reported income of other physicians and specialists in the community and the physicians enjoy added benefits of security not possible for the solo practitioner, including retirement benefits at the age of 65. They can have vacations without any loss of income or loss of patients. They have sickness benefits. They do not lose their income during periods of illness, as does the doctor in solo practice or lose their practice. In other words, they have many benefits in addition to adequate remuneration which the solo practitioner does not have. As partners they own a share of the equity in the group's property which is repayable to them upon retirement in addition to their regular retirement benefits.

I would like to emphasize that there are no deterring extra charges for any medical service which the insured may require in their homes, in physicians' offices, medical group centers, or in hospitals. Only one small charge is permitted, although many of the medical groups do not require it unless there is an abuse. If the call comes in for a doctor of a medical group after 10 o'clock at night, or before 7 o'clock in the morning, he is privileged to charge an extra $2. If there has been no abuse of night calls, many of the groups do not ask for it for it is not worth the trouble of collection. That is the only extra charge that can ever be made by any doctor in the Plan to any subscriber or his family. Every kind of medical and surgical service is available to them, including X-ray diagnosis and therapy, radium and radioisotope therapy, diagnostic laboratory services, physical therapy, visiting nurse services, and even ambulance transportation without extra charge.

It is important to emphasize that the Plan erects no barriers by reason of age, sex, or preexisting illness, injury, physical defect, or pregnancy, either to admission to its rolls or to utilization of services immediately thereafter. There are no waiting periods for medical care for preexisting illness or pregnancy. Reliance is placed solely upon group enrollment to protect the plan against the adverse experience to which unguarded individual enrollment would expose it. We accept groups of 10 employees having a common employer, if they enroll with their families. We have not yet accepted groups of less than 10, but may as experience indicates that it is safe to do so without getting a very adverse selection-the sick coming into the Plan in excessive numbers.

Since the first day of operation of the plan, a division of research and statistics in HIP has recorded every medical service to every enrollee in the plan. Today we are recording over 2 million doctors' services per year. By means of modern statistical machinery, these data are being thoroughly tabulated, analyzed, and evaluated. The utilization rates of medical, surgical, and laboratory services by all age groups and especially the plan's experience with old people and with maternal and infant care will provide valuable data for future programs of medical care. If you wish me to do so, I am prepared to report upon our experience with older people. We have about 25,000 enrollees in the old-age group, people between 60 and 90 years of age. This is an adequate population sample with which to determine how much care old people really need, when they can get it comprehensively for an unlimited length of time, without terminations by the Plan.

39087-54-pt. 6- -17

An intensive study of the experience of the Plan during its first 5 years is now being made by a special committee of impartial experts under the chairmanship of Dr. Lowell Reed, president of Johns Hopkins University. It is being financed jointly by the commonwealth fund and the Rockefeller Foundation. The value of that information, you can judge, from the fact that these foundations have contributed jointly about $311,000 for this survey.

In addition to a longitudinal study of the Plan's experience with its insured population, the special research conducted by Dr. Reed's committee includes an investigation of the sickness and medicalcare experience of large representative samples of households in New York City and in the HIP population, totaling more than 25,000 persons. The publications emanating from the research division are available to you as well as all of the Plan's own recorded experience. HIP also maintains a division of preventive medicine and health education as one of its important activities. It is the responsibility of the expert staff of this division to promote adequate utilization of medical services by the insured population, especially preventive services and those concerned with early disease detection.

In the past, fear has been expressed that when preventive medical care is available without extra charge people will take advantage of the program and wreck the plan by their excessive demands. We find that that is not true. In our experience, abuse by subscribers is negligible. Actually the reverse is true. We find that subscribers in the higher intellectual levels use the services more generously than do people in the lower economic and intellectual levels.

For example, 20,000 schoolteachers in our insured population have had the highest utilization rate, because they are conscious of their health needs. But their utilization rate is not beyond what we think is reasonable and right.

