Senator CURTIS. You referred a place or two in your statement about the costs to the insurance companies. What will it cost?

Mr. WHITAKER. We don't have any data from the insurance companies yet on this particular proposal. The report by the joint task force contains cost estimates submitted by the insurance industry but these estimates were on a somewhat different proposal. We feel we have materially lessened the costs.

We do not really have a way of pinpointing the cost ourselves. That is something which is peculiarly in the control of the insurance

company.

Senator CURTIS. Whatever is the cost it will ultimately increase the cost of health insurance for all insured people, won't it?

Mr. WHITAKER. That is certainly a possibility, Senator Curtis, that is true.

Mr. WHITAKER. This, in essence, is a cost of the collection of tax dollars and it is a matter of governmental policy and congressional policy to determine who pays the cost. The costs have to be paid by

someone.

Senator CURTIS. I don't mean to quibble over words but I would like to call your attention to a sentence on page 4 of your statement in the second paragraph, the last sentence. In there you are speaking of the defects in getting information. It says, "Chief among the defects, in our judgment, is the absence of a reporting requirement for unassigned payments for health care and services.”

Well, actually, there have been no payments to the doctors, so far as the insurance company is concerned, isn't that correct?

Mr. WHITAKER. As I just pointed out, Senator, the insurance company does not monitor the actual payments to the doctor, that is true. Senator CURTIS. It doesn't monitor it but you are asking for a law that makes them report it.

Mr. WHITAKER. What we are asking for is the amount which in the vast majority of cases will be paid by the insured or the insurance company, one or the other. While it may be true, in some instances, that bills may not be paid, certainly, in the vast majority of cases the doctors are paid for the services that they render.

Senator CURTIS. Did I understand your request would just deal with those cases where an insurance company had information of employment by the doctor amounting to more than $600 a year?

Mr. WHITAKER. No, Senator Curtis; we propose to have the $600 rule not apply at all. What we are proposing is that each bill that comes in with an unassigned claim be looked at and we are initially proposing that those bills under $100 be ignored for information reporting. When our proposal is fully effective, the insurance company will throw out bills under $25.

Senator CURTIS. I wonder if we have a problem here worth the inconvenience and burden and increase in health care insurance costs that is worth going after. Do you have any evidence of doctors failing to report income which comes from insurance companies?

Mr. WHITAKER. The best way I can answer you, Senator Curtis, is on the basis of our preliminary surveys of 11,000 tax returns of medical people that this Committee gave us last year.

Senator CURTIS. But that was all Government money, that was medicaid and medicare.

Mr. WHITAKER. That is correct.

Senator CURTIS. There is no insurance company involved in those. Mr. WHITAKER. No; but we don't know that the doctors or the health care providers who furnished those services are any different from the vast majority.

Senator CURTIS. But the point is, I think, the Government can do anything they want to insofar as other Government agencies are concerned, without any legislation.

Mr. WHITAKER. Well, my point was simply this, Senator Curtis, that that is an indication that there is some serious underreporting generally. Other indications which the Service has had in the analyses of tax returns and voluntary compliance have generally indicated that the professionals are among the group who are guilty of underreporting or of nonreporting and among that group are the doctors. This is simply general results of analyses of information.

Senator CURTIS. Well, certainly you get some information in from the field, among the few doctors who are cheating on their income tax, are they cheating on payments in cash that are made when individuals call at the office to pay their bill or do you have a problem of cheating where the money originates with an insurance company?

Mr. WHITAKER. Well, again turning to these statistics, this analysis of these 11,000 tax returns, the indication there is that there is both. Certainly the medicare payments are not in the category of cash from a patient who walks in the door, and I think there is every reason to believe that the pattern which we found would be somewhat symptomatic of the entire group in the country.

Senator CURTIS. It is hard for me to believe medicare and medicaid people, so far as the Government is concerned, have any information that Internal Revenue can't get without a statute.

Mr. WHITAKER. But leaving aside, Senator Curtis

Senator CURTIS. They can get all yours, and that is supposed to be confidential.

