fundamental research that is done at our academic health centers in schools of medicine, public health, nursing, dentistry and other fields.

We feel that to the degree that we are in a competitive market and are competing with the rest of the health care system in our local and regional markets, that specific recognition needs to be made of the additional costs of research, both clinical research within our teaching hospitals and the uncompensated cost of research associated with our medical and other health professional schools.

These are very complex streams and again there is danger of pulling the financial rug out from under both biomedical research, the delivery of uncompensated care, and the education of medical students and other health professionals.

Mr. Chairman, I would be pleased to answer any questions.
Thank you.

Chairman STARK. Thank you very much, Mr. Richardson.
[The prepared statement follows:]

STATEMENT OF WILLIAM C. RICHARDSON, PH.D.

PRESIDENT, THE JOHNS HOPKINS UNIVERSITY
ASSOCIATION OF AMERICAN UNIVERSITIES

NATIONAL ASSOCIATION OF STATE UNIVERSITIES AND LAND-GRANT COLLEGES

Mr. Chairman and members of this Committee, my name is William C. Richardson, and I am President of The Johns Hopkins University. I also serve as the Chairman of the Maryland State Health Care Access and Cost Commission. I appreciate the opportunity to share with you the interests and concerns of universities regarding health care reform, particularly universities with academic health centers. I am here this afternoon on behalf of the Association of American Universities (AAU) and the National Association of State Universities and Land-Grant Colleges (NASULGC). Together, with some overlap in membership, the AAU and NASULGC represent the sizable majority of institutions with academic health centers.

The AAU and NASULGC have established a Task Force on Health Care
Reform comprised of university presidents and chancellors, as well as medical
school deans and vice presidents of academic health centers. Two senior
university financial officers also serve on the task force. The task force is
examining the key issues of interest to universities in health care reform in
order to inform our membership and serve as a resource to the university
community, as well as to the Administration and the Congress. The issues the
task force is concentrating on include universities as providers of health care, as
educators of health care professionals, as well as in our role with respect to
university-based biomedical research, and finally, universities as employers.

Under the Administration plan, universities, like all employers, will be
required to pay 80 percent of health care premiums and cover part-time as well
as full-time employees. In addition to the other employer mandates required
by the Administration plan, universities will need to make certain decisions
similar to other large employers. For example, many private universities have
5,000 or more employees and could qualify for corporate alliance status.
Private universities and colleges will need to consider the pros and cons of
becoming a corporate alliance or joining a regional alliance. State universities
and colleges will need to adapt university policies and procedures to comply
with regional alliance decisions made by the states and localities.

The Administration's plan will affect several elements of current practice on
campus. For example, some institutions offer retiree health benefits, while
others do not. In still other instances, decisions will be made for us. If the
Administration plan is adopted in its present form, Medicare coverage will be
extended to all state and local government employees, including employees of
state colleges and universities. At the present time, coverage of state and local
government workers is limited to employees hired on or after April 1, 1986,
and to state employees hired before that date pursuant to an agreement with
the Secretary of the Department of Health and Human Services.

All of these choices and changes will affect university resources and, in many cases, significant changes will be required in the content and manner in which health care benefits and services are provided and paid for.

Of great interest to us under the Administration plan, and any other plan to
reform the health care system, is that Congress recognize the essential role
played by academic health centers and the importance of providing sufficient
resources to support the multiple missions of these centers. While the
Administration plan does identify academic health centers as integral to our
health care system, we want to ensure that the funds essential to fulfilling the
multiple missions of academic health centers are provided. Academic health
centers educate health professionals, conduct world-class research, and
provide care to many people, including a significant portion of those who now
are uninsured and cannot afford to pay for services. At many academic health
centers, a significant portion of the care provided is uncompensated. While the
AAU and NASULGC appreciate the call for universal coverage, we know this
guarantee of coverage will require a carefully considered transition period. We
must not pull the financial rug out from under the centers that will continue to
be relied upon to provide health care services to many people, with or without
a health security card, in both the short-term and the long-term. We urge you

and the Subcommittee to pay particular attention to the support that will be needed for academic health centers in any new health care system, particularly during the transition period from the current system to a new one.

The restructuring of our health care system will have a significant impact on teaching hospitals, such as The Johns Hopkins Hospital, that have traditionally served as the sites for care delivery, clinical research, and the education of health professionals in primary, secondary, and tertiary care services. Health care reform proposals will also change the various funding streams for our health education programs and world-class research programs. While there are clearly many reasons to reform our health care system, I urge you and the Subcommittee to assess carefully how each aspect of the reform proposals considered by Congress will affect the ability of academic health centers to continue to provide care, conduct research in medicine, public health, nursing and other fields, and educate health care professionals.

Let me turn for a minute to the issue of educating health professionals, a topic that has received a good deal of attention in the health care debate. The Administration plan calls for at least 55 percent of all medical residents to be enrolled in generalist training programs. As I understand it, generalists would include family medicine, internal medicine, pediatrics, and OB/GYN. Other proposals call for a 50-percent ratio, with mechanisms built in for determining the need for and allocation of residency positions over time. Mr. Chairman, we recognize that there is clearly a demand and need for more primary care providers in a new system that will rely heavily on primary care and prevention services. However, I raise three issues for your consideration in this area. First, whatever the final decision about primary vs. specialty residency training programs, the physicians of tomorrow will need to be educated in our medical schools. Some of the education process may be provided in the community, outside the medical school and the teaching hospital, but medical schools will and should continue to be the focus for quality medical education, whether a student is planning to be a primary care provider or a specialist. Any changes in the funding level and mechanism for graduate medical education should be carefully considered for the impact such changes may have on academic health centers and schools of medicine and public health.

