NATIONAL HEALTH INSURANCE

(The Role of Government in American Health)

FRIDAY, JULY 11, 1975

U.S. HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON HEALTH, COMMITTEE ON WAYS AND MEANS, Washington, D.C.

The subcommittee met at 9 a.m., pursuant to notice, in the committee hearing room, Longworth House Office Building, Hon. Dan Rostenkowski (chairman of the subcommittee) presiding.

Mr. ROSTENKOWSKI. The subcommittee will come to order.

We would like to welcome the professors and doctors this morning. I would like to express our gratitude for taking the time out of your busy schedules to participate with us in these discussions. The format of these meetings are an opening statement by each of you individually and then an opportunity for you to have an exchange and then the panel opens up to questions by the membership from this end.

It is quite informal. We would appreciate your trying to give us answers in as concise a manner as possible because, as you know, we are limited here to 5 minutes on questioning at least the first go-round. We are looking forward to indepth conversation with respect to the Government's role in the national health insurance. We would like you to know that in yesterday's hearing the Members of Congress that participated in the discussions were quite impressed. I think these are very informative and educational sessions. It really is a two-way street, both for those of us who participate and those who give the knowledge you have to offer.

I would like to present this morning Prof. Lewis H. Butler, professor of health policy, University of California. It is nice to see you back in Washington, Professor.

I would like to present Lowell Bellin, New York City's commissioner of health.

Richard Heim, executive director of Health and Social Services Department, New Mexico; and Prof. Pierre R. de Vise, professor of urban science, University of Illinois, in Chicago. It is nice to see you.

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A PANEL CONSISTING OF LEWIS H. BUTLER, PROFESSOR OF HEALTH POLICY, UNIVERSITY OF CALIFORNIA; LOWELL BELLIN, M.D., COMMISSIONER OF HEALTH, NEW YORK, N.Y.; RICHARD HEIM, EXECUTIVE DIRECTOR, HEALTH AND SOCIAL SERVICES DEPARTMENT, STATE OF NEW MEXICO; AND PIERRE R. de VISE, PROFESSOR OF URBAN SCIENCE, UNIVERSITY OF ILLINOIS AT CHICAGO

Mr. ROSTENKOWSKI. If Lew, you will begin with your opening statement, then we will go down in that order, and then we will be open to discussion.

Welcome.

STATEMENT OF LEWIS H. BUTLER

Mr. BUTLER. Thank you very much, Mr. Chairman and members of the subcommittee.

I think all of us here will find this kind of discussion very beneficial. Instead of your having to listen to long speeches from us, this kind of informal exchange is really very productive for us and I hope it will be for the committee.

I have written out a short statement, but rather than just read from that, or even follow it in detail, I thought perhaps it might be more useful for the subcommittee for me to go over some of the mistakes, or at least misunderstandings, that I personally have been involved in in the health policy field when I found myself in HEW doing the health planning as the Secretary for Planning.

That started in 1969, and in going over today's agenda I found it at least useful for me to try to think back and discover how many things we thought were so at least I thought were so in 1969-maybe it was just my ignorance and on which we based a lot of our planning and policy, many of which just turned out not to be the case.

So if the committee can get any insight from hearing a story about, in some respects, how not to do some of these things, I would be happy to tell you that story. I apologize for the fact that it comes in somewhat personal terms, but that is the only way I know how to tell it, I guess.

I am sure you have heard a lot about national health expenditures. I must confess it took a long time for it to sink into my head how huge they are and how fast they grow. The numbers are just numbers and they don't mean much until you see them in relation to other things. things.

For example, in 1969, when we started the policy planning in HEW, national health expenditures were about $60 billion. That is only 6 years ago. This year they will be exactly double that, $120 billion. At the time, we were trying to make 5-year projections-I must say that none of our projections indicated that we would reach $120 billion by now. We just didn't believe that the rate of inflation would continue and, of course, it has, and in some respects has gotten worse.

So when you think about a doubling of anything as big as this in a 6-year period, it is a rather significant event.

I suppose the other striking aspect of the expenditures, at least to me, was to see them in relation to other kinds of governmental expenditures.

In 1969, we had the view in HEW that if we could only get the Defense Department's money, we could take care of HEW's needs and, specifically, if the Vietnam war would only end, why, we would be in good shape.

It came as somewhat of a shock to me that the Vietnam war was costing-I can't say only-but it was costing at its peak $25 billion a year. When we did the projections, we suddenly realized that the end of the Vietnam war would have some minor impact, but very little really on HEW's ability to pay its bills, that our expenditures were increasing and a lot of this was due to the health sector. They were increasing at such a rapid rate that the end of the Vietnam war was certainly no salvation for HEW and, of course, that has turned out to be exactly the case.

