A different approach is presented by Mr. Robert J. Myers, Chief Actuary of the Social Security Administration, in his book, "Social Insurance and Allied Government Programs" (p. 7): “Actually a social security system is not a magical machine. We cannot put $1 of contributions into one end and continnously get $10 of benefits out from the other end. It is basic logic that the cost of a system is determined solely by the benefits and the administrative expenses paid. Accordingly, if in the aggregate the relative benefit cost of a social security system is the same as that of a private individual insurance plan or a group insurance program, the only difference in total cost arises from any differences in administrative expenses." In other words, no consideration is to be given to the reduction of "the cost of health care itself," as the insurance man put it. Notice, also, the phrase, "benefit cost." This is an actuary, not an economist, speaking. In The Ways and Means Committee inserted into its hearing record other material from me (pt. 5, pps. 2496–2502), raising questions which will become important no matter what the specific measures taken for "medicare." My main concern is that economic reasoning should find a greater application in this area. my opinion, the discussions before the Ways and Means Committee overemphasized actuarial considerations to the neglect of economic considerations. Actuaries and economists don't always speak the same language, and it is to be feared statements meant in one sense will be misconstrued by those accustomed to think in another sense about these matters. For example, an article in the December 1964 Journal of Risk & Insurance (pp. 597-602), "An Actuarial Appraisal of Congressional Proposals for Hospital Insurance for the Aged," by Paul E. Hanchett and George R. McCoy, gives an expected shortage of certain services as a reason for lowering a cost estimate. To an economist this would justify raising it. The article points to a difference in utilization, and calls it a difference in "costs." But spending more for health when you are getting more for your money does not mean higher costs. The actuarial terminology makes it seem the rich have higher costs than the poor. In this connection, it should be pointed out that the terms, "high cost," "low cost," and "intermediate cost," as used by the Chief Actuary of the Social Security Administration, accord with actuarial, not economic usage. This article may be compared with one in the American Economic Review, March 1961 "Hospitalization Insurance and Hospitalization Utilization," by Burton A. Weisbrod and Robert J. Fiesler (pp. 126-32). This distinguishes clearly between increased "utilization" and increased "costs." The Finance Committee may also be interested in this article because it calls into question a prevailing belief that by increasing deductibles you necessarily decrease the total cost of a program. (We must beware of considering only direct, immediately visible costs or benefits, and ignoring such as are indirect or not immediately visible.) The Senate Subcommittee on Reorganization and International Organizations of the Government Operations Committee (87th Cong., 1st sess., 1961), under the chairmanship of Hubert H. Humphrey, issued Senate Report No. 142, calling for a study of the "overall costs to society of disease and disability." This has hardly been noticed, although the Public Health Service may be credited with taking it as a cue for further study. This report recommends a couple of studies, "Economic Costs of Disease and Injury," by Selma Mushkin and Francis d'A. Collings; and "Does Better Health Pay?" by Burton A. Weisbrod (in Public Health Reports, September 1959 and June 1960, respectively). To these should be added "Toward a Definition of Health Economics," by Selma Mushkin (in Public Health Reports, September 1958). The Federal Budget of 1965 for the first time had comprehensive figures on health expenditures. This is more than can be said for education, for example. Yet the Council of Economic Advisers, in chapter 4, on "the economic aspects of the Great Society," of its report to the President has a good section on education, but that on health is anemic. I bring these references to the attention of your committee because they provide necessary economic concepts for judging the performance of any measure in the field of improving health care you may adopt. I request permission to have this letter put into the record of your hearings on H.R. 6675. Yours sincerely, SIDNEY KORETZ. PAN AMERICAN WORLD AIRWAYS, Hon. HARRY F. BYRD, Old Senate Office Building, Washington, D.C. DEAR SENATOR BYRD: Section 303 of the medicare bill is being rushed through Congress without public hearings and with utter disregard for its disruptive effect on other programs. For this and the several following reasons we urge you to eliminate this section from the medicare bill. Section 303 will double social security's duplication of workmen's compensation and other social insurance programs which would seriously hamper efforts to rehabilitate injured employees and return them to work. Further encroachment by social security threatens to destroy workmen's compensation, resulting in the major impetus for job safety being eliminated; destroying the financial incentives for rehabilitating and returning the disabled to self-supporting status; and leading employers to expect to become liable for lawsuits charging employer negligence, as they were prior to enactment of workmen's compensation. Section 303 will impose higher taxes on employers and employees alike. The hasty and uncritical manner in which section 303 would expand the Social Security disability program into fields already being well served by other programs should be thwarted. In our opinion section 303 should be dropped from the Medicare Bill until the issues can be adequately examined on their merits. Sincerely, BERNARD J. WELCH. ROSWELL, N. MEX., May 1, 1965. Senator HARRY F. BYRD, U.S. Senate, Senate Office Building, DEAR SENATOR BYRD: It is my understanding your Senate Finance Committee is having public hearing on HR 6675. I would like to give you and your committee my views on this bill. In spite of the apparent mandate by the electorate for liberal legislation I cannot help but feel the populace has not considered the ramifications of this bill particularly as regards subsidy and control as related to medical care. Undoubtedly there