Second, universities and academic health centers around the country all have different histories, different cultures, and frankly, different strengths. I hope any proposal to increase the number of primary care providers will recognize and affirm the diversity of our institutions while we strive to meet certain national health care provider goals.

Finally, it is increasingly important that we look to many other health care professionals to serve as primary care providers in a reformed health care system. Nurses, dentists, physician assistants, to name just a few, will be needed to provide services, and sufficient resources will be needed to support education programs for these providers. While the Administration plan authorizes additional dollars for these programs, most of the money will need to be appropriated from an already severely constrained discretionary budget. We could well find ourselves in a situation where we have created a system that relies on additional primary care providers (doctors and other professionals) before we actually have the providers in place to provide the services. It will take time for the 55/45 or 50/50 mix of generalists and specialists to be realized and, without sufficient resources, we will be unable to educate the other health professionals the system will need to succeed.

Another area of concern to many universities is the role of biomedical and related research in health care reform and, indeed, the impact of reform on our current investment in research. Of particular concern is the future of clinical research conducted at academic health centers around the country. As I indicated earlier, academic health centers have funded their various missions through multiple financing streams. Many of these financing streams have supported aspects of clinical care and research that are not covered by a

research grant or other outside source. As we move toward a system that changes the way we finance graduate medical education, and the ways we finance clinical care and reimburse for services under Medicare and Medicaid, I urge that you remain diligent in preserving the kind of core support that enables academic health centers to conduct the research essential to the development of new and more cost-effective therapies and treatments.

I also urge that, in the debate on health care reform, we remember the importance of our current investment in biomedical research through the National Institutes of Health (NIH). The Administration plan calls for increases in the investment in research, specifically in prevention and health services research. We fully support these proposals and are appreciative of their inclusion in the Administration plan. However, as you know, these increases are not paid for under the Administration plan. The funds for this research will have to be appropriated out of the discretionary budget, the same budget that funds our current investment in research as well as many other vital domestic programs. Again, we urge your careful attention in this area to ensure that we do not shift the funding from one vital area of research to pay for another.

Even as we speak, market forces are at work which are driving our institutions to make changes, many of them long overdue. University presidents and chancellors across the country are taking a critical look at their institutions and thinking strategically about how to maintain quality programs with fewer dollars. Many universities, particularly those in your home state of California, are already experiencing the impact of the explosion of managed care programs and have begun to make institutional changes and adjustments.

Mr. Chairman, historically, universities have been problem solvers. We have taken on complex and difficult problems and have found solutions. Health care reform poses a significant challenge for the nation and for the university community. Changes are already occurring and clearly more are on the way. Many of these changes will not be easy, but the university community wants very much to work with you and with the President to make the kinds of changes that address the significant weaknesses in our current health care system while we preserve and support some of our greatest strengths, particularly academic health centers. My colleagues and I look forward to working with you as you address the challenges ahead.

Chairman STARK. Mr. Matthews.

STATEMENT OF MERRILL MATTHEWS, JR., PH.D., HEALTH POLICY DIRECTOR, NATIONAL CENTER FOR POLICY ANALYSIS Mr. MATTHEWS. Mr. Chairman, I appreciate the opportunity to come and testify before the hearing today.

Two of the ideals and goals of the Clinton plan are to address the problem of the uninsured and at the same time to try to hold down health care spending, but I think the fear is that under the Clinton plan, health care spending will explode rather than decrease. And that is going to cause a great problem.

Let me explain to you by an analogy why it will explode.

Suppose you are the parent of a teenager and you go up to your teenager who needs a new pair of blue jeans. I will give you two scenarios. In the first scenario, you go to your teenager and you say "You need a new pair of blue jeans. Take this credit card of mine and get yourself a new pair of blue jeans. Let's call this a "blue jean security card." Take the card and go buy yourself a new pair of blue jeans, and whatever you get is fine. I don't care. Just please yourself."

In the other scenario, the parent goes up to the teenager and takes a $50 bill and gives it to the teenager and says, "You need a new pair of blue jeans. Take this $50, go out and buy yourself a new pair of blue jeans, but here is the catch: Anything you spend more than $50, you have to take out of your pocket. Anything you spend less than $50, you get to keep, and you can take that money and spend it however you like; I don't care.'

Given those two scenarios, under which scenario is your teenager more likely to be a prudent shopper in the blue jean market place, and under which scenario is your teenager more likely to spend more money on blue jeans than you ever imagined a teenager could spend?

When I was growing up, I had the first scenario. My mother had a card and she used to give me the card to go out shopping, but she soon found she couldn't trust me to be a prudent shopper so she ended up going shopping with me. It seemed like whenever we went shopping, I always thought I needed "this" and she thought I needed "that." Since she was carrying the card, we always ended up with that.

Our concern is that under the Clinton administration proposal, the Federal Government is going to go shopping with us for health care, and in many cases we and our physicians may think we need "this," whereas the administration will think we need "that." Since the administration is doing the shopping and paying, ultimately we will decide on "that."

Under the blue jean scenario, the only thing at stake was my pride and sense of fashion. Under the Clinton administration proposal, what is at stake is my health and perhaps even my life.

Now, we know what the problem is. Virtually all health policy analysts agree that part of the major problem in spending is that somebody else is paying the bill. We are insulated from the bill. We know what the problem is and we know the direction the solution ought to take.