Mr. WHITAKER. There is a large gap between the private sector and the public sector. The medicaid payments are somewhat, I believe, less than half of the total health care costs of the country. Even assuming that we get all the information we need with respect to medicaid and medicare, that still leaves a large body of dollars that is not covered by information reporting.

Senator CURTIS. This Committee has certain oversight in connection with our tax collection laws, and the 11,000 horror cases referred to you were all medicaid and medicare, weren't they?

Mr. WHITAKER. Yes, sir.

Senator CURTIS. We haven't referred any others in that category. I am just disturbed, I realize you have a problem and I don't mean to be critical of people as individuals, certainly not. All of us want to see every taxpayer pay every dime that he owes because any that he escapes, somebody else has to pay it.

But by the same token, all taxpayers should be treated alike, and if we are going to require some people to report unassigned claims where the payment has not been made or maybe not at all made in that taxable year, I am wondering if it shouldn't be across the board.

This would be a new departure for this committee to give enforcing tools applied to one segment of our economy only. I don't think we

even do that in collecting taxes against gamblers. I think they have the benefit of the same reporting laws, or lack thereof, as any other taxpayers, and I have some very serious questions about requiring a report in order to trace data where there is no evidence that there has been a payment made. That is all, Mr. Chairman.

The CHAIRMAN. Senator Jordan.

Senator JORDAN. No questions.

The CHAIRMAN. Thank you very much, gentlemen, for your testimony, here today. You are excused.

The next witness will be Mr. Wilbur J. Schmidt, secretary, Department of Health and Social Services, Madison, Wis., and chairman of the National Council of State Public Welfare Administrators, in behalf of the American Public Welfare Association.

We are pleased to have you, Mr. Schmidt, and you may proceed, sir. STATEMENT OF WILBUR J. SCHMIDT, SECRETARY, DEPARTMENT OF HEALTH AND SOCIAL SERVICES, MADISON, WIS., AND CHAIRMAN OF THE NATIONAL COUNCIL OF STATE PUBLIC WELFARE ADMINISTRATORS, IN BEHALF OF AMERICAN PUBLIC WELFARE ASSOCIATION

Mr. SCHMIDT. Thank you, Mr. Chairman and members of the committee.

As was stated, my name is Wilbur J. Schmidt. My position is secretary of the Wisconsin State Department of Health and Social Services. I had expected to be accompanied today by Mr. Bonin from your own State of Louisiana, and Mr. Swank from the State of Illinois, but their presence was required in their home States on account of important business necessary in connection with these matters and, hence, it was left to me to present the testimony.

The CHAIRMAN. I am sure they will be well represented by you, Mr. Schmidt.

Mr. SCHMIDT. Thank you.

I am appearing, of course, on behalf of the American Public Welfare Association in my capacity as chairman of the National Council of State Public Welfare Administrators.

While there are many features to H.R. 17550 to which we could appropriately address our attention, and many of which are very desirable, things like the improvement in social security benefits and automatic adjustments and some other things, we would like to use our time here today to emphasize our concern over one section of that bill which is section 225 known as the establishment of incentives for States to emphasize outpatient care under medicaid programs.

We have to do this because we are, very frankly, gentlemen, alarmed over what could be the result if this were to become law. This is the section, as I am sure you are aware, that increases the Federal share by 25 percent up to a total of 95 percent for outpatient and clinic services and for home health services. At the same time, it would reduce the Federal share by one-third for inpatient services in a general hospital or tuberculosis institution beyond 60 days of any calendar year, and it would also reduce the Federal share by one-third for inpatient care in a skilled nursing home beyond 90 days. For inpatient care in

a hospital for mental disease, the Federal share would be reduced by one-third beyond 90 days, and all Federal participation would end after an additional 275 days.

Now, we wish to make it clear at the outset that we support the express purpose of this emphasis on outpatient health services, but we have to sound a word of caution about this because in spite of that effort, in spite of the incentives which this seeks to establish, to get a greater emphasis upon earlier attention and earlier health care it cannot be expected commensurately on the same day we are going to see the effects of that in reduced institutional expenditures for long-term care. Obviously, this is a matter which takes longer in its development and one, therefore, in which the reduced or the withdrawal of Federal money from the program is simply going to mean a shift of the expense to the States or otherwise a curtailment of needed services to the patient.

