and you are saying they are not to be allowed to do these things, take the medical staff out, and just things that are in the formulary; isn't that what you are saying in your amendment? Mr. WALLER. Mr. Chairman, the basic purpose of this language, as I see it Senator ANDERSON. Never mind the basic purpose; isn't that what you are saying in this amendment? Mr. WALLER. Correct; I agree with you. Mr. WALLER. I am sorry I did not hear all your questions. Mr. ROOKE. Mr. Chairman, this committee does not comprise the entire staff of the hospital. This committee, which decides how many drugs can be stocked by the dispensary, does not reflect the opinion of all the physicians that visit the hospital. Senator ANDERSON. Are there additional questions? Thank you very much. Mr. Harlow. STATEMENT OF ARTHUR H. HARLOW, JR., PRESIDENT, GROUP HEALTH INSURANCE OF NEW YORK, INC. Mr. HARLOW. Mr. Chairman and gentlemen, I am president of Group Health Insurance of New York, Inc., known as GHI, the largest independent, nonprofit medical care insurance organization in the United States that offers its subscribers free choice of doctors. We now insure almost 900,000 people and process more than 40,000 claims per week. We are a consumer-oriented plan. Our bylaws require that no more than half the members of our board of directors may be doctors. We have successfully served for 27 years as a quasi-public intermediary between the buyers and providers of service. I am pleased to testify in favor of the bill now before your committee. We recognize that private plans have not been able adequately to finance the medical needs of the aged. GHI, over the years, has made a number of special provisions for the aged but these have not been enough. Financial resources of those over 65 are obviously inadequate. Involvement of the Federal Government is essential. We hope, furthermore, that just as the original social security pension allowances stimulated the development of private pension plans, the bill before you will foster urgently needed, comprehensive medical care insurance in the voluntary area-not only for those over 65. Naturally, we do not believe that the bill as submitted is perfect, nor for that matter, was perfection probably true of any other legislation that was originally introduced into a new field. We believe one needed improvement is the inclusion in part A of certain in-hospital specialist services, as recommended by the Secretary of Health, Education, and Welfare. In addition, we regret the exclusion of preventive medicine and the inclusion of coinsurance and such a substantial deductible. The purposes of comprehensive medical care insurance plans has always been to eliminate the financial barrier between the patient and the care he needs. A deductible is just such a barrier. Most important, however, is our conviction that, if this government program is to function at its highest possible level of usefulness, it should make maximum use of the strengths of the private sector. Competition among private plans has resulted in progress toward control of costs, prevention of overutilization, and prompt effective administration. Medicare should profit from continuing competition. In section 1842, the bill provides that "the Secretary shall to the extent possible enter into contracts" with "carriers" to administer part B. What may not be clear and what we hope your committee report will clarify as a matter of legislative intent, without necessarily amending the bill, is that the Secretary should deal where possible with more than one carrier in a given geographic area. There would be many advantages to competition between carriers in an area. First, yardsticks of the cost of administering benefits can be created. For example, judging by reports filed with the New York State Department of Insurance, it costs GHI about half what it costs its local nonprofit competitor to process a claim. Second, by using experienced carriers, existing procedures for the control of overcharging and overutilization would be included in the Federal program. To illustrate, GHI uses electronic machinery to check on the number of services for which payment should be made according to standards established for each diagnosis. Specialist consultations are arranged in questionable cases. Most important, more than 10,000 doctors have agreed to limit their fees to the moderate amounts paid by GHI. Such existing arrangements will limit fee levels more effectively than will the mere phrases "reasonable costs" or "reasonable charges" now in the bill. Consumeroriented organizations have historically been the most vigorous and effective in developing techniques to maintain control of costs. That competition among carriers is administratively practical is proven by the large number of such programs already in effect. A list of some of the larger choice programs in which GHI participates is attached. More than 750,000 people in the New York