3. Federal aid to indigents. It would be highly desirable from every point of view if medical care of indigents could be furnished through insurance rather than by the rendition of services directly by the governmental agency responsible for such people. There has been great concern about those not completely indigent but who need some assistance in order to be able to purchase proper coverage. The Federal Government might aid in the solution of this problem and encourage this highly desirable method of dealing with the depressing problem of the medically indigent by undertaking to match funds with States who are willing to initiate and administer a program of buying prepaid hospital and medical insurance for this class of people.

4. Federal purchase of insurance for its beneficiaries.-The Federal Government and its various agencies could render great assistance to the present voluntary prepayment plans by purchasing insurance from such plans as meet proper standards in lieu of the direct provision of medical services. Such classes would include veterans, dependents of military personnel, merchant mariners, Indians, etc. Such a practice would place the care of these people in the hands of their own personal physicians, would permit the Government to get out of the hos pital business to a great extent, and would greatly improve the facilities available for all the population.

5. Federal loans to prepayment plans.-Loans, repayable with interest, should be made by the Federal Government to prepayment plans in order (1) to permit new plans to be organized where none exist; (2) to permit presently existing plans to expand to meet the present needs; and (3) to permit improvement in the services rendered.

6. Federal loans to groups and clinics.-Many groups and clinics would be organized and would be willing and able to give comprehensive medical care to groups of patients on a prepaid basis if they had funds to build a proper physical plant and other facilities. Loans on an FHA basis should be made to such groups as show their willingness and ability to furnish such a service. This money would all be returned with interest and the building of such facilities would have a salutary effect upon the national economy.

SUMMARY

There is strong public demand for prepaid health care. The present plans need study, improvement, and standardization. The Federal Government can aid by establishing a Federal prepayment bureau, by reinsurance of voluntary plans, by aiding the poor to purchase such coverage, by utilizing such coverage for its own beneficiaries, by loans to present and projected plans, and by loans to groups for the provision of physical facilities for furnishing prepaid medical

care.

LEE PLAN FOR PREPAID MEDICAL CARE

PREAMBLE

I believe that for the vast majority of people and for most doctors a system of voluntary prepayment for medical care is preferable to our present system of fees for services rendered. I believe that the care to be rendered should be comprehensive care. By comprehensive care I mean coverage for all medical services including preventive but excluding those services already accepted as State responsibilities such as mental disease, long-term tuberculosis, industrial accidents. military medicine, and for veterans with service-connected disability. I believe such prepayment plans should be regional in character and should not attempt to cover a large unhomogeneous area. I believe that whenever possible the arrangement should be made directly between the patient and the doctor or group of doctors who renders the service without the intervention of any third party. I believe that the arrangement should be on a capitation basis. I believe that the patient should have the right to choose his physician and that the choice of a group instead of an individual is also recognized as the exercise of this free choice. I believe that any doctor or group of doctors should be free to offer to their patients any form of payment plan which is acceptable to the two parties involved and which does not violate laws covering such agreements. I do not believe that membership in a medical society should be denied to any individual doctor solely because he is associated with any legal prepayment plan. I believe that plans for prepayment of medical care should be initiated by the

doctors themselves and that doctors should be encouraged to develop plans of varying types.

THE HEALTH REGION

For purposes of administering prepayment medical plans, and for all other health activities as well as the State should be divided into health regions each of which represents an area which has a common-health situation. (Analogy school districts, irrigation districts, port authorities, bridge districts, etc.) Each region should have a health council with lay and professional representation which first should act as a broker for the purchase of proper prepayment coverage but which ultimately should interest itself in everything which concerns the health of the region. Any prepayment plan should be operative in the region only. The person who becomes ill should be covered for emergency care by proper indemnification insurance. The limitation to a region insures proper sense of responsibility between doctor and patient, simplifies policing and encourages good local practice. A proper community is not penalized by association with a remote area where practices are imperfect.

THE WORKINGS OF THE PREPAID PLAN

Under the plan I propose the health concil would receive from any group or individual the agreed-upon premium and would act as the custodian of this fund. It would ascertain the physician or the group which the individual patient desired as his physician. If the patient chose a group which had sufficient qualified personnel to make comprehensive care possible, the health council would turn over to this group the total premiums (less minimal administrative expense) for the group to divide as it sees fit. If the patient chose a doctor unaffiliated with any group, the premiums would be placed in a fund against which this doctor and any other specialist the patient might need to consult could place a bill according to a fee schedule agreed upon by the local doctors themselves. In this way fee-schedule type of coverage and capitation type could exist side by side. The patient would receive the care he needed. The doctors would be fairly remunerated.

THE PLACE OF THE UNION

Unions which have health and welfare funds could negotiate with the health council to get the best coverage possible for the funds they had available. In case the funds were insufficient to purchase comprehensive care, various forms of deductible coverage could be arranged by the health council to fit the funds available.