As you know, the admission and length of stay in hospitals and nursing homes is really a matter determined by physicians. They exercise their judgment as to whether an individual can be cared for at home or, perhaps, in a less costly facility than a hospital or, for that matter, even in a nursing home.

But, on the other hand, it is not just the needs of the patient that guide the activities of States in the general provision of the services in this area because States, too, have pressures in connection with their share of the costs of the medicard program which often result in the States taking action in a summary way in view of the needed finances to limit the kind of benefits which will be provided.

So I do not think it could it could be assumed here that the States need some kind of incentives to keep oosts down. What the States need is continued support from the Federal Government in order to provide services which are required, and thus not to have to be burdened with funds which the States really do not have.

Furthermore, there are just too many instances in which even after determination by a physician or by the physician joined by others like the social worker and the family and others who have interest, that an alternate care plan for home health care, perhaps, or some other kind of arrangement just does not exist.

So that, in spite of the best efforts of everybody, these kinds of facilities are not obtainable.

As a matter of fact, this point is brought out in a couple of documents that I refer to in our statement which, by the way, Mr. Chairman, I ask the privilege of filing with the committee, and on page 114 of the report of the HEW Task Force on Medicaid and Related Programs, this long-term problem is brought into focus with this

statement:

Importantly, the Task Force thought that although classifying patients is sounds, patients should not be summarily discharged from skilled nursing homes or other health facilities if alternate facilities are not available. Keeping a patient in a health facility when his needs for support services cannot be met elsewhere does not represent misuse; it represents a default on the part of the community to match services with needs. Investments in alternative services are the only way to solve the problem.

That is the end of the quote.

Further, the Department of Health, Education, and Welfare states: on pages 127 and 128 of the June committee report on H.R. 16311, and I quote from that:

Health care problems for the new combined adult assistance program involve greater needs for long-term medical and custodial care and rehabilitation services-quite different in kind from the preventive and acute care of younger adults and children.

We believe, therefore, that these needs would not be adequately met if we were to entertain enactment of the provisions of section 225 of this bill.

The States are moving, as they can, in the direction of intermediate care facilities. But this is a slow process. They do not have full command over the provision of the services because they must rely in large measure upon the development of these under private or nonprofit auspices, and so as time is passing, while these kinds of facilities develop, States are forced to depend upon their services through their long-term care provisions of title XIX.

Now, what about the mentally ill, and the section in here which not only reduces the Federal participation of care for those individuals after the 90-day mark, but says nothing at all will be shared by the Federal Government after the next 275 days.

For the mentally ill, the complexity and uncertainty of needed treatment is reflected in the present State laws and programs. The State plan, under medicaid, has to show as well as see to it that assurance is given for immediate readmittance to a mental hospital upon the discovery that the patient is not being properly handled or his needs arise after release which call for his or her readmission.

It happens that among these who are over the age of 65, in particular, who are the ones in question here in the public mental hospital, that their conditioning-they may not show physical dependence, it is not subject to self-dependence necessarily at the end of the year's time and yet, at the same time, it cannot be said that they are no longer to be regarded in a patient status, although as far as this measure is concerned this would, in fact, be the end result.

Now, there is a statement on this subject that comes from the Health, Education, and Welfare Task Force on Medicaid, and I quote from that:

We fully support the Department's commitment to modern concepts of care for the mentally ill and the development and implementation of alternatives to inpatient care in mental institutions, using title XIX funds where possible. Maximum effort should be encouraged in planning for alternate care, guided by the needs of the patient. In such a flexible approach to care, based on patients' needs, arbitrary limitation on duration of care of patients in mental institutions is inappropriate, and the task force recommends against imposition of any limitation.

So, we see, as we look through the whole matter that all that can really happen if we approach a solution of the problem of costs which, apparently, is underlying the introduction of this idea, through the process provided in section 225, will simply mean that the costs will be shifted to the States where the money is not available, and I would fear, gentlemen, that most likely the result of that would be that there would be a reduced level of care or level of benefits resulting therefrom, as I have already information that, and I am sure you have, too, to the effect that, some States had to reduce the levels of their