will be great attempts made at broadening this already enveloping legislation. Government will also attempt to fix prices for services rendered, competition will be somewhat stifled, excessive utilization would be the order of the day, and nursing home benefits would become astronomical. There would undoubtedly be great increases in Government subsidy with huge proportions being the eventual rule. This may well aid increased inflation which is already at our door. Perhaps this would be a good time to voice my most strenuous objection to inclusion of physicians under social security. I for one have no intention of retiring at age 65, provided the Lord allows me to achieve this age, nor do I wish to be supporting a program which I feel is more a tax rather than an insurance program. My estate planning, though meager, has not included this outgo nor source of income. It would be most appreciated if you and your committee would delete this from the final legislation if you approve it. It may also interest your committee to know that I and many other physicians will not participate in this program even if it is passed by Congress. Perhaps it would also be well for your committee to investigate the amount of governmental control which is already instituted and certainly that which is contemplated since the passage of the bill on area wide planning. It would appear this is a perfect example of a two-page bill passed by Congress which ends up as pages and pages of regulations and control subsequent to the good wishes of Congress. It would also appear this bill is aimed particularly at cutting out competition which has made our American free enterprise system so successful. By this cutting of competition I do not feel you are encouraging thrift but encouraging expenditures. I would feel you have no further to look than the Veterans' Administration for a perfect example of this. Cordially yours, HOWARD L. SMITH, M.D. COMMONWEALTH OF KENTUCKY Hon. HARRY FLOOD BYRD, DEPARTMENT OF HEALTH, Chairman, Senate Finance Committee, Senate Office Building, DEAR SENATOR BYRD: Due to the fact that I have had many years of experience in administering the medical aspects of Kentucky's public medical care program under the provisions of the Public Assistance Act, the Kerr-Mills Act, and the Children's Bureau Act, Senator Paul H. Douglas of Illinois requested that I present my views to your committee relating to the State health department being involved in the medical care program under title XIX of H.R. 6675. I am firmly convinced that the State health departments in the 50 States are uniquely equipped to administer the medical aspects of public medical care programs. This should be done in cooperation with the social welfare agency. Without a mandatory clause in H.R. 6675 to this effect, it will not be done except in a few instances. In Kentucky, our legislature enacted a State law in 1960 requiring that the social welfare agency and the State department of health enter into a contract for the health department to administer all medical aspects of the program. This includes the setting of standards, the determining of the basis for payment, and the approval of services rendered. This program has worked beautifully in our State and has tended to elevate the quality of medical care delivered to all the citizens of our State. Our hospitals and nursing homes have made tremendous improvements in the quality of services delivered. The vendor groups in our State are well pleased with the program and we can certify that the eligible recipients are receiving the highest quality medical care available. In 1963, I was a member of a group of State health commissions who drafted a statement on the role of State health departments in public medical care programs. This statement was adopted unanimously by the Association of State and Territorial Health Officers in October 1963. I am enclosing this statement for the record of your committee. I respectfully request that your committee give consideration to an amendment to H.R. 6675 which would require the State health departments to participate in administering the medical aspects of the Social Security Act. With best wishes, I am, Respectfully yours, Enclosure: RUSSELL E. TEAGUE, M.D., Commissioner, Kentucky State Department of Health. SUBMITTED BY RUSSEL E. TEAGUE, M.D., M.P.H., COMMISSIONER OF HEALTH OF KENTUCKY THE ROLE OF STATE HEALTH DEPARTMENTS IN MEDICAL CARE A small group of State health officers, concerned with current and future problems in medical care, requested the assistance of the Division of Community Health Services, Public Health Service, in developing a statement on the role of State health departments in medical care. This statement, presented to the Association of State and Territorial Health Officers by its Committee on Health Services Administration, chaired by Dr. Franklin D. Yoder of Illinois, was approved by the Association at its October 1963 meeting with the following resolutions: The Association recommends the following statement to its members as a useful description of the role of State health departments in medical care, and as a guide in determining what State health departments can accomplish in assuming their proper role in medical care administration and in the cooperative development of facilities and services with all professional, official, and voluntary agencies concerned. Medical care, in a generic sense, refers to the organization and administration of personal health services. It encompasses the system of arrangements and institutions through which health services of a personal nature are produced and delivered to the population. Patterns The changing patterns of medical care and the technological, social, economic, and political trends which have influenced its evolution are well documented. In brief, some of these factors are: 1. Increasing technical capacity to prevent disease and to provide effective medical diagnosis, treatment, and rehabilitation. 2. Increasing specialization of health personnel and facilities. 3. Increasing size and mobility of the population and changing age composition, as well as changing morbidity and mortality patterns with increasing emphasis on the chronic diseases. 