THE PLACE OF THE MEDICAL SCHOOL

A small amount (25 cents per month?) could be added to the premium to be turned over to the local medical school which might serve several regions. In return for this premium, the medical school would undertake to furnish free consultation including operations, etc., to any physician in the system who requested it. In this way esoterics, unusual, very difficult procedures (lung surgery, heart surgery, brain surgery) could be done by the staff of the medical school. The premiums received by the medical school would largely defray the cost of medical education. The liaison of the medical school with the practitioner would raise the standards of medical care.

HOSPITALIZATION

Would be provided by a standard Blue Cross policy. In time the health councils might own and operate their own hospitals. The health councils in the beginning would buy hospitalization for their clients under the best terms they could get.

OUT-OF-REGION COVERAGE

Would be provided by one of the very inexpensive indemnification policies presently offered. (Independence Insurance Co. of Los Angeles.)

ROLE OF MEDICAL SOCIETY

They could act if they desired as custodian of the funds to be distributed to the nongroup affiliated physicians. They could act as the guardian of professional standards in this plan.

RÉSUMÉ

This plan gives what the customer wants: comprehensive care. It is consistent with medical ethics and State laws. If the premiums (as they should be) are large enough and if the physicians (as they should) deal fairly with the plan, the doctor could prosper under it, the medical schools will be rescued from their dilemma, and the standards of medical care will be greatly raised. PROPOSED PLAN FOR PREPAID MEDICAL CARE OF LABOR GROUPS IN LOS ANGELES

The most important development in recent years in the field of prepaid medicalcare plans is the increased interest in such plans on the part of organized labor. Hardly a labor contract is written today which does not contain some health and welfare provision. The number of people involved when one considers dependents as well as the actual union members is very large. In the past a good many plans have been tried. None have yet proven wholly satisfactory to either the unions receiving the service nor to the doctors who furnish it. A great deal of the money has apparently been wasted and the situations call for a new approach which takes cognizance of the various interests involved and the mistakes of the past.

Generally speaking, the workingman desires for himself and perhaps even more for his family the assurance that when the need comes he will have access, under financial conditions which he can afford, to medical and hospital care of the highest quality. In general he wants comprehensive care, i. e., coverage for all or practically all of the hazards and provision for preventive and diagnostic services as well. He wants to be sure that when he has paid his premium that will be all, or substantially all, of the money he will be called upon to furnish for medical care. In the first place he wants quality; in the second, financial security against the hazards of illness.

Organized medicine on the other hand has certain strongly held convictions on this matter and certain criteria which it insists must be met. In the first place it insists that the physician shall not be under the control of any outside authority whether that be a lay group, an institution, a labor body, or the Government, particularly not the Government. It insists upon a free choice of physician, it frowns upon anything resembling a closed panel and indeed upon any panel arrangement whatsoever, it does not like groups of patients being delivered en masse to any particular plan. While officially tolerant to groups there is pretty widespread hostility on the part of many doctors and medical societies to the whole concept of group practice. In order to get truly first-class medical care, it is necessary to have the cooperation of the organized medical bodies. Therefore, in formulating a plan it is most important to get the approval of organized medicine.

The following plan is proposed as one which seems to meet the needs of the insured upon one side and the stipulations of organized medicine upon the other. It is proposed that these plans be established on a regional basis in order that the special conditions of each separate community may be met with local control and local responsibility. The first step would be the formation of a local or regional health council which should be a nonprofit foundation with a board of directors composed of men and women of unimpeachable integrity and with keen interest in the field. This body should act in the capacity of trustee for all funds in the area which are to be expended for prepaid medical and hospital services. It would be, in effect, the broker for the purchase, in behalf of the beneficiaries, of the best coverage available in the area. But in addition to this function of brokerage it would be charged with the task of developing new plans for prepayment of medical plans if no satisfactory ones are available. Groups, unions, employers, individuals, anyone desiring health coverage would turn the funds they had available for such services into the health council which in turn would make the best deal possible in behalf of the clients.

For the special problem of union welfare funds there is suggested an arrange ment which might give the unions what they want in the form of comprehensive care and still meet the stipulations of the medical societies. This would involve the collection of a certain sum per month from each prospective beneficiary. From this sum the council would first purchase hospital insurance from presently available Blue Cross plans or recommended insurance companies. (Or when the membership became large enough it might pay the hospital charges directly.) The hospitalization being provided for, it would then contract for comprehensive medical service to be furnished to its clients by groups of doctors already existing or formed for the purpose of furnishing such care. These

groups would be required to meet certain standards as to the number of specialists represented on their staffs and the proper distribution of them, and would be limited in the number of patients they could take to the number they could properly care for. But for these clients who desired the services of a doctor who was not in a group and for these doctors who did not care to enter into group practice a special arrangement would be made. For every patient who chose a nongroup affiliated doctor to be his medical adviser, the monthly fee would be deposited with a fund under the custody of the county medical society. The participating doctors who rendered service would put in bills based upon an agreed-fee schedule to this fund and would be reimbursed as they are now on a fee-for-service basis.

