tures, and modes of treatment through a sort of quasi-public utility approach.

With regard to the latter point, the association is unequivocally opposed and believes it is entirely improper and an encroachment upon the jurisdiction of other congressional committees and Federal agencies, to use the economic stabilization program as a vehicle to reform the system for delivering health care in this country.

This objective is not even thinly disguised in the presentations made by the administration and the Chairman of the Cost of Living Council in connection with the submission of S. 3032 to the Congress. The President's health message of February 6, 1974, contains the following statement:

To contain medical costs effectively over the long haul, however, basic reforms in the financing and delivery of care are also needed.

More blatantly in this regard, Dr. Dunlop requested specific authority for wage and price controls in the health care sector "until enactment of health insurance legislation." When this event may occur and what health services may ultimately be included are, of course, matters of conjecture that are more within the province of Congress than the administration and are or should be irrelevant to the mission of the Cost of Living Council.

On the specific question of continuing the controls on dentists, the Cost of Living Council's testimony is bereft of justification. As indicated point by point in our record statement, none of the seven principal reasons cited by Dr. Dunlop for continuing mandatory controls over the health sector apply to dental practice, or if they do, they apply also to so many other segments of the economy that their meaning is lost as a basis for singling out dental practitioners.

Dental offices are typified by high overhead expenses, most of which have been decontrolled by the Cost of Living Council. The dental practitioner in effect operates a small business which has, at the present time, negligible impact upon hospital costs or health insurance rates which are the major cost elements in our present health care system. Accordingly, the application of existing controls to dental practice because of rising costs in other segments of the health care industry is patently unfair and discriminatory.

For these and many other reasons that are documented in the materials we have submitted, the association respectfully recommends that the committee reject any legislation that would continue economic controls over the health care sector.

Gentlemen, I thank the chairman and members of the committee for this privilege of coming before you to present this testimony.

[Dr. Williams' prepared statement, on behalf of the American Dental Association, and the study referred to by Dr. John R. Glennie, entitled "An Economic Analysis of the Cost of Living Council's Proposed Phase IV Regulations Covering the Dental Profession", follows:] PREPARED STATEMENT OF DR. CARLTON H. WILLIAMS, PRESIDENT OF THE AMERICAN DENTAL ASSOCIATION

The American Dental Association appreciates the opportunity to present its position on S. 2961 and S. 3032 and H.R. 13206. S. 2961 is Senator J. Bennett Johnston's bill to phase out economic controls unless the President, after applying very strict tests, determine that one or more sectors of the economy is dangerously

inflationary and must be continued under controls. S. 3032 is the Administration's proposal to extend the Economic Stabilization Act after April 30, 1974. S. 3032 would continue mandatory controls only on the health care sector of the nation's economy. H.R. 13206 would continue the Economic Stabilization Act after April 30, 1974 with no changes from existing law.

The American Dental Association is opposed to extension of the Economic Stabilization Act. The Association has reason to believe, from nearly three years' experience with harsh and unequitable controls on dentists, that those who administer price and wage control programs are determined to treat health providers as a quasi-public utility requiring regulation of incomes, expenditures and modes of treatment, as well as price increases. In fact, the President's Health Message of February 6, 1974, contains the following recommendation: ". . . I will, therefore, recommend to the Congress that the Cost of Living Council's authority to control medical costs be extended." The document makes clear that "medical" includes "dental". "To contain medical costs effectively over the long haul, however, basic reforms in the financing and delivery of care are also needed...'

The Association is unequivocally opposed and believes it is entirely improper and an encroachment upon the jurisdiction of other Congressional Committees and federal agencies to use the economic stabilization program as a vehicle to reform the system for delivering health care in this country.

The American Dental Association urges Congress to support the Association in rejecting any proposal for government regulation of health providers, both institutions and individual practitioners. We urge that Congress fairly evaluate the need for continuing price and wage controls to curb inflation and not use the inflationary problem as an excuse to place health providers in an economic strait jacket. The Association is convinced, moreover, that the dental profession's record over the past seven years, including the nearly three years of Economic Stabilization Act controls proves without question that costs of dental care have not contributed and are not now contributing to the nation's serious inflation problem. Let us look at that record.

