choice among qualified persons. Then comes the problem of the difference between financial standards and that of medical care standards.

When it comes to medical standards, some of the greatest experts in the field have spent a lifetime studying this question, and it is almost impossible to develop a substantive quality of care. So you have to face it. The frustrating answer for us is that this evaluation is not now done effectively.

The answer is severe penalties to abuses. If you sent to jail, not the person who gave one extra shot, but a person who when you walked into a medicaid mill to have a cavity filled and receive a spinal tap, and then this person charges the public for that-if you send him to jail, then the public costs would go down, and quality of care would go up.

That is the problem. If you look at other systems, for example, the Internal Revenue, you will note that, unless there is some enforcement of regulations, there is no compliance.

Nursing home owners laughed in New York State because, despite all of the publicity, nothing has happened basically. They are always three steps ahead of us in playing new games.

Now, personal liability is another way to check abuses. As with pension funds, where I am personally liable, I pay careful attention, because I do not want to go to jail. I have many other commitments. This one gets extra attention.

You notice, in occupational hazard insurance, the directors are personally liable. In antitrust, triple liability works. Here, the guy can charge his lawyer to medicaid to prevent the Government from imposing its regulations.

MOST SERVICES OWNED BY PROVIDER

You mentioned the contract. In most of these areas, the service is owned by the provider. The State gets into tremendous difficulty if, when the State is not satisfied with the services, it tries to cancel them. If, on its say so, the State could not renew, you would be years ahead. Representative HEINZ. I think that is a very helpful statement. I found the testimony raises a number of fascinating questions, really beyond the scope of today's hearings.

It is my personal hope that our House Subcommittee on Health and Long-Term Care can do a great deal more in the areas which we have touched on today, about trying to understand the real needs of our senior citizens, the way we can facilitate their access to all kinds of long-term care, whether that be community-based care or institutional care, as the case may be.

It is a massive subject. It is my hope that perhaps our subcommittee-and this is no easy task, it is not an overnight task-will get something accomplished, and within 2 or 3 months might be able to make a model proposal, or draft model legislation in this whole area, not even necessarily with the hope of enacting it this year or next year, but with the hope of trying to deal with this question comprehensively from a congressional point of view.

You have opened a very important door for us, in addition to the specifics, of what you presented.

I congratulate all of you.

Senator Moss. Senator Brock, the Senator from Tennessee.

STATEMENT BY SENATOR BILL BROCK

Senator BROCK. I think I would like to echo Mr. Heinz' comments briefly.

I have been fascinated by the testimony, and I am intrigued by some of the specific thoughts that Dr. Etzioni is suggesting. The vouchered concept has a great deal of appeal to me because it maintains a pluralistic approach which I think enhances the quality of the system by forcing qualitative competition. I think that will be the one thing that will force this system to be responsive.

I am not sure I agree with whether we can have enough money ever to do the kind of audit that we have got to do to enforce standards. I would agree with Mr. Hawes that it is totally inadequate to have one paragraph of regulations for profit agencies and another 65 pages for the public institutions.

"WE HAVE GONE TOO FAR"

I think there is a medium ground. I think we have gone too far with 65 pages, and I think it is totally inadequate for just one paragraph for the other. But it does seem to me that maybe we are beginning to touch on something, that a nonpartisan consensus is what we have here.

It would appeal to me at least to try what Dr. Etzioni suggested in the latter part in his paper, and that is a pilot test of the vouchered concept.

I might say too that, at least in my own State, and I have done a number of nursing home visits and other visits of this type, that money has quite often very little to do with the quality of service provided, and I think that is what Mr. Hawes alluded to.

This is something that is hard to legislate and mandate, but perhaps we could take a starting point with some sort of pilot project, in selected States, that would try three or four different routes. One could be a voucher route, one a highly audited proprietary route, and another for a nonprofit route.