area are included. Of greatest interest to the committee, perhaps, is the inclusion on that list of the Federal employee program, as well as those of State and city employees. So far as we know, in every case where choice has been offered, it has worked out to the satisfaction of all concerned. GHI is only one plan and New York is only one area where competition between established, substantial, and experienced agencies is possible. We hope that your committee will recommend that, wherever it can be done, these independent plans be incorporated into the program. Administration of part B should not be turned over completely to representatives of the profferers of services, like Blue Shield, or to the commercial insurance industry. The independent, nonprofit plans will bring to medicare the beneficial results of private competition. (The attached follows:) GROUP HEALTH INSURANCE, INC.-LIST OF LARGER GROUPS WITH CHOICE PROGRAMS I.A.M., district 15 welfare fund( Machinists Union). Painting industry insurance fund. Milk industry welfare fund. Ice cream industry welfare fund. Brewers Board of Trade, Brewery Workers welfare fund. Actors Equity insurance fund. New York Paper Cutters Union. Iron Workers welfare pension fund. Office Employees International Union, Local 153 welfare fund. Senator ANDERSON. Thank you, Mr. Harlow. Were you here earlier when we were talking about the experience of insurance companies when Mr. Eddy was on the stand? Mr. HARLOW. Yes, sir. Senator ANDERSON. I do not think you have time to do it now, but is there any possibility that you might take a look at part B and give us your estimate as to whether or not the premiums to be provided are adequate for the service to be rendered or is that outside your field of activity? Mr. HARLOW. No, sir; I think I can speak from a good deal of experience. The benefits of our plan cover an unlimited number of doctors' visits to the home, as well as patients' visits to the doctor. There is one variable in this bill that is pretty hard to predict, and that is the level of fees. Our plan pays $4 for an office visit and $6 for a visit to the home. If those are the fees to be paid, $6 per month is plenty. If, however, the fees that are payable under this bill go up substantially, then there may be some question as to whether the $6 is enough or not. But if the fees remain at anything like this level on the basis of our experience, the hundreds of thousands of people paying for an unlimited number of home and office calls and ambulatory diagnostic visits, the $6 is adequate. Senator ANDERSON. Thank you. Any subsequent ideas you have on that we would be very happy to have because you are serving a great many people, and I understand serving them very well, and I would be happy to have anything if you have any information on it. Mr. HARLOW. I would be glad to send you our experience on it. Are most of the people that you insure employees? Mr. HARLOW. Yes, sir; we only enroll employed groups. When people leave those groups they can maintain their insurance on an individual basis, and we have many thousands of retirees who have left employment. Senator CURTIS. That is all. Senator ANDERSON. You mentioned the fact of competition. Do you compete for these groups you now have covered like American News, taxi industry, machinists, and so forth? Mr. HARLOW. All those groups that are listed there, sir; each in dividual member of the group has a choice of carriers. The two most recent in New York, the taxi industry, where we competed against the health insurance plan and Blue Shield, and we got the most of the three, then the city employees of the city of New York, where we got twice as many as Blue Shield. Senator ANDERSON. Now then, when this group was up for bidding, did HIP submit a bid and did you submit a bid also? Mr. HARLOW. We all offered-they have a choice of three plans as described in centrally designed literature. They can buy HIP, Blue Shield, or GHI coverage. Of the individual members of the last two groups we have gotten substantial majorities. Senator ANDERSON. And you are suggesting wherever it is possible to get competition and bidding for this service there should be competition? Mr. HARLOW. Absolutely. These groups should be open to choice. As a rule, choices are opened again for group members every year or a year and a half and the fact that the insurance carriers are on the spot, I think tends to make them peform more effectively. Senator ANDERSON. I am not trying to commit the committee on this, but would you mind sending down to me the bidding on these two contracts that you mentioned where you and HIP and Blue Shield competed? Mr. HARLOW. Certainly, sir. Senator ANDERSON. I would appreciate it. Mr. HARLOW. Very glad to. (The following letter was subsequently submitted for the record. The attachments referred to in the letter were too voluminous for inclusion in the printed record and were made a part of the committee