The same arrangement would be invoked when a patient who was signed up with a group chose a nongroup doctor for some special service. This doctor would bill the group for the agreed-upon fee in accordance with the schedule. If the aggregate of the bills presented to the county society fund exceeded the funds available they would be prorated as CPS has done under some circumstances. Special arrangements, not difficult to devise can be made for X-ray and laboratory services to the insured. In this way both (those who favor capitation group practice and those who prefer fee-for-service) could be accommodated. There is complete freedom of choice to the patient and no outside control of the physician. And the patients have the assurance of comprehensive coverage at an agreed-upon fee.

An additional and a very important feature of this plan would be for the health council to contract with a medical school (or schools) to furnish overall consultation service to all the doctors who participate in the plan. For this service a fixed percentage of the premium would be paid to the medical school which in turn would make its staff available for such procedures as neurosurgery, heart surgery, etc., which might be beyond the competence of the individual group or doctor and would also make its staff available for any difficult or special problem which might arise. In this way the beneficiaries would be assured of medical care of the highest order, the standards of practice in the community could be raised and the medical school would have an assured income to meet its deficits. This feature would add greatly to the attractiveness of the plan to the patients.

It is not possible to say offhand what the cost of such services should be. Quality should be stressed before cheapness. Most people would pay more for health coverage if they were assured of such quality. But some approximations can be made. The hospitalization should be about $1.25 per month per person. The medical services might well be furnished for an average of $5 per month per person. The medical school should get $0.50 per month per person. The overhead of such a plan should be very small indeed as there would be no commission, no sales expense, no reports to be filed, etc. Only a careful actuarial study could show just what the charges would be. The availability of union funds of course might limit the benefits which could be purchased. There are many administrative details to be worked out but no serious obstacles are likely to be encountered.

The plan provides most of what is desired by all parties interested in prepaid medical care plans.

Dr. LEE. I want to say this: I have been in the practice of medicine. for 33 years now, beginning as a solo practitioner, so-called, going to Palo Alto and beginning the organization of a little group which began with 2 of us and then 3. And now we have about 60 doctors in that group.

I want to make it perfectly clear at the beginning that I am a devotee of group practice, and if there is any bias I certainly am biased. in favor of group practice as a method of practicing medicine.

I believe most firmly that it not only improves the quality but it is an economical way to practice, and it is a good thing for both the patient and the doctor. So anything that I say will have to be interpreted in the light of the fact that I actually am a biased individual, my bias being in favor of group practice as a method of supplying medical care.

The CHAIRMAN. I wish there were more biased as you are in such a good cause.

Dr. LEE. I am also biased, Mr. Chairman, in favor of prepayment for medical services. I am certain from my experience with the public, and my experience on the Truman Health Commission that that is what the public in general wants.

Mr. DOLLIVER. May I interject a point at this point? When you say prepayment, do you mean prepayment by the patient or prepayment to the doctor before the illness occurs?

Dr. LEE. I mean prepayment by the patient for his medical and hospital bills. That method of supplying his hospital needs, I know, is what the public in general wants.

The proof of that has been the experience of these various hospitalization and medical care plans since 1938. There were about 2 million such policies in effect at that time, and now there is something like 90 million people who have some kind of coverage.

In our own experience we are constantly being requested by our patients to provide them with some system of prepayment, and we are in the process of trying to do just that in our own group.

I would like to read, however, my first paragraph just to highlight it. I would say that the proper objectives of any project of this sort are threefold:

First, to increase the supply of medical and hospital care where it is deficient; and

it.

Second, to improve the quality of such care; and

Third, to make such care accessible to all those who desire and need

Now, there has been a great deal of discussion about No. 1, whether the supply of medical and hospital care is sufficient. I am quite sure it is not. I can demonstrate, and we demonstrated in our commission's report and other places, that there is a great shortage of hospital facilities.

My own personal opinion is that there is a great shortage of doctor supply and other paramedical personnel, meaning nurses, laboratory technicians, and so forth.

So any project for prepayment presupposes, it seems to me, that there is some thought given to increasing the supply, the supply of people and the supply of facilities. That has to be taken into consider

ation.

It is perfectly senseless to put a program for furnishing medical and hospital care into effect and not have people or the facilities to furnish that care. The supply has to be improved.

That is not particularly the subject of the discussion before your committee, but it is something that has to be considered in making any such plans before you can serve. You have to have the pie. And the matter of how you cut it is not important if there is not any pie to cut. I believe that this matter of deficiency in supply has to have serious consideration in any step in our consideration of the whole problem. The CHAIRMAN. On that matter, Doctor, you have just raised, if there is any additional opinion that you wish to express beyond that which you have already expressed, we will be glad to have you either give it to us now or put it in the record afterward.

The fact is that we do have before this committee legislation that seeks to deal with that problem which you have just mentioned.