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elderly than Medical, including Title XIX, the new medical assistance program. Expenditures for health care in this country both public and private are increasing at the rate of about $3 billion a year. In 1965, the American people spent a total of $40 billion on health care, nearly 6 percent of the gross national product. Before 1970 this total will probably exceed $50 billion annually.

The combination of Medicare (Title XVIII) and the new medical assistance program (Title XIX) will help to bring about vast improvements in health facilities and their use in this country. Title XIX authorized increased Federal grants to the States to provide medical care to all people receiving public assistance and to others who are medically indigent. Title XIX requires that the States provide for the payment of many services that have not been provided by the States before. To receive Federal funds for the program, the State must provide comprehensive care and service to substantially all of its needy people.

This will include payments for hospital care, nursing home care, and physician services for those needy aged whose benefits under Title XVIII have run out. At no time, therefore, must the older person, sick and impoverished, fear deprivation of medical care because of financial need. Fifteen States and one territory have already obtained approval of their Title XIX plans and arranged by matching Federal funds. California can be proud of the dynamic leadership that made it among the first to participate in this noble social welfare and health program.

California's program of medical assistance is an exciting innovation in many ways. First of all, it attempts to remove the stigma of poverty in medical care from its program. A Californian eligible for medical assistance receives a green card, for all practical purposes a credit card, entitling him to the same services, the same doctor, the same hospital, the same nursing home as any other paying patient. His doctor, or hospital, bills the State and is reimbursed according to going rates even as the non-indigent patient pays the doctor or hospital the customary fees or charges. Two and a half million Californians are eligible for California's medical assistance program and already over a million doctors' bills have been paid. This is one quality medical care for all, equally, without regard to ability to pay. It is a landmark in American medical history.

California's efforts in this Title XIX program mark also the fulfillment of a philosophic dream-a true partnership of public and private interests for the benefit of all citizens. President Johnson said last year,

Only through a creative and cooperative partnership of all private interests and all levels of government—a creative Federalism-can our economic and social objectives be attained. This partnership has written the story of American success and a new vitalization of this partnership and a new confidence in its effectiveness have produced the extraordinary economic and social gains of recent years.

And never has this been so clearly evident as in this partnership to improve the nation's health.

California's State government, its doctors, its hospitals, its health and welfare departments have written a bright page in our history. Title XIX has been the less well known section of the Medicare Act, P.L. 89-97. Through these efforts it may become even more significant.

But Title XVIII, the more familiar section, has also had an exciting impact. Since July 1, when the Law became operative, over 1,000,000 patients over 65 have been hospitalized, at a cost to the government of about $500 per patient. Half of these patients had no insurance previously. The experience of the aged under Medicare will be observed carefully. Ninety-seven percent of the short term general hospitals are participating, and only the handful that failed to meet civil rights requirements are not participating. Over 19 million people are eligible. The disastrous predictions of "mammoth traffic jams" never took place. America went from pre-Medicare to the new era in a quiet and orderly fashion. There was no more demand than in other years-only the quiet security of the aged who need no longer dread the economic impact of illness.

We will want to measure the results of these improved circumstances and the effects and by-products of Medicare.

We have heard a great deal about the shortages of doctors, dentists, nurses. medical technicians, professional aides, hospital beds and nursing homes. These shortages are real. But Medicare is not the cause of the shortages. The shortages already existed. The Medicare program only adds urgency to the need for both public and private action to relieve some of these critical shortages. In Califor

nia, and in the country as a whole, legislation of the past 3 years, and pending legislation in the Congress, aim to provide us with more hospital beds, more doctors, more health service workers of all kinds. We have a generation of missed opportunity to catch up with, and we are on the way.

Other significant effects of the Medicare Law on the medical care for older people are inherent in the standards in the Law itself.

The utilization review committees provided for under Medicare will undoubtedly be a useful instrument in making more efficient the use of hospital services for older people, in fact, for the whole population.

Another of the important side effects of Medicare will be to highlight the need for area-wide community planning of all its health and medical care facilities and manpower. Communities must plan for adequate numbers of facilities with a full range of needed services. They must also design the facilities so they are flexible enough to get the most utilization from them as needs change. A comprehensive pattern of services must be integrated into the facilities. Cooperative arrangements must be developed to assure that community resources are used to promote quality care with the most efficiency and economy.