First, the Federal Bureau of Labor Statistics data shows that from mid-1967 through August, 1971, dental fees increased at a lower rate than those of all services aggregated: all services 29.3% compared with dentists 27.9%.

Second, as part of the health sector, dentists did not nearly match the increasing cost trends of hospitals and physicians. From mid-1967 to August, 1971, hospitals prices according to the Bureau of Labor Statistics increased 63.5% as compared with physicians 31.2% and dentists 27.9%. These statistics become more meaningful as a reflection of inflationary potential when one realizes that hospital costs are approximately 37.1% of the health dollar and 2% of the GNP. Cost of physicians services are 28% of health care costs and 1.5% of the GNP, while dental care costs make up only 8.1% of the health dollar and only 0.4% of the GNP. These spending levels, provided by the Department of Commerce reflect consumer expenditures for health care obtained in the private health sector, and no federal program spending is included.

Third, since August, 1971, dental feees increased 8.4% as compared with all services 10.8%, hospital costs at 10% and physicians' fees at 7.3%.

The Association is submitting for the record a summary of an economic analysis on dental costs and Phase IV of the existing law. The complete analysis was prepared by Dr. John R. Glennie, of Lewin and Associates, as part of the Association's petition to the Cost of Living Council protesting the Phase IV plan for continuing harsh controls on dentists.

The Association cannot reconcile the Administration's plan for mandatory controls on dentists with the profession's nearly negative impact on inflation. The case for controls on health care providers was presented by Dr. John T. Dunlop, Director of the Cost of Living Council before the Subcommittee on Production and Stabilization of the Senate Banking, Housing and Urban Affairs Committee on February 6. Dr. Dunlop cited seven principal reasons for continuing mandatory controls on the health care sector of the economy. In our judgment, those reasons either do not apply to dental practice or they also apply to so many segments of the economy that their meaning is lost as a precise basis for controlling dental fees. The following is a brief review of Dr. Dunlop's seven justifications for continuing controls on health care providers:

(1) The nature of the reimbursement system, much of which is "cost plus" on a retrospective basis with little restraint on costs at the time services are provided.

If this makes any sense it is a criticism of the way in which members of society purchase most retail commodities and practically all services.

(2) The demand for services which does not always correspond to need and, therefore, leads to excessive utilization of services.

One of the nation's most serious health problems is underutilization of dentists' services. Only 50% of our population sees a dentist during any year. Only 20-25% receives comprehensive care. Federal health agencies, including many "blueribbon" health commissions have deplored the low utilization of dentists' services as a prime public health problem.

(3) The manner in which consumers pay for service. Rarely do they pay the full cost at the time of utilization; often they pay only a small fraction of the cost directly.

If this proposition means that third parties, insurers and health service plans, underwrite a substantial percentage of health care costs, that may be true for hospital and physician costs but is not true for dental care costs. Only 7.2% of the annual costs of dental care are paid by third parties for private care and only 3 is paid by government under such programs as Medicare and Medicaid.

(4) The relatively inelastic supply of health manpower, particularly physicians. The supply of dentists is growing rapidly. In 1967, 3,360 students graduated from dental schools. In 1973, 4,230 students graduated. In 1978, approximately 5,300 students will graduate. This rate of increase is well beyond that needed to reflect the general population increases and increases projected for the next decade. Additionally, dentists have increased their productivity substantially, 1756 over 1967, and with greater use of highly trained auxiliaries, the dental profession will improve productivity even more in the next ten years.

(5) The national excess of hospital beds which means that the hospitalized patient has to pay the fixed costs of the beds not occupied, frequently, facility and service expansion is not sufficiently evaluated in terms of market feasibility. The characteristic applies only to hospitals.

(6) The nature of the product and the lack of competitive pricing information which make informed consumer choice difficult.

Information on fees for dental procedures is easily available to prospective patients or to consumer groups acting in behalf of purchaser of health care. The American Dental Association itself publishes periodic survey results of fees for dental procedures.

(7) The role of the professional in making "purchasing decisions" for the patient; this is particularly true for such items as hospital care and laboratory services.

