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Mr. THOMPSON. Despite these low percentages of total, these items reflect costs that must be dealt with. Shifting these from the private sector to the Government would only serve to move the cash from one pocket to another—someone still has to foot the bill for all of these service related items.

Looking at costs from a broader perspective, let me interject a few more statistics. To compute what it costs us administratively on the average per contract, we simply divide out total operating expenses by the number of existing contracts. In the case of Massachusetts, that comes to approximately $2.30 per contract per month. A low enough figure when you consider that this entails enrolling, billing, paying claims, utilization review, servicing claims problems, answering direct inquiries and processing that contract out should the subscriber leave the group.

All of this is not to say that we have found the answer to controlling overall costs in the system-no one has. We are doing many things to at least get a handle on why costs have moved so sharply and what can be done about it. Utilization review in 1974 in Massachusetts saved $3.8 million for Blue Shield and between $2.5 and $4 million for Blue Cross. That is a start—but more must be done. In order to do that we must get at the root of some of the problems within the system itself——the same problems which must be resolved before any National Health Insurance plan can be successfully implemented.

Let me quickly go through some of the more obvious questions.

Acute versus preventive care: Insurers for years have been subject to criticism because we seemingly emphasize sickness rather than health; the fact remains that insurance whether Government or private is provided to insure against a risk. In this case, the risk is that you will get sick and seek medical attention. Blue Cross/Blue Shield were originally set up to meet the needs of the acute illness because technology and the means of the system at that time were also in that mode. The system has experienced a shift away from the heavy institutional emphasis to the more flexible ambulatory and the private sector has kept pace. However, there is sincere and credible concern as to whether a total reorientation toward providing preventive care benefits would either lower the incidence of acute illness or be the most cost effective means for the subscriber and the public at large.

As an adjunct to this, no matter how sophisticated medical technology and engineering becomes, hospitals will probably never be obsolete, at least not in our lifetime. The secret to stopping high cost institutional settings from proliferating is not by refusing to acknowledge them by removing benefits but simply to look realistically at the costs entailed and devise methodologies for adequate regulation. No small job, but one that is becoming more and more necessary.

Resources, are a continuing debate, are we overbedded, are we underbedded. How many physicians per thousand and in what specialty distribution is adequate. Again, good planning is the key. Planning, however, should be based on specific area needs and not on some master plan solution for the Nation as a whole. Only after we are able to look at each region, each area objectively to assess what is good and bad will these questions be resolved.

In summary, there are some basic principles which can be applied

to the National Health Insurance debate which are entirely consistent with those of my organization and I believe, of others within the private sector they are:

(1) Retention of the private sector within any national health insurance structure.

(2) Maintenance of free choice for individuals as to physician, hospital and mode of medical delivery.

(3) Public financing of medical care for the poor and the medically indigent.

(4) Mandated minimum benefit levels and standards coordinated with supplemental and catastrophic coverage.

(5) The phasein approach to massive new programs or untried risks such as well baby care, universal dental coverage, vision and hearing benefits.

Those are some of my perceptions of the health care system, the problems and national health insurance considerations. Thank you for the opportunity to present them.

Mr. ROSTENKOWSKI. Thank you, Mr. Thompson.

We open now the panel to a discussion. Is there any comment that any member of the panel would like to make on another panelist's testimony?

Any observations!

Mr. SOMERS. Just to get things going, I would ask Dr. England, who was pointing out that under certain Government systems there is in effect a rationing of medical services. I don't think that is necessarily true. But assuming that to be so, don't you believe we have rationing now here?

Dr. ENGLAND. Well

Mr. SOMERS. Is one form of rationing better than another, is that your point? Don't we ration now on the basis of those who can afford and those who can't?

Dr. ENGLAND. I think what you are talking about is an individual making a judgment of the allocation of his own resources.

Mr. SOMERS. No.
Dr. ENGLAND. I don't call that rationing.

Mr. SOMERS. I don't either and that is not what I am talking about. Suppose you don't have resources for medical care. Don't we ration in terms of affording it? You don't have access if you don't have the financial resources ? Isn't that a rationing process?

Dr. ENGLAND. The presumption is that there are a number of people not getting medical care. I am not expert in what goes on all over the country. All I can say, that in my area, this is not happening.

Mr. SOMERS. Anybody who wants medical care in your area automatically finds access to it?

Dr. ENGLAND. That is right.
Mr. SOMERS. How, can you—
Dr. ENGLAND. Go to the doctor and they get taken care of.
Mr. SOMERS. You don't send bills, I gather.

Dr. ENGLAND. I send bills. I don't always collect them. That is after the fact.

Mr. SOMERS. You don't expect me to pay my bills if I come to your area.

Dr. ENGLAND. You look like an honest and able man; I would expect you to, yes.

