We find it significant that the groups which place greatest urgency upon the use of the social security system continue to support compulsory health insurance for the population generally as their longrun objective. This program for the aged, therefore, may be visualized as simply the first step towards eventual compulsory health insurance for the Nation.

Pressures from other groups in our population will be exerted either to bring in specified groups or to reduce the age at which an individual may become eligible under the program. Strong arguments of hardship and necessity would undoubtedly be advanced and efforts would be continually made to relieve local and State governments of their responsibility by passing it on to the Federal Government.

We see no sure way that these three major dangers could be avoided. To us they are real dangers and I express them as an earnest belief and not simply an emotional arguments.

H.R. 4700: We have expressed our grave concern with respect to the use of the social security system to provide health care for the aged. However, it is our belief that we have a responsibility to be as helpful as we can to the Congress in its consideration of legislaiton affecting the health of the public and I shall, therefore, comment on particular provisions of this bill in the interest of the beneficiaries, the providers of the services, and for the protection of the financial integrity of the Social Security System.

Service benefits: We believe that the use of the service benefits principle and the provision of comprehensive benefits would remove the major economic barriers to hospital care for the retired aged. So far as hospital services are concerned the bill meets fairly well the test of comprehensiveness. With the uncertainties about the cost of the program, we would not urge that the 60 days of hospitalization provided by the bill be extended further, especially since the proposed nursing home benefits would meet some of the needs which might otherwise require additional days in a hospital.

We would, however, suggest a reexamination of the definition of "hospital services" to make sure both that it includes all that it is meant to be included, and that it excludes all that is meant to be excluded. As worded, the definition may fail to cover laboratory and other ancillary services in certain situations; it may, on the other hand, be a bit too broad-for example, by including drugs for use after the patient leaves the hospital. This is an exceedingly difficult definition to draw with precision, but it is a most important one if there is to be legislation of this kind.

Facilities to be used: It appears that the bill intends that services not be provided in facilities operated by the Federal Government. However, the bill provides that exceptions may be made by regulation. We do not understand the intended scope of these exceptions. Any general use of these facilities for a new class of beneficiaries as large as the class contemplated by this bill could do as much as any one thing to undermine the voluntary hospital system.

Eligibility for hospital participation: Reasonable criteria are necessary to determine the eligibility of hospitals to participate. The bill stipulates that any hospital licensed by the State may participate. The quality of State licensing programs varies a good deal. Any future efforts to improve minimum standards should be addressed to

the States. We suggest that particular study be made of the limitation placed upon the eligibility of surgeons who may render care under the program because of the hardships that may be caused to certain beneficiaries. However, this matter relates to the medical profession much more directly than to hospitals.

Interference in hospital operation: The provision in the bill appearing on page 10, line 15, forbidding governmental control of the "details of" administration of operation of hospitals troubles us by what it may imply about control of the broader aspects. I would recommend that these two words, "details of," be deleted. Aside from the wording, this is a matter that touches on one of our major objections to the use of the social security mechanism. We do not believe that any governmental program for so many people can fail to interfere to some extent with the administration and operation of hospitals, if only because a Government agency paying for so large a volume of care must reserve to itself some rights to examine what it is paying for. Within tolerable limits such examination would be administratively defensible, but the extent of the authority is of great concern to us.

Exclusion of custodial care: Many aged persons, although no one knows how many, are in institutions of one sort of another partly or wholly for the reason that they need some help with their living arrangements which they cannot find outside of institutions. They may need help merely because of a certain degree of senility, or they may suffer from some physical limitation that makes much existing housing unsuitable for them, or at least unsuitable without household help of kinds that is not often available.

We in the hospital field are only too well aware of the difficulty of discharging to their homes elderly patients who, even though they no longer need active medical care, cannot walk upstairs or cannot dress or bathe themselves. Recourse in such cases is frequently had to nursing homes. I am sure that doctors, like hospitals, send patients to these homes whose need is essentially for a domicile suited to their limited capacities.