4. Increasing costs of medical care; expanding economic capacity of the Nation collectively and individually; and progressive removal of economic barriers to the receipt of medical care. 5. Increasing involvement of voluntary and official agencies in financing the availability of facilities, personnel, research, and organization of health services. Problems The principal problems in medical care include the following: 1. An increasing fragmentation in delivery of services; artificial separations between preventive and curative services; and depersonalization of the patient through categorical disease emphasis and medical specialization. 2. A lack of comprehensiveness and continuity in patient care resulting from the fragmentation and depersonalization of services. 3. The maldistribution of health services and facilities, and shortages of professional and technical personnel. 4. The absence of a defined locus of responsibility for medical care, which would be responsive to the needs and problems, capable of achieving solutions, and publicly accountable for the results. Governmental responsibilities Official agency responsibility for health services to the public does not rest exclusively in health departments. A number of governmental units at Federal, State, and local levels have some responsibility for insuring that the environmental, social, emotional, and biological health of the population is improved or maintained. Some of these other agencies have primary responsibilities for categorical health programs, for example, autonomous mental health agencies or Hill-Burton agencies. Others include health in addition to their primary responsibilities, for example, departments of education or welfare. Only the official health departments, however, have primary responsibility for the general health of all the people. To the extent that personal health services are less than adequate for any of the people, to that extent medical care is important to us as State health officers. PRINCIPLES The basic principles which should guide the role and function of State health departments in medical care include the following: Goal The goal of medical care is the provision of a continuum of high quality, comprehensive health services, ranging from primary prevention through rehabilitation, which would be available to each individual when and where he needs them, and without regard to race, color, creed, residence, or economic status, with those able to pay for medical treatment services being expected to do so. Leadership The achievement of this goal will require the dynamic interaction of private and public organizations and individuals at all levels of responsibility. Creative, professional, and responsible leadership in this endeavor is a prime requisite. Official health agencies should be prepared to assume a leadership role in mobilizing and coordinating all resources to improve the quality, availability, organization, and distribution of health services for the population as a whole. Relationships We must strive for the establishment of effective relationships among private and public organizations at local, State, and Federal levels, as well as at each level among the various units concerned with medical care. Such relationships should insure that each unit fully utilizes its skills, experience, and resources to strengthen the medical care system and contribute to, but not dominate or fragment, the direction or growth of health services. This should promote the movement of program activity and achievement to that level of responsibility which assures the most effective services, while maintaining an appropriate degree of central leadership, consulation, and coordination. Flexibility The State health department role and function should insure that the initiative for planning personal health services arises from within the States and their various communities in order that variations in existing authority, responsibility, and capability will be considered in appropriate relation to local needs, resources, and attitudes. Priorities In establishing priorities, we should endeavor to achieve an integrated balance among the substantive areas of service, research, and resource development; and should be guided by present circumstances while anticipating future progress. Methods The technical and organizational methods which we develop for any particular medical care activity should utilize and apply the latest in specialized knowledge and skills from the medical, social, economic, and behavioral science fields. The methods should, however, emphasize program requirements rather than special interests of the individual professions in order to apply the generalist approach necessary to achieve coordination. Standards The standards of qualitative and quantitative adequacy which we develop for any medical care activity should be defined professionally, implemented realistically, and evaluated objectively. FUNCTIONS State health departments have some general responsibility for seven principal functions related to medical care. The scope and type of our specific activities will vary among and within the States, depending upon variations in legal authority, organizational capacity, and historical precedents. However, we all have some degree of responsibility and capability for performance in each of the seven broad functional categories. As new legislation and administrative decisions create the authority for expanded medical care programs and activities, we will be able to use our existing functional capacities as the basis for assuming added responsibilities. The following outline describes the general functions, and gives examples of activities which some State health departments are now or are capable of performing in each category. Planning and coordination. The planning function requires: (1) The exploration of present needs; (2) their projection to the future; and (3) the assessment of capabilities and requirements to meet the obligations through the most effective use of scarce resources. The coordination function is an essential and vital part of planning, especially because a multiplicity of specialized skills is involved within an agency, as well as among the numerous agencies with which the health department relates. Achievement of the goal of comprehensive, continuous medical care demands a high degree of coordinated planning, for which we as State health officers can provide leadership. Within the health department itself, annual and long-range planning of all activities serves to integrate medical care functions and to coordinate these functions with others of the agency. Because categorical grant programs tend |