files.) GROUP HEALTH INSURANCE, Mrs. ELIZABETH B. SPRINGER, Chief Clerk, Senate Committee on Finance, DEAR MRS. SPRINGER: This letter, and the material attached hereto, is forwarded in response to specific requests made by Senator Anderson during the testimony of Arthur H. Harlow, Jr., president of Group Health Insurance of New York, before your committee on the matter of H.R. 6675. It is being forwarded by me at Mr. Harlow's request, because of his current absence due to illness. Two specific areas of information are covered: (1) Examples of the kind of materials issued to eligible subscribers enrolling in choice-of-plan arrangements, said materials being those issued to employees of New York's taxi industry and to certain employees of the city of New York. It is expected that the city group will shortly include all of its 290,000 employees. (2) Based on experience under our comprehensive plans, an indication of why we feel that the estimated $6 a month cost, for part B of the program, is actuarily sound. With respect to (1) above, the attached packet of materials include the covering instructions and descriptive brochures which were distributed to members of New York City employee group. Also included is the GHI brochure used in the taxi industry situation. The descriptive materials issued in that case by the other participating medical plans followed the same general format. In both of the choice situations mentioned in Mr. Harlow's testimony, and referred to in the material enclosed, GHI's program was chosen by a greater number of enrollees than the plan offered by the local Blue Shield organization. We feel that with appropriate adjustment, this choice-of-plan technique would be administratively applicable to the part B section of the medicare program. With respect to item (2) covering the cost question, the following is submitted: The highest cash claims level of any of GHI's retiree groups produced an utilization level of $77 per annum per capita, which approximates twice the level of use for our typical employed group utilization. In order to make the most conservative estimate, we assume that the medicare program part B utilization level would be approximately 21⁄2 times that of our active group, or approximately $100 per annum per capita. We estimate that the cost of those benefits again be most conservative, which are included in part B, but which are not ordinarily part of our medical program (hospital costs for psychiatric care, home-care benefits, and benefits for certain prosthetic appliances) to be an additional $15 per annum per capita. From this total cash claim cost of $115 we deduct $35 (rather than the full $50) which represents our estimate of the claims cost saving resulting from the part B deductible provided in the bill. The remaining $80 per annum per capita cost, which is the product of an initially conservative estimate as to the value of benefits and a conservative application of the deductible, can be further reduced as a result of the 20 percent coinsurance feature, leaving a net cash claim cost per annum of $64 per capita. Allowing for a 10-percent charge for administrative costs, the result is a $70.40 per annum cost or $5.87 per capita monthly. As you can see from the foregoing, assuming that doctor services are rendered at the schedule of fees outlined in the attached GHI brochures, the $6 per month cost estimate is sound. Let me extend, for Mr. Harlow and our organization, our appreciation for the courtesy shown during his appearance at your hearing. If we can be of any further service or provide any additional information, we are at your disposal. Sincerely, Senator ANDERSON. Senator Douglas? JOHN C. MCCABE. Senator DOUGLAS. I was much interested and greatly pleased by your endorsement of the recommendation of Secretary Celebrezze and others that the costs of the hospital services of medical specialists, the pathologists, X-ray men, physical medicine services, doctors, and anesthetists, be covered under the basic hospitalization plan where the hospital normally includes these costs in its bill. Some weeks before Secretary Celebrezze testified, some of us introduced an amendment to provide for this, and I would appreciate if you would look it over and see whether it meets your approval. Senator ANDERSON. You know what is in the Douglas amendment, do you not? Mr. HARLOW. Yes. Senator ANDERSON. It restores the original King-Anderson language. Mr. HARLOW. I think it is a fine amendment. Senator DOUGLAS. You approve it? Mr. HARLOW. Yes. Senator DOUGLAS. I notice that one of your patrons is Helena Rubenstein, Inc. This is an organization which is highly conscious of beauty and health, is it not? Mr. HARLOW. I should imagine so. Senator DOUGLAS. And the employees of that organization sell beauty and health to the women of the world, isn't that true, sir? Mr. HARLOW. Yes. Senator DOUGLAS. It sells them to the affluent women of the world. Mr. HARLOW. Yes. sir. |