This is obviously a gratuitous and undocumented comment upon professional decision-making, professional judgment. The dentist, physician, lawyer, or other professional prescribes the treatment or procedures needed to remedy the patient's or client's problem. There is no evidence to show that dentists, physicians or others in the learned professions abuse professional judgment to obtain unwarranted or unnecessary fees.

At the outset, it was mentioned that the Administration is clearly seeking to control incomes, expenditures and modes of providing health care rather than price increases in the health sector. The excuse is that when national health insurance is adopted in two, three or five years from now, the costs of health care must be already under strict regulation for the economy to sustain such a health insurance program. In our judgment, that proposal is patently absurd. But even if it had any credence, it would not apply to dental care costs. No one of the health insurance proposals now pending or any that are contemplated offers any sufficient dental care benefits. The typical plan would provide insurance or subsidy for low cost procedures for children through age 12. At most, this would represent less than 5% of the nation's dental care bill.

It is clear that dentists are not contributing to the serious inflation problem of this nation. In fact, they are not in a position to do so. It has also been revealed that what seems clear from the President's 1974 Health Message and from testimony from Dr. Dunlop and others that controls on health provider has less to do with inflation than with a commitment to hold health care providers within a closely regulated, federal public utility framework. We ask Congress to reject that plan as not justified, not compatible with our private enterprise goals and, of most importance, not suitable for sustaining the health standard for the care of our citizens.

HOGAN & HARTSON, Washington, D.C., November 30, 1973.

Re Proposed Phase IV Health Care Docket.

COST OF LIVING COUNCIL,

2000 M Street NW.,

Washington, D.C.

GENTLEMEN: Pursuant to the Cost of Living Council's Notice of Proposed Rulemaking published in the Federal Register on November 7, 1973, submitted herewith on behalf of our client, the American Dental Association, are comments on the Council's proposed regulations to govern health care under Phase IV of the Economic Stabilization Program.

Included as part of these comments is a study prepared by Dr. John R. Glennie of Lewin & Associates, an independent management consulting firm, analyzing the impact of the proposed regulations on the dental profession.

We strongly urge the Council's careful attention to this study and to the other comments submitted on behalf of the American Dental Association.

Very truly yours,

EDWARD A. MCDERMOTT.
HOGAN & HARTSON,
Washington, D.C.

BEFORE THE COST OF LIVING COUNCIL

PROPOSED PHASE IV HEALTH CARE DOCKET

Comments on Proposed Rules, Published November 7, 1973, Providing for the Regulation of Health Care Under Phase IV of the Economic Stabilization Program, Submitted on Behalf of the American Dental Association.

On Wednesday, November 7, 1973, the Cost of Living Council ("Council") published in the Federal Register a Notice of Proposed Rulemaking containing new regulations to govern the health care industry under Phase IV of the Economic Stabilization Program. These comments on the proposed regulations, in conjunction with the attached study by Dr. John R. Glennie of the firm of Lewin & Associates, independent management consultants, are submitted on behalf of the American Dental Association ("ADA") for the Council's consideration in response to the invitation set forth in said Notice.

A. The Inequities of the Proposed Regulations

For the reasons set forth below, ADA and its members believe that the proposed Phase IV health care regulations, which would limit dentists to a 4 percent annual ceiling on aggregate price increases regardless of incurred cost increases, are unduly harsh, unfair and inequitable to the dental profession. As demonstrated by Dr. Glennie's study, and as ADA will further demonstrate if the Council holds a hearing on these proposed regulations pursuant to ADA's petition to the Council of November 20, 1973:

(1) Prior to and during the period of economic controls, dental fees have increased at a rate far less than those of hospitals, the major contributor to inflation in the health services sector. Yet, the proposed regulations continue to subject dentists to extremely harsh and inequitable controls.

(2) Dentists, unlike physicians, do not materially contribute to increases in the cost of hospital care. Moreover, the proposed regulations would relieve from the restrictive controls imposed on dentists certain other health service providers, such as nurses, dieticians, nutritionists and occupational therapists, whose fees contribute much more significantly to hospital costs than dental fees.