Under any proposal, such as H.R. 4700, there is bound to be a great deal of pressure to get people into nursing homes. We do not deny the social justification, under present conditions of housing and the unavailability of personal help, for placing many of these people in institutions. In many cases this may be the best of limited choices. However, it ought to be kept separate from a health program, so as not to confuse either the purposes or the costs.

Although the bill seeks to exclude such custodial care, our question is whether these provisions could not be made more effective for the purpose intended.

The provision requiring transfer from a hospital as a condition of eligibility would undoubtedly tend to curtail somewhat the use of nursing homes for custodial purposes. This provision would also have an effect on the justified and unjustified use of hospitals, but I am bound to say that we do not know whether the net effect in this respect would be good or bad. On the one hand, it would make it easier for hospitals to discharge elderly patients who no longer need the intensive services available in the hospital, and to that extent would undoubtedly alleviate a troublesome problem.

It is obvious, on the other hand, that physicians desiring to obtain nursing-home care for their patients would be required to use hos

pitals as way stations to their destination. Close questions of professional judgment occur so frequently that I believe the making of hospitals the one entrance to prepaid nursing-home care holds appreciable danger of inflating the cost of hospital care under the program.

The bill requires that, in order to participate, a nursing home must provide skilled nursing care, and related medical and other services. It is clearly intended to require something more than State licensure of a nursing home, but how much more we cannot tell. A nationwide program such as is contemplated by this bill poses a dilemma: either institutions must be allowed to participate which fall rather far short of what we could wish, or the promised benefits will turn out to be unavailable to large numbers of supposed beneficiaries.

The definition also requires that the services be either supervised or prescribed by a doctor, and the bill elsewhere stipulates that he must certify the nursing-home care to be "medically necessary." We believe the bill was intended to apply only to persons who were in need of medical or nursing care. But the phrase "medically necessary" is open to an interpretation which would include persons not needing such care but unable for a medical reason to live in the usual household environment.

Proper housing for the aged is badly needed, and so are many kinds of nonmedical help to those of limited capacities. These services, even to the medically handicapped, are what we have described as "custodial care." The harm in confusing them with health care is more than financial, grave though the financial implications could be: to equate custodial care, in the public mind, with health services could set back our efforts to make people realize what present-day medicine can do for them, and to seek medical help before it is too late. The inclusion of nursing home benefits presents difficult problems, but also offers important advantages. At least at the outset, the availability of services would be limited by the availability of facilities, whatever the criteria for participation. Among the advantages of the provision is the probability that, with an assured source of income, many more homes of high quality would develop and some present institutions could raise their standards. While statutory language could not assure good results, we believe the terms of the bill could be strengthened, both for the improvement of quality and for the exclusion of care that is primarily custodial. One provision that I would suggest for the latter purpose might be made applicable to hospitals as well as nursing homes-a requirement of periodic (perhaps weekly) certification by the physician that continued medical and nursing care in an institution is necessary.

Payment for hospital care: I turn now to the provision governing the payment to hospitals. The bill stipulates that payment should be made "on the basis of the reasonable cost incurred by the hospital *** for all bed patients," with authority to vary the amount where that formula is impractical or inequitable. In general, this approach seems to us fair and proper. We believe that hospitals should be paid fully for the cost of services rendered. But a good many important questions are concealed in any such generalization about hospital costs, and I think your committee should be aware of them and of the wide range which such general language would leave to negotiation and administrative action.

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Hospital costs vary a great deal, not only from place to place, but even within the same city. To a large extent costs vary with the quantity and quality of the services provided by the different institutions. To cite one example: the hospital that equips itself for the performance of open heart surgery automatically increases its operating cost appreciably. The educational functions carried on by many hospitals are costly, but it is no accident that a major contribution to health care of the public in the country is provided by our teaching hospitals.

There are a great many questions involved in determining hospital costs, and some of them are both difficult and controversial, as several public hearings on Blue Cross have lately demonstrated. I can only suggest a few of the major points involved: Should costs be averaged for the entire patient population although some make far greater than average demands upon laboratory and other ancillary services? If so, should the same daily average be applied to all, despite the fact that the aged have longer stays and so require less intensive care? Is depreciation a proper charge to be included in costs? What about the cost of the educational functions? How about the cost of carrying for the indigent, insofar as that cost is not met from public funds?

