is the fact that we are having this FHA type mortgage guarantee for private nursing homes. I am for action, too. I want correct action. The CHAIRMAN. Are there any further questions? Mr. ALGER. Mr. Chairman. The CHAIRMAN. Mr. Alger. Mr. ALGER. Mr. Secretary, I appreciate not only your statement but I recognize by scanning through the report how much you have left unsaid. I particularly appreciate the introduction you have given us in this report in which you start by stating that we all know a problem exists and then you make this statement which is so seldom made any more: The existence of a problem does not necessarily indicate that action by the Federal Government is desirable. I have not heard that very much lately. Then you give us six reasons why the Federal Government should not take action, five reasons why the Federal Government should. Obviously in your statement here today you pretty well have gone into your position but time did not permit your going into the fullness of this report. For example, chapter 3. I would like to call to your attention that where you mention one part of this report as you did, as to the cost from 1948 to 1958, the increase in medical care percentagewise, that that remark is qualified in the following paragraph of the report which says that over a longer period from 1938 to 1958, the price of medical care as measured by the Consumer Price Index increased only slightly more than the average for all goods and services. Then you go ahead in the report and fully explain the many additional services which we now enjoy in medical care which we did not have back in earlier days. Now, I want to ask several questions, Mr. Chairman, but because of time shortage ask that the record be left for the answers. I won't take the committee's time now unless you see fit to comment on them further. First, as to cost we have a staff study here which says that $2.3 billion per year is an intermediate cost estimate. Now that figure has not been used before to my knowledge. You used the figure of $1.12 billion. I would like to have a further comment for the record on this memo to us from our counselor. Secretary FLEMMING. On that, the figure I used was the estimated 1960 cost. That is a calendar year cost. Of course, the cost over a period of time will go above that for various reasons. But I will be glad to respond in detail to that observation. Mr. ALGER. In that response I am sure we should define what the words "intermediate" means in that statement. Secretary FLEMMING. I might say, Congressman, and Mr. Chairman, we, of course, if you would like to have us, will be very glad to comment on the figures used in the staff report. The CHAIRMAN. It will be helful to us. Secretary FLEMMING. We would be glad to see the report if you desire to make it available to us and we will be happy to comment on those figures. The $2.3 billion figure used in the staff report referred to is intended to express in terms of current dollars the long-range average cost of H.R. 4700. This is a concept which has more limited significance than cost as a percentage of payroll since its does not take account of potential changes in earnings levels. Its computation can be explained as follows. The cost of the benefits under H.R. 4700, as under the present OASDI program, will rise in the future whether measured in dollars or on a percentage of payroll basis. The level-premium cost of 0.79 percent of taxable payroll is an average of costs which start at 0.53 percent in the first full year and in the long-distant future are calculated to be higher than 0.79 percent. A dollar equivalent for this average percent of payroll figure can be computed only on the assumption that earnings levels remain constant into the indefinite future. The calculation of costs as a percent of taxable payroll allows for a change in earnings levels in the future (on the assumption that the taxable payroll base will change correspondingly). One type of dollar cost figure related to the 0.79 percent of taxable payroll could be obtained by multiplying the first year taxable payroll ($210 billion) by 0.79 percent. The resulting figure of $1.66 billion represents the contribution income that would be collected in the first full year of operation if the program were financed on a level-premium basis. This figure may be compared with the estimated first year cost of $1.12 billion. Another concept that can be used to translate the level-premium cost into dollars may be termed the equivalent level annual long-range cost. This is obtained by multiplying the level-premium cost as a percentage of taxable payroll by the equivalent level average annual taxable payroll. The latter, because of population growth, rises in the future from the present $210 billion even when earnings levels are assumed to remain constant. On this assumption the long-range average taxable payroll is $319 billion. Applying 0.79 percent to this amount yields a figure of $2.52 billion as the so-called long-range average annual dollar cost. Thus, it might be said that the annual expenditures under the program would rise steadily from a first-year cost of $1.1 billion and have a long-range average of $2.5 billion (indicating that at some time in the long distant future the annual cost so calculated would exceed the latter figure) if one assumes that earnings levels remain into perpetuity at their current level. Mr. ALGER. Also in that answer will you reconcile if you can the 0.56 percent of payroll which is the figure that was used here. I understand we are increasing one-fourth percent employee-employer which makes the 0.50, which strikes me mathematically as an imbalance. Now there are the other questions, Mr. Secretary. I would like to know, if you can give us an estimate, how many additional persons would be needed to administer this program to the best of your knowledge. Secondly, how on any basis of cost estimate you use, will the doctors' fees be fixed. Further, how many doctors would be involved and how would they be involved? Would it be voluntarily? Would it be involuntary? Would they have the right to enter or to withdraw from the market? What would be the rule laid down for doctors? What, if any, information do you have of the British experiment in this entire field that might be beneficial to us? Certainly there must be