Mr. SOMERS. Meaning the other people are not so honest.
Dr. ENGLAND. No, some of them are not able.
Mr. SOMERS. I see.
Mr. ROSTENKOWSKI. Mr. Cathles.

Mr. Cathles. I had always thought the question was not the ability to pay but access to care. It has been said that the areas where you have the biggest problem are in the rural area where there are insufficient facilities and in the ghettos where you don't have adequate facilities. But I thought the poor were pretty well taken care of in those areas where facilities existed. State to State there are variations. Some States are liberal, others are not quite so liberal. But I didn't think it was so much a question of income.

Mr. SOMERS. The figures would support you in one sense. Actually the poor right now use medical services more than higher income groups, measured in terms of number of visits to physician and number of days spent in the hospital.

But that can also be interpreted as a sign of lack of access in the sense that they get treated at the point of emergency and where the illness has become very serious since there is a barrier at the earlier stages by the very fact that to receive the care that you expect, they have to go through a means test process which is either very delaying or rejective because it is in all States and all areas a deeply humiliating process. You have to declare poverty and pauperism to caseworkers under very difficult circumstances. Most people try to avoid it. The net result is they eventually get access when there is no choice.

Dr. ENGLAND. May I make an inquiry about that?

These people that—these statistics would be based on figures that would come from people being taken care of by Medicaid. That kind of indigent?

Mr. SOMERS. No, these figures are published by the National Center for Health Statistics which does it on a national survey basis, which they ask of a representative sample: How many visits were made to the physician, for what, how many days in the hospital, et cetera.

Dr. ENGLAND. Sort of like a poli ?
Mr. SOMERS. Yes, it is a survey.

Dr. ENGLAND. I guess it is all right. I have never been asked anything by anybody from a poll and I don't know anybody that has been. I am always a little suspicious of them. I don't think you can necessarily jump to saying that the fact the patient sees the doctor more often or he is in the hospital longer means he has been denied access. This could well represent what I was talking about before in terms of overutilization and the unlimited demand placed upon the service that is free at the point of entry of the patient.

Mr. CATHLES. I think I would like to make just one more comment. That is, you know, you talk about reluctance and you talk about the awful thing about the means test, but most of these people that you are referring to are already part of our welfare system. They already have identified themselves as needing assistance. They already are receiving welfare payments from the Government.

Mr. SOMERS. Well, I don't think so.

gram?

Mr. CATHLES. You have the near poor; they are better educated people, they have jobs and there may be a problem insofar as their ability to afford adequate care. But I question whether it is really standing in the way of their getting the care that they need.

Mr. SOMERS. The State of New Jersey, which is fairly typical does not make payments, welfare payments, to people who can't afford medical care. They are not covered under our medicaid program for example. You have to be on welfare. Therefore, if you are in that category not being able to afford medical care but also not on welfare, then you are going to go through the local means test of the local community and declare yourself a charity case. I can't say numerically whether they outnumber the group you are referring to. I don't know of any studies of that. But there are large numbers involved.

Dr. ENGLAND. May I make one other remark?

Ever since this got started back in, when even medicare first got started, I don't know how long you have to go back, but it was a long, long time, this business of the means test has been emphasized, how it is humiliating. There is, I believe and again I am only expert in taking care of sick people, not sick governments, but isn't there a means test of a sort that is attached to the food stamp program?

May I ask the committee?
Mr. CRANE. Yes, there is.
Dr. ENGLAND. Has that stopped participation in the food stamp pro-
It started at $40 or $50 million per year. Now it is up to $4 billion.
If the means test keeps people out, it does it in a strange manner.

Mr. SOMERS. Nobody has alleged that people don't receive
Dr. ENGLAND. I thought that is what you were saying.

Mr. SOMERS. Obviously, there are millions of people on welfare. It doesn't prove that it does not keep a great many other millions out.

Dr. ENGLAND. I don't think the many millions of people on welfare are all that are on food stamp. I think there is some difference.

Mr. THOMPSON. Mr. Chairman, I would volunteer a comment on the issue of accessibility.

A more troubling aspect looking in that area is looking at the figures presented to a committee such as yours, the figures that seem to prove one thing or another and yet statistics can be used to prove the opposite. I am sure all of us sitting here and all of you up there, you have all see the statistics on the beds per capita in this country and they are used by one person arguing, saying that means we have too many; another would use them to say we have too few. I can't say whether we are ahead or behind another country in any argument of that sort.

On the issue of access it seems to me it is hard to measure that by some abstract term. The key is really what do people perceive as the access. It is not what they use. I don't think it is particularly important to measure different categories of people either by economic level or by any other characteristic, geographical or otherwise. The key is what they believe the access is that is available to them whether by their own perception they need care?

We attempted to get a handle on this in our State and we did an interview process of some 700 Massachusetts citizens which I am told means you can draw conclusions as to the universe. The public's percep

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