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7. Q.

What order of magnitude of savings might HALT be able to achieve?

A.

For Medicare, Medicaid and other personal health services
HALT anticipates short run Federal budget savings in the
neighborhood of five billion dollars annually. Comparable
savings would be made in private sector expenditures.

8. Q.

Are these reductions in present expenditures?

A.

No. They are containment of increases which will certainly occur without the intervention of the HALT plan. Over several years. HALT's cost containment plan would bring down yearly increases in health costs to the level of increases in the Bureau of Labor Statistics annual cost of living index.

9. Q.

A.

Most states are being hard pressed by the increasing pressures
on their budgets produced by health care cost inflation.
Would HALT help them?
In two ways.

By participating in HALT they would
receive an approximately 9% decrease in the amount of Medicaid
matching funds they are presently required to appropriate
Their increased expenditures for health insurance benefits
for state employees would also be reduced.

Yes.

10. Q.

Well how does HALT do all this?

By mirrors?

A.

No, by applying cost containment procedures which have already
been tested and found effective in a number of states, by
installing a system of cost controls, and by mandating negoti-
ations, within budgetary limits by hospitals, doctors and
other providers with state agencies, insurance companies and
consumer representatives.

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A.

HALT has two phases. Phase I is operative for the first two years. It calls a halt to all hospital price increases except for an allowable increase up to the previous year's increase in the "market basket" hospital costs. The allowable increase takes account of wage increases of non-supervisory hospital employees. Phase II begins in the third year sooner if a state is able to complete its organization work in less time.

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What about doctors and other professional providers?

A.

In phase I their allowable increases would be held to the
increased costs of overhead expenses (approximately half the
costs of charges). In Phase II they would be paid
through a negotiated reimbursement schedule.

13. Q.

Would laboratory, x-ray, nursing home and other health
expenditures be in the program?

A.

Yes. All major health expenditures would be required to
be held to the previous year's level, with specific allowances
for the increased cost of providing the specified services.

14. Q. Who would supervise the program?

A. A state designated agency in each jurisdiction, operating

under Federal guidelines.

15. Q. Since hospitals are the major area of health expenditures,

must they all operate under the cost containment formula?

A. No. States which already have official cost containment

programs which are holding down cost increases to the
escalation in hospital "market basket" costs would be
considered in compliance with the HALT plan. States, which do
not have such programs would have a two year Phase I period
to develop such a plan and submit it for approval by the Dep't
of Health and Human Services.

16. Q. What happens in Phase II?

A. The full HALT plan becomes operative. Hospitals would be required

to have prospective budgets negotiated with a state organized
commission consisting of the public agency, The Medicare carrier,
the insurance companies and consumer representatives. Within
broad Federal guidelines states would be allowed considerable
flexibility in the specific methods they select for containing
hospital cost increases. Each state would adopt a prospective
budget formula, within the predetermined ceilings for the year.
This would cover Medicare, Medicaid and private payors.
Representatives of doctors and other professional providers
would negotiate with the state annual fee schedules or other
reimbursement mechanisms which would set prices for services
for the coming year.

17. Q. What about HMO's?

A. The state commission would negotiate annual budgets with them.

18. Q. Would HALT be flexible enough to take into account major changes

in population, unusual incidence of disease, and the financial
problems of institutions which serve disproportionately large
numbers of senior citizens, the poor and near poor?

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A. HALT would take these factors into account in annual budgeting

and in retrospective budget adjustments, when appropriate.
19. Q. What would HALT do about the unemployed who have lost insurance

coverage, the working poor who have lost Medicaid protection,
and other similar groups?

A. Unfortunately HALT would not be able to help them. It would

not extend or improve eligibility or benefits. A comprehensive
national health insurance program is needed to help these people
and millions of others. HALT is simply a constructive alternative
to containing health care costs, without further penalizing
consumers.

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20. Q. But isn't this a rather drastic proposal, likely to be opposed

by many of the special interest groups?

A. HALT is comprehensive rather than drastic. It's a systematic

rather than piece-meal approach to containing health costs.
It embodies long advocated principles like prospective budgets
for hospitals, already approved in principle by the American
Hospital Association, the Health Insurance Association of
America and Blue Cross Blue Shield, and embodied in Medicare
legislation passed by the Congress. It covers both public
and private insurance programs, advocated in principle by
the Health Insurance Association of America, negotiated
payments for HMO's, approved for Medicare by the 97th
Congress, and a limitation on physician fee increases,
approved by the U.S. Senate in the summer of 1982.

PREPARED STATEMENT OF HOWARD D. SLOBODIEN, M.D.

I am Howard D. Slobodien, M.D., President of the Medical Society of New Jersey. I appreciate the opportunity to appear before yoụ and to present the collective opinion of the 9,300 physician members of the Society.

Practicing physicians are concerned with a number of proposals that are being considered by the Administration to curtail the costs of Medicare. While these proposals are well-intentioned, they may not achieve the desired result. If they do have a salutary effect on cost containment, they can have an adverse impact on the quality of care and the health of

our senior citizens.

Diagnosis Related Groups The DRG program is being hailed by the Health Care Financing Administration as the answer to controlling hospital costs. Its effectiveness as a cost containment measure has not been established, and New Jersey is the only state in which it has been tested. That test has not been . completed nor properly evaluated. The reconciliation called for under the Federal Waiver has not been completed and will not be completed

without modification of the original protocol.

As a practicing surgeon, I had great hopes for DRG. After all, I have been reimbursed along DRG lines since entering private practice. My charge to the patient in the vast majority of cases includes the fee for both the operation and the total hospital care, regardless of the

variation of the number of days involved. This method has worked well so I looked forward to the DRG program when it was first proposed.

But now I have great reservations about its applicability in paying hospital costs or harges. I am far from convinced that there has been a saving in cost in New Jersey. I am particularly concerned that the quality of care may be deteriorating, and that patients are being forced out of the hospital setting still hurting, still in trouble, and still in need of acute care, merely because the system rewards those

institutions with rapid turnover of patients.

The DRG program has been criticized adversely in outstanding publications, by extremely well-qualified individuals located in areas

stretching from the Atlantic to the Pacific.

This criticism covers

many areas in the application of the program. It should be noted that among these criticisms is the fact that the medical profession has been invited only minimally or marginally to participate in the program. The only rebuttal to these criticisms, as far as I know, has come from

those responsible for initiating or expanding the DRG concept in New

Jersey.

Yet, these same people who defend this program, have MDs, PhDs,

and MPHs, etc. among their scientific accomplishments, but they continue

to oppose the application of scientific inquiry despite their backgrounds

and despite their avowal at the onset of DRG that it was a pilot program. The Congress of the United States is approving this program for Medicare

purposes despite the lack of proof of its merits.

The medical profession has been given a bum rap

that it is respon

sible for much of the rise in health care costs, despite the fact that

physicians do not receive even one cent of every five spent on health

care.

If for no other reason

and there are many others -- doctors

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