More widespread use of home health services will alter the picture of hospital and other institutional use dramatically. Medical care costs will change. Even as they are rising now, the more efficient use of hospitals and more appropriate use of facilities of all kinds may reverse this trend.

Specialized practice in geriatrics should become more remunerative under Medicare and this, in turn, should encourage more doctors to go into this type of practice. Undoubtedly, Medicare can be expected to accelerate the growing interest in the field of geriatrics. It will be easy now for physicians to carry out more fully their professional responsibilities for older people and older people will be less constrained in obtaining the care they need. By removing the financial barriers to high quality care the program will help to remove financial considerations from the patient's and physician's decision about what kind of treatment is necessary and what medical facilities should be used. Up to now, such considerations have in many cases prevented older people from seeking and obtaining the medical care they needed.

There will also be a stepped-up interest in the whole field of gerontology. As we gain more knowledge of the process of aging and the over-all health of the aged, we can relate this information to other aspects of living, improve the quality of care, and the quality of life for older people.

This needs to be accompanied by more emphasis on educational programs on aging. Colleges and universities are already adding courses on gerontology and directing more research to the process of aging. The Older Americans Act of 1965 provided, among other things, for a grant program to support training programs in aging. More can be done to encourage research and demonstration projects. Short in-service training programs and vocational training programs for auxiliary personnel who can care for the aged, such as home aides, should be encouraged. We will need more trained career personnel at all levels and from all disciplines to carry out programs designed for the aged.


With Medicare now part of our daily life, the organization and delivery of medical services to the aged will be changed dramatically in the years ahead, and with them the patterns of utilization will change.

As President Johnson said in signing the Social Secuirty Amendments of 1965:

"No longer will older Americans be denied the healing miracle of modern medicine. No longer will illness crush and destroy the savings that they have so carefully put away over a lifetime so that they might enjoy dignity in their later years. No longer will young families see their own incomes, and their own hopes, eaten away simply because they are carrying out their deep moral obligations to their parents."

It will indeed be interesting to attend such a conference as this a few years from now, to talk again about the patterns of utilization of health services for older people in this country. I'm sure that the story will be quite different-and far better.

Early in this address, Dr. Silver makes some good observations on the tendency of the elderly to stay away from doctors and medical services unless and until

they have a condition which has become serious. Inferentially, there is a plug for preventive health services.

Beginning on p. 221, there are some interesting statistics concerning hospital utilization. Utilization of nursing homes and related facilities is discussed beginning on p. 222. Statistics on physicians' visits are on p. 222.

The remander of the address discusses the impact of Medicare upon health services to the elderly. Since the address was delivered soon after eligibility for Medicare began, he could not say much about the effect of Medicare to that date, but he was very optimistic about prospective effects of Medicare upon health services to the elderly. Besides removing the financial barrier to utilization of health services, Dr. Silver thinks Medicare will have several important side effects:

1. The utilization review requirement will result in more efficient use of hospital services for the elderly;

2. Medicare will highlight the need for area-wide community planning of all health and medical care facilities and manpower, and will probably stimulate more and better planning of this type;

3. More widespread use of home health services will be stimulated;

4. Specialized practice in geriatrics should become more remunerative under Medicare and this, in turn, should encourage more doctors to go into Geriatrics. 5. There will be a stepped-up interest in the whole field of gerontology, resulting in advances and improvements in non-medical aspects of aging.



Washington, D.C., July 7, 1967.


Chairman, Subcommittee on Health of the Elderly,

Special Committee on Aging,

U.S. Senate,

Washington, D.C.

DEAR SENATOR SMATHERS: During the course of my testimony before your Subcommittee on June 22, 1967, I was asked to submit data substantiating my assertion that U.S. prices for drugs are the highest in the world.

The examples cited below are taken from the 1961 report of the Senate Antitrust and Monopoly Subcommittee (Administered Prices-Drugs, Report No. 448, 87th Cong., 1st Sess.). As you undoubtedly know, this Subcommittee under the Chairmanship of Senator Estes Kefauver made an exhaustive examination of drug prices which culminated in the passage of the Kefauver-Harris Act of 1962. Data on foreign prices were secured through the State Department from American Consulates abroad.