(3) Prior to controls, dental fees increased at a lower rate than the rate for all other services combined. Furthermore, the rate of increase in dental fees was substantially lower than the rate of increase for certain services which, unlike dental fees, have not been subjected to special sector controls during Phase IV! (4) The proposed regulations are particularly harsh with respect to young dentists who are attempting to establish their practices.

(5) The proposed regulations ignore the fact that since July 1971 dentists have been restricted to annual aggregate fee increases of less than 2.5 percent per annum while the costs incurred by dentists have increased more than 18 percent.

(6) The proposed regulations will aggravate the burden imposed on dentists by freeing dental laboratories (which already account for more than one-fifth

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of total dentists' expenditures) from the same restrictive controls placed on dentists.

(7) The proposed regulations, by not permitting dentists to fully recover increased costs, will severely constrain dentists' capabilities to invest in technologically advanced equipment and to absorb the increased expenses of improved materials.

ADA and its members submit that the proposed regulations will have a serious and perhaps lasting adverse impact upon the nature and quality of health services-particularly dental services-for years to come. ADA and its members also submit that the proposed regulations demonstrate on their face a basic misunderstanding of the dental profession, its relationship to other health service providers, and its impact upon the economy and upon inflation.

B. Recommendations

ADA respectfully submits that the foregoing comments and the attached study of Dr. Glennie fully demonstrate that dentists should not be included within the health care industry for economic stabilization purposes, and that dentists would be treated more properly and more equitably for economic stabilization purposes in the same manner as other services. Accordingly, the ADA and its members request that the Council promptly take the following fully justified and proper actions:

(1) Permit dentists to pass through costs on a dollar-for-dollar basis and otherwise be subject to Subpart E of the existing Phase IV regulations governing most other service activities generally, and

(2) Allow dentists, as most other service providers are already allowed, the benefits of the small business exemption. Such exemption is entirely consistent with the requirements of Section 214 of the Economic Stabilization Act of 1970, as amended.

C. Additional Comments on Proposed Regulations

1. Section 150.502 of the proposed regulations provides that the "rules and regulations in effect on December 31, 1973 remain in effect until the completion of the current fiscal year" for health care providers, including dentists. This provision would subject dentists to two different sets of rules solely on the basis of a wholly arbitrary standard, the end of their fiscal year. Presumably this provision has been included in the regulations as a result the change in the provisions relating to price increases (e.g., Section 150.508 with respect to dentists). The inequity of this provision as it would be applied to dentists totally outweighs any reason for its existence. In instances where a dentist's fiscal year ends after January 1, 1974, the new rules should be applied to all dentists equally as the effective date of the new regulations. In other words, where a dentist's fiscal year ends on March 31, 1974 (for example), the dentist should be permitted to increase prices, on a weighted average basis, up to the limit imposed by the new rules for the three-month period between January 1–March 31, 1974 and thereafter be subject to the regulations in the same manner as dentists having a calendar year fiscal year.

2. On Monday, November 26, 1973, the Council published in the Federal Register for public comment certain proposed forms to accompany the proposed Phase IV health care regulations. Proposed Form CLC-81, "Record or Report Form for Medical Practitioners," would be provided for use by medical practitioners, including dentists, to monitor compliance with the Council's proposed regulations concerning permissible aggregate weighted price increases and the revenue margin limitation. Proposed Form CLC-82, "Price Schedule for Medical Practitioners," would be provided for the maintenance of a price schedule by dentists listing the principal services offered and details concerning the pricing of such services. The Council implies that completion of these complicated forms is necessary for a practitioner to monitor compliance. This is a burdensome, time consuming and expensive task. The Council's proposal of the use of these forms by dentists further demonstrates the inequity inherent in the proposed regulations and emphasizes why the small business exemption should be extended to dentists. D. Conclusion

ADA respectfully submits that the proposed regulations will seriously impair the dental profession's orderly economic growth and will jeopardize the continued advancement of the quality of dental medicine. It is therefore essential that the Council consider the comments set forth above and the attached study of Dr. John R. Glennie and promptly implement ADA's recommendations for regulating the dental profession under Phase IV of the Economic Stabilization Program. HOGAN & HARTSON.