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Government, together with the insurance industry, should develop a catastrophic insurance plan that can be purchased by all people, not just the elderly. I think it is possible with the proper deductible.

I will give you an example here, the hospice case. This person has run out of all benefits. And they are letting her go from the hospital. The hospital does not want people there without some assurance of getting paid. I think that is possible to get a catastrophic insurance plan. It does not necessarily have to go under medicare. But I think if you work together with the insurance companies, you are going to have the opportunity to develop a proper catastrophic insurance plan.

We do not favor raising taxes or increasing beneficiary copayments or using general funds. In our opinion, the problems are not caused by insufficient funds, but by exorbitant fees of the doctors and the charges by the hospitals. These charges must be contained.

In this regard, a feasibility study should be made to determine the plausibility of regulating the hospitals and also requiring de tailed reporting procedures for the medical profession.

The Government, in cooperation with industry, should develop affordable private insurance plans. Small companies should be encouraged to secure the health plan for their employees from an insurance company.

Home health care costs should be reimbursed by medicare to encourage more patients to receive medical attention at home instead of in the hospitals.

Some employers are now reimbursing retirees for the amount of the medicare premium. Tax_laws require that such reimbursements be included as income. The law should be changed to exempt these reimbursements from taxation. Companies are purchasing additional insurance, and if they have a plan of their own, they are reducing their own costs of outgo. So that this is not a taxable item on the senior citizen because they are reimbursed.

Probably the most important of all things that concern us is the assurance of proper medical attention for all people at affordable cost. In this regard the laws relating to malpractice should be refined, in order to reduce the expenses of the doctors. There are far too many cases where people are instituting legal action to sue the doctors for malpractice, and far too many instances where the awards are excessive. Because of the high premiums paid by the doctors, they pass it on to the patients. Treatment of an illness by a doctor, in our opinion, is a matter of judgment.

There is a shortage of general practitioners throughout the Nation, particularly in populated areas. If more doctors made house calls, it probably would result in keeping more people out of the hospitals. Incentives should be provided by the government to encourage medical students to become general practitioners.

And, last, many dollars are paid out for doctor visitations to patients in the hospitals for which for the most part consist of “Howdy," "How do you feel?” “Keep up the good work, and I will see you tomorrow.” And he charges the same fee as if you went to his office. There is something wrong with that. These costs must be contained. Doctors' fees for hospital visitation should be limited by Government regulation, and should also be limited as to total remuneration for the number of patients they visit. If they have 10 patients in the hospital, they are charging each one the same amount of fees. I think if he can cover the whole thing within an hour, it should be put on an hourly basis.

I hope I am going to be popular with the medical profession after this, but those are our viewpoints.

Mr. SMITH. Thank you, Mr. Miller. We will get to questions at the conclusion of all four of your statements.

Mr. Keiserman.

STATEMENT OF DAVID KEISERMAN Mr. KEISERMAN. Thank you, Congressman Smith, for permitting me to present the views and fears of the over 250,000 members of the New Jersey Council of Senior Citizens.

The President's budget message to Congress regarding medicare has caused great concern to our membership. If the President's recommendations are accepted as put forth, the impact upon both the senior citizen and the young workers would be catastrophic. The end result of the recommendations would shift more of the costs upon the senior and make the younger workers pay higher taxes and raise the cost of decent health care to unaffordable levels.

The concept upon which the changes are based is totally errone ous. The administration claims that placing a coinsurance charge on hospital stays from the second to the sixtieth day would reduce overutilization. Seniors today are already paying more than 60 percent of their health costs. Medicare covers less than 40 percent of the cost. Is not that enough coinsurance? Less than 2 percent of hospital stays exceed 60 days. This so-called catastrophic plan proposed will help very few of our elderly and will go a long way to increase the number of seniors who live near or at poverty levels or below poverty levels. The resulting premium rates for supplemental health care would also skyrocket.