The Kefauver report shows substantially higher prices for drugs in the United States as compared with other industrialized countries of the world. The following examples are typical:

1. Chlorpromazine, a potent tranquilizer used widely in American mental hospitals throughout the country. This product, marketed exclusively in the U.S. under the trade name of Thorazine by Smith, Kline & French, was priced at $3.03 to druggists (25 mgm, tablets in bottles of 50's). Rhone Poulenc, the French firm which originated this compound, sold the drug in equivalent amounts at $51. The price in England was $.77; in Germany, $.97; in Belgium, $1.37. 2. Prochlorperaxine, another potent tranquilizer used widely in mental hospitals. This product, also developed in France and marketed exclusively by Smith, Kline & French in the U.S., was priced to druggists at $3.93 (10 mgm. tablets, 50's). The price in France was $.80; in England, $2.24; in Germany, $.80.

3. Tolbutamide, oral anti-diabetic compound. This product, sold exclusively in the United States by Upjohn under the trade name of Orinase, was priced to druggists at $4.17 (.5 gram tablets, 50's). Hoechst, the German firm which originated the compound, sold equivalent amounts in Germany for $1.85. The price in England was $1.87; in France, $2.04 in Belgium, $2.45.

4. Reserpine, a drug used widely in the treatment of hypertension and heart disorders. For this compound the Kefauver report compares the world prices See statement, p. 53.

of Ciba, a major Swiss firm which holds the patent on this purified form of rauwolfia, a product of nature used for centuries as a medicine in the Far East. Prices to druggists for Serpasil, Ciba's trade name, in the U.S. were $12 (1 mgm. tablet, 100's). For equivalent quantities Ciba charged in England $3.94; in France, $1.21; in Germany, $2.78, and in Belgium, $4.24.

5. Chloramphenical, an antibiotic controlled world-wide by patents in the hands of Parke Davis, an American firm. According to the Kefauver drug report, this company charged druggists in the U.S. $5.10 (250 mgm. tablets, 16's); in England its price for equivalent amounts was $2.67; in Belgium, $3.36; in Holland, $3.03; in Italy, $3.90.

More recently, data in this area have been collected and made public by Senator Gaylord Nelson, Chairman of the Monopoly Subcommittee of the Senate Select Committee on Small Business. This information disclosed during May and June of 1967 substantiates the continuance of higher drug prices in the U.S. as compared with industrialized countries abroad. The following examples may be noted:

1. Chlorpromazine continues to be marketed at a higher price in the United States than in France, where the drug was originated, as well as in other cities in Europe. According to the Monopoly Subcommittee, this drug, still marketed exclusively by Smith, Kline & French under the name Thorazine, is priced at $6.06 to druggists for 25 mgm tablets in bottles of 100. In France and England it is sold for $1.08; the price in Germany and Italy is $2.40.

2. Prochlorperazine, discussed above, also continues to be sold at a higher price to the American druggist than to the druggist in European countries. Smith, Kline & French sells its product for $7.86 for 10 mg. tablets in bottles of 100. An equivalent amount costs $1.75 in France and $1.95 in Germany.

3. Reserpine, the antihypertensive referred to in point 4 above, is sold to druggists in the U.S., under the Ciba trade name, Serpasil, for $4.50 for 100 tablets of 25 mg. This same Swiss firm sells the identical quantity in Berne, Switzerland, for $1.24; in Bonn, Germany, for $1.50; in Vienna, Austria, for $1.56; and in Rome, Italy, for $1.52.

4. Prednisone, a synthetic analog of cortisone used to control inflammation associated with rheumatoid arthritis, is marketed by various pharmaceutical firms. An international comparison of both Parke-Davis' prednisone, sold under the trade name Paracort, and Schering's brand of prednisone called Meticorten revealed that both these firms market their products at substantially higher prices in the United States than in a number of European countries. Paracort (Parke-Davis) sold to the druggist in the U.S. for $17.88, is marketed in London for $2.10 (5 mg., 100 tablets). Schering sells its Meticorten in the U.S. for $17.90 (5 mg., 100 tablets) while the same product in an equivalent amount and strength is priced in Berne, Switzerland, at $4.37.