I disagree on one of the particular points. That is the statement that it is generally true that the for-profit category of providers contain certain inherent disadvantages in the public service area.

I have not found that this is necessarily true in my own State. I can document this from my own experience.

I think I might cite to you the report that came out within the last 24 hours, in the General Accounting Office, on the cost of administering the medicaid payments. The highest single cost was that which is experienced by the Federal Government, almost twice the cost of administering the payments under a private agency, and in some cases, four times as much as we have experienced with Blue Cross and Blue Shield. So I think there can be some combination, but I personally do not know what the best route is and I am not sure there is one route that is best for 50 States.

I think in Tennessee our problems are sufficiently distinct from New York to suggest that maybe we should be allowed to test a different pattern, and that is what I like about the two suggestions I have heard. One is a better audit mechanism and better standards, and the other is more pluralistic approach.

I do not really have any questions, Mr. Chairman, other than to thank the witnesses for their contribution, and it is a subject matter that is far more complex than we are going to deal with in 1 or 2 days.

Senator Moss. Thank you.

Mr. Cohen.

Representative COHEN. Mr. Chairman, just a couple of points.

I am particularly interested, Dr. Etzioni, that you espoused the principle that liability-personal responsibility-does breed greater professional responsibility, and while it does not pertain to this particular hearing or this subject matter, I think this might be of benefit that would advocate no-fault practice insurance. When you take away the personal liability, you breed irresponsibility in the practice of medicine.

I also think it is rather unfair to use New York's experience in the abuse of nursing homes, whatever, to then project that to other parts of the country.

I think you also indicated it would be devastating, if we were to adopt the HEW guidelines, simply based on your experience in San Francisco and those in New York. I would dare say that we should not look to New York as being an example, but other areas. In view of the controversy now coming down from New York, it should not be used as an example of what might be going on in other States, and that is just a personal opinion.

CONFLICTING STATEMENTS BY WITNESSES

Dr. Etzioni, you indicated there is some conflict between your own testimony and Mr. Koch who preceded you, that after Mr. Koch said: "Let's have a study to find out what is going on," because we should not move into this area before we have a comprehensive study, and in your statement, as I recall, you said after 10 years of study, there is no doubt about the injury that we suffered by the older people in this country, and you indicated that most proprietary institutions are shamefully operated.

Based on that statement, I have a question: Does the HEW study that you referred to, actually come to that conclusion, or is that your conclusion based on your reading of HEW's study?

Dr. ETZIONI. Later in the day you will have HEW here, and you should ask them if you can, and prevail on them to share with you the findings of the study, so that you get it from the source, and then there will be no need for me to interpret it here.

I think the statement is correct. You could have a bigger sample, so in the study that has many limitations, nevertheless, it is the best study done, and it does not reach any conclusion on this matter by itself.

Nevertheless, there is a distribution by ownership of the problems, and so anybody can read a table, they can see what the study concludes. It is, in my humble judgment and my information, a political decision and not a scientific decision.

Now, the problems we know from other studies are rampant in Florida, are prevalent in the North, are certainly known in California, and the problems wherever they are, consist of a large number of

proprietary nursing homes. Indeed, it is also the same ones who appeared in other States, so it is not a New York problem.

Representative COHEN. Let me put it this way, if I can. Would it be fair for me to characterize your statement that HEW, is promulgating these rules and regulations, has acted in total contradiction of the facts of their own study?

Dr. ETZIONI. This is not an innocent mistake. I am not accusing particular officials, but this is a philosophical decision, and it is not based on any evidence.

Representative COHEN. I am asking for your opinion. You did come before us and make the statement, and I am just trying to test itthat in your opinion, HEW proposed regulations in total contradiction upon the facts as shown by the HEW study itself.

Dr. ETZIONI. Yes, sir.

Representative COHEN. One question, Mr. Hawes. I think you indicated 50 percent of the expenditures go for overhead, as far as home health care organizations are concerned.