On the other hand, certain groups, like restaurant cooks, dishwashers, porters, scrubwomen have a low utilization rate, in spite of the fact that they may have the largest amount of unmet need for medical care. Because they have never previously enjoyed adequate medical care, they do not at first know how to use the available services. HIP's health education program is therefore directed at these people who do not use the services adequately, so as to bring their utilization rate up to what it should be for optimum disease protection.

HIP's objective is to have every family select a family doctor and use him and the specialists and laboratories of their medical group for the prevention and the early detection and treatment of illness. When a subscriber joins the Plan he has 30 medical groups from which he can make his selection. He is encouraged to pick a group in the borough of his residence. He then visits the medical center of the group where he picks a family doctor from the 10 to 30 or more general physicians on the roster of the group. If he does not like the family doctor he has first chosen, he can change to another family doctor in the group. If he does not like the group he can easily transfer to another. If he does not like the Plan he is at liberty to drop out at any time. He therefore has a wide range of choice. Although he cannot choose every licensed doctor in the State of New York, he can choose among 30 groups and within the group of his choice he has a wide selection of family doctors.

The effect of this wide exposure of the insured population to medical care can be measured by the fact that at least 74 percent of the enrolled members of the insured families are now using their physicians' services within each calendar year and this rate is rising as our health education program takes hold. That is, 3 out of every 4 people enrolled in the plan see a doctor one or more times a year. The average rate of utilization of doctors' services by the insured population of 400,000 people is 5.4 services per year per person.

It is important to emphasize that the lack of financial barriers to utilization of medical and laboratory services has not led to any significant amount of needless use of the services by the insured. Subscriber abuse is minimal and easily corrected.

The experience of HIP and of many similar plans throughout the country is now sufficiently voluminous to demonstrate that comprehensive medical care through prepaid group practice is professionally feasible and financially practical from the standpoint of both the doctors and the public. There can also be no question of the importance of prepaid comprehensive medical care to public health; nor its importance for the care of long-term chronic illnesses.

To facilitate its growth, two things are necessary: (1) elimination of interference by local professional societies with prepaid group practice; (2) financial assistance by government through direct loans or through guaranteed mortgages from private lending institutions which will encourage the wider extension of prepaid comprehensive medical care throughout the country under local community sponsorship. I emphasize that plans should be developed and sponsored locally. To be eligible for such loans they should be required to meet certain basic requirements as to professional personnel, physical facilities, and operational program.

As a result of our own experience, we would advocate that prepaid group practice plans have a wide community sponsorship by representative citizens of the community; not solely from labor, or solely from industry or the medical profession, but representing all elements in the population. The board of directors should operate the plan as a trusteeship for the community as are the voluntary hospitals of this country.

Government at all levels may also help through the purchase of prepaid medical care for its own employees and wards. It should follow the accepted practice of purchasing medical care under group contract from the prepayment organization which produces the best values for the price charged.

ROLE OF FEDERAL GOVERNMENT

The role which the Federal Government should take in promoting and extending adequate medical care to the insurable population of the country might well follow that which it has already taken to promote and extend adequate hospital care under the Hill-Burton Hospital Survey and Construction Act. Federal assistance to the States might first be limited to grants-in-aid to encourage the States to survey for themselves existing deficiencies in medical care within the State and to determine the following:

(1) The extent to which the insurable population is not covered by prepaid medical and hospital care.

(2) The gaps in benefit provisions under existing prepayment programs.

(3) The means whereby the gaps in population coverage and the gaps in benefit provisions under existing programs may be eliminated. (4) The availability of voluntary insurance plans which provide comprehensive benefits for medical care in the homes, in doctors' offices, in diagnostic laboratories, and X-ray services, as well as in hospitals.

(5) The desire of the public for prepayment plans which will provide comprehensive medical services.

Some have said that the public does not want comprehensive plans. That is not our experience. They may not as yet have the money to buy it but many families most certainly want it if they can get it.

(6) The existence of State laws which prohibit or make it impossible for physicians to provide such comprehensive medical care through prepaid group practice of medicine.