These questions have no easy answers. Hospitals cannot be asked to abandon these functions without sacrificing the public interest, and in the main they can look only to their paying patients to bear the cost. Exclusion of such items for any group of patients would merely pyramid the burden upon the others.

One of our greatest concerns at the present time is that public resistance to steadily increasing hospital costs may prevent hospitals from providing the best possible care. We are troubled by the phrase "reasonable cost" in this bill because of the danger that some Federal official might become the arbiter of hospital costs throughout the Nation, and thus of the scope and quality of hospital services. So too, the authority to pay on a basis different from cost is, at least in theory, capable of being used as an instrument of control of quality. I would urge you to reexamine these words so that, without sacrificing proper protection of the public interest, they do not permit possible Federal control of all hospitals.

If legislation similar to H.R. 4700 were enacted, decisions on all these matters would have to be made either by the Congress or by the administration. I am sure you will understand the concern of the hospital field that the decisions promote rather than impede improvement in the quality of care.

Utilization of private nonprofit organizations: The bill authorizes but does not require the use of private nonprofit organizations as intermediaries between the administering agency and the participating hospitals and other providers of care. We believe that nonprofit prepayment plans should be used in this capacity. We have two purposes in mind.

In the first place, use of such an intermediary can do much, as I believe experience of the Medicare program has shown, to avoid governmental pressures, and to enable hospitals or groups of them to speak with a single voice. The intermediary or intermediaries would be the only contractor or contractors with the Government, and individual hospitals would, as in the medicare program, be subcon

tractors. Such an arrangement would help to mitigate the danger of governmental interference.

In the second place, whether the intermediary were an existing Blue Cross organization or some new agency created under hospital auspices, it could bring to bear a skill and a know-how that could prove most helpful to the Government. It is no disparagement of bureaucracy to say that a program such as this will need all the wisdom and all the experience that is available.

Existing prepayment organizations we believe have the ability to discharge this function effectively and efficiently. New agencies could be created and endowed with much the same qualifications. We would suggest a provision requiring use of intermediary agencies unless the Secretary should find, with respect to some part of the country, that none is available which can perform satisfactorily.

Basis of eligibility of beneficiaries: We are convinced that, for working people and their families, the voluntary prepayment system is a desirable means for financing their health care. We believe it is preferable to any system of hospital care financed by Government or by compulsory social insurance. With this premise, we conclude that in financing hospital care the special problem of the aged is really a problem of the retired aged. We see no reason at all to provide this special protection to the active employee merely because he has reached 65, or in the case of a woman when she has reached 62.

We recognize that a workable and equitable test of retirement for this purpose is not easy to devise, and we would respectfully suggest that the Department of Health, Education, and Welfare be asked to study this problem. If it is possible to work out such a test that will do even rough and approximate justice, we believe that would be preferable to use of arbitrary ages which have very little to do with a person's ability to obtain health services through normal channels.

If such legislation is not to be an entering wedge to similar provision for the entire population, it seems to us important to limit the beneficiary group as nearly as may be to those who face the special problems of the retired aged.

Avoiding rigidity in the benefit pattern: We see in this legislation a danger of freezing patterns of care, and of making more difficult future adaptation to a rapidly advancing medical science. If, for example, it becomes possible in the next decade or two to care for the ills of the aged more largely on an ambulatory basis, would the emphasis which this bill places on institutional care prove an obstacle to shifts in this direction?

Any program that finances some kinds of health care and not other kinds will, I think, inevitably influence patterns of care and tend to create vested interests which may hinder change. There would be an added difficulty in making changes later on, because of the contractual aspect of the social insurance system. Despite the reserved legal power to amend the law, it is extremely difficult to take away any of the benefits which have once been promised and for which contributions have been collected. This is true even if other benefits are substituted, because there will always be individuals to whom the old benefits are more advantageous than the new.

We believe that it is essential to build a greater degree of flexibility into any health care provisions than exists in the present cash benefit