Mr. HAWES. I think I said an average of 58 percent goes for overhead and profit to proprietary agencies providing homemaker services.

Representative COHEN. That is right. How does that compare with with the amount of money that goes to the nursing home institutions? Mr. HAWES. I am sorry. I do not have that information, but I will try to get it.

Representative COHEN. You do not know what that is-whether it is out of line in terms of other institutions and agencies? Mr. HAWES. No.

Representative COHEN. Do you know if that is out of line in terms of hospitals?

Mr. HAWES. Overhead and profit appear to be even higher in the homemaker program than it is in the medical program. Our prepaid health plan audit indicated it was 52 percent for overhead and profit and 48 percent for direct services.

Representative COHEN. And compared with the nonprofit agencies, what would be a similar amount of money for expenses?

Mr. HAWES. The nonprofit agencies have their problems in that they have to live up to these standards, and I would say we don't have information on that; it is about 50-50, I think, of the nonprofits. Representative COHEN. About 50-50 nonprofit, and 58 for the profit?

Mr. HAWES. Yes.

Representative COHEN. For the nonprofits, 52 overhead, and 48 wages; and 58 overhead, 42 for wages-for profits.

FEW HOME HEALTH SERVICES

Dr. ETZIONI. Could I add one thing? You asked me about costs, calling for a study. What I said is based on what we know of the nursing homes; there are comparatively very few home health services: each provides for different services. For every 100 nursing homes, there are 5 home health agencies, and we know very little about those.

Mr. COHEN. I was questioning your original statement, where you said after 10 years of study, you said there is no doubt about the study results.

70-652-76

I guess that is all I have.

Senator Moss. Mrs. Lloyd.

Representative LLOYD. Thank you very much, Mr. Chairman.

Gentlemen, I appreciate your testimony here today. You certainly have given us a deep and inside look toward the future problems we hope to avoid, and I must say as a freshman Member of Congress, and in hearing your testimony, this is the very first time I heard anyone say that a lack of regulations has caused chaos and abuse. So that was most enlightening.

Dr. Etzioni, we were discussing the voucher system which I think has much merit. I wonder how it would work for so many persons who are incapable of choosing a type of care. This is certainly a program that could be applied on a broad base, but as to that aspect, have you considered that?"

Dr. ETZIONI. The members of their family, social workers, therapists they can come to them, and in their hands, then very few people are incapacitated. So you do want to avoid the abusive nursing homes, and one which is inhumanely operated, so relying on their relatives and on professional workers, I still think they are better able to make a choice than the nursing home owner who is looking for a profit in the proprietary area.

Representative LLOYD. In which area do you think we have less effective regulations?

Dr. ETZIONI. In the area of nursing homes, health regulated services, in the area of mental health services, in the area of moving people out from State institutions into the community, the community is not ready for them, and so there is a great significance in working these problems out.

Representative LLOYD. Most of our committee hearings concern testimony with regard to a lack of homemaker services, and this is one area that we are really down on. Is this because of the definition of skilled nursing service? What is skilled nursing services?

I know in my State, we have many nurses who go out and perform services that a less-skilled individual could perform. This is very costly. But this is the very first time I have heard testimony that we should have more skilled people providing these less demanding services. Why are homemakers providing the services?

Dr. ETZIONI. If you go into a nursing home, the services are provided, but not if you stay home. If you are a social worker, and you have a case of a person with limited disability who needs some kind of attention, such as changing a bandage twice a day, it is almost impossible to get that service at home.

GREAT COST TO EVERYBODY

So you put the patient into a nursing home at great cost to everybody. The patient gets some service, but he loses contact with the community and with his family, and ultimately he is not returned. So one problem is you push people into these institutions, and by not having the resources to provide the services at a fraction of the cost in the home, you come out spending a great deal more. The next thing is you still need M.D. approval to, say, serve meals-on-wheels to somebody's home. The setup is very inhospitable to extend home health services and to avoid great costs.