These recently disclosed comparisons of drug prices in the United States and abroad substantiate the findings disclosed in the Kefauver report. Prices for drugs are considerably higher in the United States than in other countries of the world in 1967 as they were in 1962.

I hope that the example cited above will satisfy any questions you may have about my assertion that U.S. drug prices are the highest in the world. And, I am confident that your Committee will give full consideration to the serious issue of drug prices as they relate to the overall health problems of the aged. Sincerely yours,

WILLIAM R. HUTTON, Executive Director. [Enclosure]


Mr. Chairman, members of the Subcommittee: I am William R. Hutton, Executive Director of the 2,000,000-member National Council of Senior Citizens. I appreciate this opportunity to appear before the subcommittee.

President Johnson has called Medicare and Medicaid the most ambitious and formidable social welfare program to be undertaken by the American people in recent decades. All of us can understand that difficulties are inevitable in an undertaking of this vast scope and there are clearly many serious problems. Members of the National Council of Senior Citizens do not spare themselves in recognizing that Medicare and Medicaid are doing more to break down the

barriers to adequate medical care for older people than any other steps that have been taken in the history of American medicine and in the history of our social legislation.

But it is precisely because we believe that the organization and delivery of medical services to every American citizen may be changed dramatically by the impact of these programs, that we are glad to submit the following observations. Through its enactment of the Social Security Amendments of 1965 which included these important health programs, the United States Congress clearly recognized that the problems of medical care for the aged are more severe than for other age groups.

Though we are intensely grateful to Congress for the enactment of these programs, we have had plenty of opportunity during a full year of their operation to realize where they fall far short of the minimum that is needed to make good health a reality for many aged citizens.


Nevertheless, we want to emphasize that in our goal to seek a better life for all older Americans the National Council of Senior Citizens is extremely conscious of the national interest. This concept of seeking improvements for the elderly within the framework of the national interest is one, Mr. Chairman, which has brought recognition of our organization by the members of this Congress as a responsible voice of the elderly people of America.

We are desperately concerned about the health care needs of the elderly. We are just as desperately concerned with unnecessary, unrealistic, “runaway costs" which are forcing up the price of health care, not only to elderly people themselves, but for their sons and daughters and for their grandchildren.

Ever since the spring of 1965 when it became clear that Medicare was going to be enacted-the National Council of Senior Citizens has been warning Congress that soaring hospital costs and spiraling doctor fees pose a dangerous threat to the program.

We believe quite sincerely that this is currently an economic threat and not a political one. Something must be done to halt the rate of health cost increases. We must work to control costs and improve efficiency without sacrificing the quality of care. While to some degree this calls for the understanding and cooperation of the people who will use the care, it calls more seriously for restraint and judgment by those doctors who are wilfully and flagrantly raising their fees on the theory that "Uncle Sam can afford it" or who are inflating their fees because a patient happens to be privately insured.


Though it is understandable that some hospitals which are belatedly meeting staff demands for needed increased wages are having to meet higher costs, it is also clear that there are wasteful and extravagant practices in many of our health institutions. Inside and outside of Government there is a great need for built-in incentives to control costs.

Mr. Chairman, in your Senate statement on June 7 announcing these hearings, you asked a number of questions to stimulate discussion concerning the organization of our medical services as they affect the elderly. I would like to group several of our observations under the topics prescribed by these questions. Do many of our elderly face insuperable obstacles in obtaining needed health services?

I know that the committees of Congress appreciate the tremendous difficulties we experience in gathering accurate data on the invisible poor. As President Johnson pointed out in his message to Congress on social security, there are 5.3 million older Americans living in the squalor of poverty and obviously it is difficult if not impossible for many of them to meet the deductibles and co-insurance features of the Medicare law. The leaders of our over 2,000 affiliated clubs have told us they believe there are many older Americans in their communities who will not go to a doctor because of their lack of money.

Many aged sick would rather suffer in silence than admit they cannot produce the $40 for the first day of hospitalization, the intial $50 for doctor bills, or subsequent one-fifth of all doctor costs as co-insurance for medical insurance. The people I am talking about, Mr. Chairman, include many proud Americans whose sweat and toil helped to make this country great. They don't wish to admit

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