The increase of the premium for part B of medicare to cover 35 percent of cost instead of the less than 25 percent paid today, is another unconscionable imposition upon the elderly. Along with this premium increase, the administration wants to freeze the amount medicare pays to doctors. Doctors' fees rose more than 18 percent in 1982 alone, while the cost in the consumer price index rose only 5 percent. This freeze would not preclude doctors from raising their fees still more and make medical care unaffordable. We have already been advised that the part B cost will rise to $13.50 a month from the current $12.20, an increase of 14 percent, while there will be a freeze on the cost-of-living increase on the checks for seniors.

The taxing as income of employee health benefits would adversely effect the low-income worker the most. It will reduce the emphasis on fringe benefits because they cannot afford to pay more taxes. This would add to the discrimination against older workers, since health group insurance rates are generally based on the average age of the persons covered. Younger workers will forgo health benefits to reduce their tax burdens only to find that when illness strikes them or their families, they cannot afford proper medical care.

Another contemplated change in the medicare program is the proposed regulation drafted by Health and Human Services, which will make auto insurance policies the primary source of medical coverage for injuries related to auto accidents. We in New Jersey, who still own cars, face a doubling of our personal injury protection premium, which will increase from $58 to $114 a year that we can expect here in New Jersey.

The New Jersey council recommends that Congress and the administration develop a comprehensive health cost containment plan that would control the present runaway costs for health services. Such a plan must include preventative health care, such as HMO's which have proven so successful, more qualified medical schools, and doctors trained in gerontological medicine so that seniors can be properly cared for, expansion of home health care, more trained nurses, therapists, and technicians who can furnish care in their specific fields at much lower cost than those demanded by doctors, controlled growth and spending by hospitals that will prevent constant rising hospital costs. And I am sure there are many more innovative ways by which costs can be contained.

I would like to point out yesterday's Star Ledger had a page 1 news item which reflected the premature hospital discharge of people. It is being blamed on the diagnosis related group or DRG. The hospital now encourages to discharge early so they can save money. And there is quite an article in yesterday's Newark Star Ledger regarding this.

I would ask that your committee please look into whether or not this is actually taking place here in New Jersey.

Let me express again the thanks of New Jersey Council of Senior Citizens for this opportunity to present its views and concerns and to emphatically point out that shifting more of the costs of medicare to the elderly is not solving the problem, but merely adding to the burden that so many of us can so ill afford.

Our medical program must be strengthened and made more efficient so that all Americans will have the best medical care in the world at affordable rates now and in the future. We as a nation cannot afford less. Thank you.

Mr. RINALDO. Thank you Mr. Keiserman.
Mr. Bond.

STATEMENT OF DONALD BOND Mr. BOND. Good morning, Mr. Chairman, Congressman Smith. My name is Donald S. Bond. I live in Princeton, N.J. I am president of the Princeton Chapter 459 of the American Association of Retired Persons.

I am a physicist and have specialized in electronics and telecommunications for 54 years. During the last 9 years I have been a telecommunications consultant with particular emphasis on applications to health care delivery and education for people who live in sparsely settled areas. This has included direct planning on satellite communications in cooperation with the Alaska Area Native Health Service, of the Public Health Service, in the Alaska bush and with the Royal Flying Doctor Service in the Outback of Australia. And I have made extensive travels in those areas.

My comments relate to three matters. One is the prospective payment—the DRG plan-proposed for reimbursement to hospitals under medicare A health insurance. The second, proposed changes in copayment, or cost sharing of hospital charges for patient hospital care, and against catastrophic costs included in long-term illnesses. And third, reduction of the costs of medical malpractice insurance and malpractice awards affecting both physicians and hospitals.

These views are those of the legislative task force of the board of directors of the Princeton Chapter of the AARP. The opinions are independent of any that may be put forth by the National Headquarters of the American Association of Retired Persons.

The first topic, the prospective payment plan for medicare reimbursement to hospitals may prove highly successful in limiting hos-. pital costs if a number of conditions are properly met.