To give you some sense about that, right today total national expenditures this is not just Government, but total national expenditures for surgery in medical care, just surgery, now exceeds the cost of the Vietnam war's biggest year. HEW's expenditures for medical care alone-forgetting the welfare and education side of the DepartmentHEW's expenditures for medical care alone now exceed the Vietnam war in its biggest year.

So gradually some of the enormity of these expenditures began to sink into some heads such as mine that really had not been very much exposed to the problem up until then.

The second characteristic of the medical care area in the role of Government that was sort of slow coming home to us is what was happening with the medicaid program. At that time, of course, most of the attention was devoted to medicare for older persons. Medicaid was a program we knew had a problem, but that was just another problem among many in our view.

Gradually it became apparent to us that medicaid was not just another problem. It was an overwhelming problem. For example, after a couple of years we began to realize that the growth in medicaid expenditures, which, of course, were coming out of general revenues, not out of payroll taxes, but the growth in medicaid expenditures and keep in mind the Federal Government was only paying half of thatwas such that it was going to squeeze HEW's entire budget; that is, biomedical research, education, all were going to be squeezed because of the growth in medicaid and some other so-called uncontrollable programs.

To put it in another framework, I and some others came thinking that the so-called welfare mess-we are talking about cash payments for public assistance-was our biggest problem, and gradually we began to see that the payments under medicaid were going to outstrip cash payments eventually at the rate they were going.

While not all of that has turned out to be the case, because of States cutting back since then in their plan for medicaid expenditures, we are still now at a point where $7 billion is going out for that purpose matched by another $7 billion by the States. That continues to be, at least in my opinion, the No. 1 priority for any approach to health insurance on the way towards national health insurance or as a part

of an overall bill.

Perhaps I will make one other comment about the expenditures. At that time medical costs nationwide were inflating at 10 or 12 percent. We, of course, had no idea that inflation generally would become as

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bad as it has in the United States, but that rate of inflation was double the normal size of inflation for everything else, that is the Consumer Price Index was going up maybe 3 or 4 percent a year, and medical costs were going up double that.

I will refer to this later, but the more we got into it, the more it seemed that there ought to be a way to stop that; that if we could only become more efficient and handle the Government's affairs better and the Nation's and do something about inefficiency in medical care, we would be able to control that inflation.

Now here it is 6 years later and the normal rate of inflation is under control, if you call 6 percent under control, but at least it isn't in double digits this year, and medical care costs are still increasing in the range of 12 to 14 percent this year. So nothing much has changed and we are spending 8 percent of our gross national product.

When I started it was 7 percent, and where it stops it is hard to tell. It leads you to the conclusion that while it is possible to do nothing in this field, that is, to have no further Government initiatives, it is not possible to do that and stop the trend in costs that is going on now. If the problems are to be addressed, at least in my view, it may require spending some money to, in the long run, reverse some of these trends. Now without going into any detail on the issues I have enumerated in the testimony, I would like to hit five or six basic misconceptions that we had at that time, or at least that I had, that underlay a lot of our thinking about medical care policy. It took a number of years for those to get out of our heads.

The first, and I think you have heard quite a bit about it over the last few months, perhaps even yesterday in the testimony, is the influence of medical care or more medical care on the Nation's health. I remember then we would go up and testify before Senator Kennedy's committee, and we would make statement such as "America is 10th or 12th in health standing in the world and life expectancy and, therefore, we need national health insurance."

Senator Kennedy would say the same thing, and he would also say, "Therefore, we need national health insurance."

Well, we were both wrong. It is very clear now that while there are a great many reasons for having a coherent health insurance system and a national health insurance system, one of them is not to improve these overall health indicators for the country. That is just not going to happen.

Now I could not believe that at first, because I said, "Well, I know people who, if they had had medical care, they would have lived longer or their lives would have been saved or if they had a heart attack, if we would have gotten them to the hospital in 20 minutes, and they would have lived," and "How can you tell me that the cumulative effect is that it won't improve the Nation's overall health?"

Of course, it will improve individual health and there are some groups, particularly the poor, who should have longer life expectancies, but the other factors that influence health, personal habits, stress, employment status, nutrition, the environment, these have such a major impact on these overall indicators that in that picture medical care is not that significant.

So when we talk about the Nation's role in health, which is the Government's role in health, the subject today, we have to remember that