THIS BILL PROVIDES SUBSIDIZED GOVERNMENT REINSURANCE

The reinsurance plan provided in this bill is presented as a self-sustaining program and not a subsidy. However, the bill subsidizes the reinsurance plan to the extent of the entire administrative cost for the first 5 years. The Secretary of Health, Education, and Welfare has asked for $1,250,000 for administration during the first year.

Moreover, the bill provides an appropriation of $25 million to start the reinsurance plan. If the plan proves not to be self-sustaining from premiums received from voluntary health insurance organizations, all or part of this sum will become a subsidy. If this bill is enacted into law, we predict that it will soon become apparent that Government reinsurance is not the answer to the expansion of voluntary health insurance plans and that the inevitable next move will be frank, outright Government subsidy of voluntary plans-the historical intermediate step toward a national compulsory health insurance system. Government subsidy and Government regulation are inseparable. The United States Supreme Court has made this fact clear in its pronouncement that "it is hardly lack of due process for the Government to regulate that which it subsidizes."

The voluntary health insurance plans will never satisfy those who demand that all the population be covered for all the medical and hospital care they want. No sound insurance system can reach this totally unrealistic objective. Nor can any government do it without bankrupting its people or lowering their standard of living.

SPECIAL ACTS AFFECTING PREPAYMENT MEDICAL CARE PLANS-SURVEY THROUGH 1953 COMPILED BY COOPERATIVE HEALTH FEDERATION OF AMERICA The attached chart and summary of special acts show the type of State statute authorizing prepayment, medical-care plans existing in each State having such a statute as of the end of 1953. The year appearing immediately below the name of the State at the top of the chart indicates the time of enactment of the first statute on the subject. The summary likewise shows the year of enactment and the current code section number. Amendments are not indicated in each instance in the interest of conserving space, but will be found in the supplements to the code under the same section number.

The breakdown in the chart is designed to indicate at a glance the nature of the special act in each State. The first breakdown shows the most important aspect-whether the legislation is designed for use for only professional-controlled plans, or for both professional- and consumer-sponsored plans through the same act or a separate parallel act.

“Restrictive" means that act is designed for only professional-controlled plans, commonly called Blue Shield plans.

"Mandatory" means that the restrictive act grants professional-controlled plans a monopoly in the prepayment, medical-care field, since as a practical matter it would be impossible for consumer-sponsored plans to operate under these acts.

"Permissive" means that the restrictive act, while designed for the exclusive use of professional-controlled plans, does not require that all prepayment, medical-care plans be organized under that act. Thus the benefits of the act do not extend to consumer plans which must organize under other corporation statutes and are exposed to the common-law prohibition against corporate practice of medicine and against adverse rulings under insurance laws, which situation may exist in that State and bar operation of consumer plans as a practical matter. "Open" means that the special act is not designed for either type of plan and may be used by both.

"Separate act" means that in that State there is a parallel, separate act for consumer-sponsored plans granting approximately the same rights to those plans as are afforded in the so-called Blue Shield act existing in the same State.

The elements of State regulation appearing in the chart show very little, if any, requirements for many of the restrictive acts. Real regulation exists only where a State license is required, coupled with power in the State to suspend or revoke the license. Only partial regulation exists where approval of the contract forms and rates is required without the requirement for license. Only pseudo or apparent regulation exists where filing only of contract forms and rates is

required, without necessity of a license. This latter situation exists in many of the States, such as Minnesota, but is not shown specifically on the chart which is designed to show whether a given State actually exercises some regulation through a license or approval of contract forms or rates. Exempton from insur ance laws and from taxation exists in many States. It will be noted that under the classical standards for tax exemption many plans operating under these special acts did not measure up and have tax exemption only by virtue of a section in the special act.

The elements of professional control show the decisive provisions which characterize the special act as being restrictive in the sense that it may be used only by the organized medical profession. This is obvious where all or at least a majority of the incorporators and/or directors must be doctors or persons ap proved by the medical association. It is less obvious where the special act is made part of the preexisting Blue Cross statute. However, an inquiry into the situa tion in those States will readily show that since the Blue Cross hospital pan is under the influence of the medical profession, the Blue Shield plan will auto matically fall under the same influence. In any event, where the Blue Cross and Blue Shield statutes are combined it is impossible for consumers to operate a democratically controlled plan. Where the special act required participat a by a specified number of licensed physicians in the area or the State, it is obvious that the plan could not operate under such an act without sponsorship or endorsement by the county or State medical society, or by both, and the Society involved would naturally reserve such endorsement for its own Be Shield plan.

Many of the restrictive acts require free choice of physician as an essential ingredient in any plan operating under the act. This means that a subscriber to the plan would be free to choose a different physician in any part of the State for each item of medical service required. At first blush this might seem to be a desirable provision, but on closer inspection it will be found to be the device used by the organized medical profession to perpetuate the fee-for-service method of paying for medical services, to the exclusion of all other methods. A plan embodying free choice as narrowly defined by the medical profession is actuarially feasible only if all of the physicians agree to a special fee schede Obviously such a uniform fee schedule on a statewide basis could not be effected other than through a State medical association, which would natura y reserve such action for the exclusive benefit of its own Blue Shield plan. As a practical matter it would not be possible for a consumer-sponsored plan to obtain an agreement from the medical profession on a fee schedule which would constitute the entire payment for the item of medical service rendered to people within the specified income brackets.

Since free choice automatically involves a fee schedule, Blue Shield plans are necessarily very limited in the number of services or amount of indemnity pro vided. They often exclude the first items of service and limit the number or type of professional calls available in any illness or contract year. Some are limited to surgery and to calls at the hospital and exclude office and home calls. Fee for service always involves a pyramiding of costs as specialist's care is re quired, and in every case where more than one physician is involved the overbea! of each physician adds to the total cost as reflected by the fee schedule. Th in order to have a saleable contract, meaning one that would fit the budget d most people, the benefits available must necessarily be scaled down.

On the other hand, a consumer-sponsored plan usually embodies group practice of medicine with prepayment. The central principle in group practice is that the science of medicine is so vast and complex that it cannot be mastered " one individual, and that only a balanced group of general and specialist prac tioners, free to consult with each other, and practicing medicine as a group are best able to combine the knowledge and skills in order to effect the best diagnosis and treatment. Free choice, as narrowly defined by the medical professi£. and as such made a mandatory part of a State law, would make group practiť impossible.

In the broad sense free choice should include in its meaning the right of a consumer of medical services to freely choose to seek care from a solo practe tioner or a group of practitioners practicing as a clinic, as well as freedom t join or to quit a group-practice plan. Incidentally, the State laws conta the typical free-choice section, as narrowly defined, actually or tend to mike impossible the operation of group-practice plans, worthwhile as they may be

Experimentation for all types of plans with different methods of prepayment, different types of benefits, and with or without group practice, would be desirable in a free economy where public acceptance should be the ultimate test for success. Many State special acts restrict experimentation, and some actually limit activity in the field to one stereotyped plan. This situation is undesirable and should not be tolerated in a democracy.

Any Federal plan designed to make more and better medical care available to more people should not be drafted without considering the limiting effect of these special State acts.

Further, any proposal for a Federal-aid plan should consider that it may have the possible effect of endorsing the existing restricted situation, and of adding strength to a trend toward class domination of the field of medical economics, all because of the underlying basis created by existing State legislation.

(In the summary under Restricted Acts, Illinois, Massachusetts, and Wisconsin are not included since a parallel separate act permits consumer-sponsored plans. Thus the States listed under restrictive acts have no provision for consumer-sponsored plans by either a separate or open act.)