The scheme has been tested by several States. Of these, the experience in New Jersey has been the most extensive and informative. Based on the results in New Jersey and our own judgment, we call attention to the following necessary features for an acceptable, workable plan.

The first of these is the prospective reimbursement system must apply to all classes of patients and payers. The proposed legislation would provide for prospective reimbursement for medicare patients only. The results would be a shift of cost overruns to nonmedicare patients and their payers and would thus be unfair to the younger patients and those outside medicare coverage.

In the second place, the introduction of prospective reimbursement should include safeguards to prevent the shifting of excess costs to elderly patients.

In the third place, the prospective reimbursement if it is adopted, it should be made mandatory for all acute-care hospitals. The experience in New Jersey has demonstrated that a program that was initially optional, rapidly gained statewide acceptance and is now enforced in all 96 acute-care hospitals in the State.

Furthermore, considerable flexibility in diagnosis related group rates must be permitted to take into account differences in local costs. Alaska's so-called market-basket hospital costs are inherently much higher than those in any of the lower 48 States.

Then, in the fourth place, prospective reimbursement will introduce several new complications. It will tend to slow the adoption of new medical techniques if they involved additional costs that are outside the DRG schedule.

Revisions to the cost schedules can be excessively delayed by the Federal administrative machinery, so that hospitals are unfairly deprived of any prompt upward adjustments, and the introduction of new medical techniques will be sadly delayed.

Then, in the fifth place, the experience of New Jersey should be examined carefully as a guide to a Federal program of prospective payments.

As we noted previously, New Jersey has the only DRG prospective system in the United States that is both all payer and all hospital. An independent evaluation of the New Jersey experience is almost complete. It was made by the Health Research and Educational Trust of New Jersey, located here in Princeton, N.J. Their reports, some of which are already available, will be the best present source of data on actual results.

The report I refer to that is a summary is by May and Wasserman and is entitled, “Some Preliminary Results From the New Jersey DRG Evaluation,” and it was issued in December 1982.

This New Jersey study convinces us that with the proper safeguards an all payer, nationwide prospective reimbursement system to hospitals would help control rising hospital costs.

Then I come to the second major topic. We applaud the efforts to prevent catastrophic costs to patients with long illnesses. There can be no question that long hospital confinement can be financially devastating to medicare patients without adequate private insurance protection.

The plan put forward recently by HHS to reduce the patient's share of the cost of hospitalization beyond 150 days is a major step to avert catastrophic loss of lifetime savings of the patient and of his family on one medical disaster.

The major consequences of the HHS program should be considered. And here are two of them.

One, cost sharing by the patient for shorter-term hospital stays will be excessively increased. In an example given by HHS, and referred to by Dr. Davis this morning, for the so-called low-cost hospitalization, a hospital confinement of 15 days would increase the patient's share by nearly $400, and for a term of 60 days, the increased cost would be nearly $1,200. In each case the day-one charge would remain at the present projected $350. The burden of such an increase will fall most heavily on low income participants whose principal income is from social security and who cannot afford supplementary insurance coverage.

Then, restraints must be provided to prevent excessive reliance on long-term free hospitalization. While we have stressed the social necessity of avoiding catastrophic costs of long-time hospitalization in acute care and certain other facilities, means should be included in regulations on medicare to prevent abuse of the system for longtime hospital confinement is not absolutely necessary.

Perhaps the fairest way is by continued cost sharing by the patient, his family or a third-party payer. The amount of this further sharing beyond day 150 should be a very modest percentage of the DRG hospital costs. The patient must be assured of not being reduced to the poverty level by a single protracted illness.

Thus, we favor legislation to protect against catastrophic costs of illness but only with safeguards to prevent excessive increase in medicare financing costs.

Furthermore, if the committee does not have a copy of the report I referred to on the New Jersey results, I will offer a copy here for inclusion in the record.

Mr. RINALDO. We do not have a copy, and with no objection it will be included in the record. So ordered.

[The complete prepared statement, along with the New Jersey DRG evaluation report submitted by Mr. Bond follows:)

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