I would also recommend that the State surveys should include: (1) A determination of the nonwage and low-income group in the population which cannot afford to prepay their medical care through the purchase of voluntary health insurance.

(2) The possibilities of experimentation by State and local governments with coverage of some or all of this group by voluntary medical insurance plans. I do not think we can have a ready made solution for this problem, and some experimentation at a local level or State level with such coverage of the nonwage and low-income group is therefore necessary and desirable. More physical disabilities may exist among the nonwage and low-income group than in the general population, and there may have to be an adjustment of the premium rates or some way of carrying the extra cost if utilization experience proves after practical trial that there is an excessive need for medical care. We only suspect but are not yet sure about it.

(3) The degree to which Federal assistance might be required to enable State and local governments to provide medical and hospital care to persons in the nonwage and low-income groups.

(4) The possibilities of experimentation by State unemployment funds or other State agencies with the provision of medical care for temporarily unemployed persons and their dependents through continuing the prepayment of premiums for the unemployed for care which may be needed during periods of temporary unemployment.

Some of the labor unions already do that for temporarily unemployed members of the union.

Small Federal grants could be employed most effectively to assist States in carrying out experimental programs designed to extend prepayment plans and comprehensive coverage under these plans to the part of the population within the State which is at present not covered or inadequately covered under such plans. In recognition of the fact that comprehensive medical service coverage under any voluntary prepayment plan requires economies and increased efficiency in operation which can be achieved only bv organization of medical services as group practice, Federal aid to State and local communities is needed. Such aid could perhaps be provided through the Federal guaranty of loans from private banks or other lending agencies for the establish

ment of prepaid group practice of medicine under local community sponsorship and in accordance with certain required standards.

The organization of medical practice along such modern and more efficient lines requires loans to medical groups for the construction of the required physical facilities, to be repaid by them out of future earnings. Such loans for the purpose of encouraging local prepayment programs for comprehensive medical care should be limited, I believe, to the acquisition of medical group centers, the purchase of X-ray, laboratory, and other professional equipment required for group practice, and perhaps the administrative expenses of the medical group center during the first year of its operation. The annual appropriations for this purpose need not be large nor would they be needed for more than 5 or 10 years, for as the loans are repaid they may be used as a revolving fund.

Certainly the guaranty of mortgage loans from private lending institutions would alone have a tremendous influence in changing the pattern of medical practice in this country to something more modern and more adequate than now exists in most areas.

It can be predicted that rapid progress in the extension of prepaid comprehensive medical care will not be made, however, (1) until such loans are made available; (2) hampering State laws are repealed wherever they exist; and (3) effective steps are taken by higher professional authorities to eliminate interference by members of the local medical profession in restraint of change from the present costly and disorganized methods of medical practice to a more modern and more economical pattern.

If you would permit me and if I could have a few more minutes, I would like to point out, Mr. Chairman, how economical the operation of such a program may be.

You can measure the economies in the use of prepayments in part by the percentage of the premium cost expended annually to pay for the medical care of the insured and how much is lost somehow along the way.

One of the largest medical expense indemnity service plans, one of the largest Blue Shield plans in this country with an enrollment of 3 million subscribers spends only 70 percent of its total gross premium income for doctors' services.

HIP is a much more economical operation because it receives its income in 500 or more checks each month from its enrolled groups and distributes this money on a per capita basis to 30 medical groups in 30 monthly checks.

As a result, instead of only 70 percent of the premium being expended to buy medical services, 85 percent of each premium dollar was used by HIP in 1953 for the direct purchase of medical care for its beneficiaries.

Under the medical expense indemnity plan of which I am talking, the administrative expenses of running the insurance company last year was 15.5 percent.

Under HIP the total operating expenses of all kinds during 1953 are 11.2 percent, which can be broken down as follows:

Eight percent for the administrative expenses of operating the insurance plan, and 3.2 percent to meet the costs of medical supervision, research, and health education, which are for the most part not normal functions of other insurance companies.