the record committee.

In a third instance, a little boy fell off a horse and suffered a supracondylar fracture that I reduced under a general anethetic and immobilized in plaster. The boy's mother gave me a negative past history and a negative history for any of his current problems. So I checked his throat, heart, and lungs, and went to work. I admitted him to the hospital because of possible pain, possible ischemia of the arm, and to elevate the arm for a day or two under observation. Since I wrote no lengthy history, I got back the chart with snide remarks to the effect that it hadn't been completed. The lab work, to top things off, had been finished about an hour before the boy was discharged, and the lab report was sent to the record room for the greater glory of the record committee and the Joint Commission on Accreditation of Hospitals.

How often does this sort of thing occur in your hospital? Daily, I'd guess. Think of the unnecessary cost to the patient for tests that aren't likely to benefit him ! And what about the doctor's time? You can't do a thorough systemic review, past medical history, social history, followed up by a complete physical examination in much less than 30 or 40 minutes. Of course, I'm talking about only the isolated injury or the simple complaint. If the patient seems to have other ailments or if the diagnosis is obscure in any way, then the execution of a good history and physical is obviously indicated, and routine lab work plus the needed specific tests and X-rays becomes justified.

Granted, we did all these tests and physical exams as a matter of routine when we were attending medical school. But, as part of our training, they were designed to benefit us as much as the patient.

What about annual physical exams? I'm all for them. Suppose that, in the absence of any medical indications for a lot of work-up, the hospitalized patient asks for a complete examination and is willing to pay for it. The doctor in charge should certainly agree to it. He can do the examination either then or later in his office if that is more convenient. But what if-as sometimes happens—the patient expects his hospital insurance or Medicare to pay for the exam? Health insurers and Medicare don't ordinarily pay for routine annual physicals, yet in some cases they're unwittingly paying for this extra work when it isn't medically indicated—all in the name of the record committee, the tradition, and the holy accreditation commission.

Many doctors and hospital administrators, I expect, will charge me with advocating sloppy medicine. They'll use statistics showing that in some communities the routine V.D.R.L. or other serology tests do pick up an occasional unsuspected case of syphilis and that some hospitals do find a few cases of active tuberculosis by routine X-rays. A heart murmur in a child may be picked up, and sometimes this is a good thing to know, and sometimes not. During physical exams, I sometimes find an unsuspected hernia, though the patient would probably have found it himself soon enough.

Well, I'll concede that routine testing has some meritbut only for certain types of patients. For example, those with a history of promiscuity probably should have a V.D.R.L. whenever you can catch them. Others, particularly heavy cigarette smokers, should have chest X-rays often. Elderly people, since they're more prone to various ills, should be given regular physicals. Last month, for instance, I discovered breast cancer in an elderly woman who had been admitted to the hospital for phlebitis.

What it boils down to is that all medicine, at best, is a compromise between the ideal and the practical. Ideally, we could pick up more diseases by giving people physical exams throughout the year. But, practically, we can't advocate that kind of medicine. If we did an upper G.I. series on all adults annually, we could find an occasional stomach cancer. But we don't because the yield is too low to justify the cost of such exams. And how many doctors regularly have sigmoidoscopies done on themselves?

Some physicians are just as guilty as hospitals are in overtesting. Rather than aim for individual tests, the diagnostician often resorts to a shotgun approach in the hope that some diagnosis will fall in his lap. Testing has become a matter of blindly following routine. Yet any doctor should be able to determine when a patient needs a physical exam and specific tests. By using this more selec

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