some lessons we can learn from the experience of our friends on this. Then, if you care to comment at all, on whether the general taxpayer should pay this. This goes to the equity. Business is being asked now to make further contributions. Is that a fair way to tax people because they are going to pay for it in the price of consumer products. Of course, the ultimate taxpayer pays for it. Secretary FLEMMING. I might say, Mr. Congressman, on that last point that that is one of the reasons why I have asked for a restudy and reevaluation of the legislative proposals that have been made in previous years. It seems to me that they should be looked at in the light of the data that we have now brought together and also in the light of the possibility that the principles involved in those proposals can be applied just to the aged and not to the total population. That is one of the reasons why I feel that kind of exploration should take place and will take place in the next few months. Mr. ALGER. It will certainly help the consistency of our position no matter what action you take. I want to thank you for your statement. If you will provide the answers, at least for myself, I will appreciate it. Secretary FLEMMING. We shall be very glad to supply them for the record. (The answers provided by the Department are as follows:) 1. Additional personnel needed to administer H.R. 4700. 2. Methods of payment and participation of doctors. 3. British National Health Service. 1. Additional personnel needed to administer the program The DHEW has not made a detailed study of the personnel that would be needed to administer a program of hospital and surgical benefits. The number of persons required would vary over time and according to the method of carrying out the provisions of the bill. As in almost any new program, there would be a large initial noncontinuing workload involved in handling inquiries, providing certificates of eligibility, taking new claims, making agreements with hospitals and others, etc. While it would be necessary to employ a number of additional personnel immediately, the first impact of the program would be spread over large segments of the current personnel of the Department. Very little, if any, additional staff would be needed to collect and record the contributions. The continuing workload required to operate such a program would include the maintenance of agreements with hospitals and medical societies, arrangements for reimbursements of the providers of service, auditing and payment of bills, determinations of eligibility of beneficiaries for services, etc. The number of personnel required within the Department would depend of course on the extent to which the administration were contracted out to nonprofit organizations (the number of personnel in the Department would be less if administration were contracted out, although the administrative costs might well be greater.) The medicare program, under which some 2 million persons receive benefits, including out-of-hospital physicians' services as well as hospital and surgical benefits, is operated with a total staff of fewer than 400 persons. There are 71 persons in the headquarters staff. The Army audit staff may spend the equivalent of 5 man-years on this program and the agents (Blue Cross, Blue Shield, Mutual of Omaha, and State medical associations) have about 300 persons working on the program. Taking into account the size of the beneficiary rolls and the procedures that would be involved in the administration of H.R. 47000, a rough estimate of the additional staff needed, including any persons employed for this purpose by organizations acting as agents if this method of administration is adopted, might be about 4,000 persons. A more precise and reliable estimate would require detailed management studies. 2. Methods of payment and participation of doctors Under the majority of voluntary health insurance arrangements that apply to surgeon's and other physician's services, it is customary to establish in advance a list or schedule of the fees that will be paid for each of the many procedures surgeons perform and for other services physicians provide. With knowledge of the frequency with which these different surgical procedures will occur in a population of a given age and sex it is then possible to determine costs in advance. In order that the fees thus established may constitute payment in full of the surgeon's or physician's charges, it is customary for the voluntary insurance plan or the group purchasing the insurance to arrive at agreements with the doctors that they will accept the amounts shown in the fee schedules as payment in full and not submit a bill to the patient for additional amounts. In a great many parts of the country the Blue Shield plans have such agreements with so-called participating doctors. They are applicable to lower-income families belonging to the plan. In other places unions and local medical societies have made similar agreemtns. Under H.R. 4700, the social-insurance program could rely on the same approach, since it would be insuring largely lower-income families. It could use Blue Shield plans as agent, or it could independently negotiate agreed-on fees. Both methods are used by medicare, the medical care program for dependents of the Armed Forces. Participation on the part of surgeons would in no sense be compulsory, any more than it is under voluntary health insurance. A surgeon unwilling to operate on a beneficiary for the scheduled fee would be free not to accept him as a patient. There are about 16,000 practicing surgeons (of whom about 8,00 are diplomats of their specialty boards) practically all of whom would be qualified to participate under the terms of the bill. Qualified doctors who wished to participate in the programs-that is, to accept agreed-upon payments from the insurance system as payment in full for specified services-would so indicate, presumably by registering their names on a list or panel. They could enter or withdraw at any time subject to a reasonable notice to potential patients and to the insurance system. 3. British National Health Service The National Health Service differs in a number of major respects from a program of hospitalization insurance. The scope of services provided is comprehensive. The entire population is eligible to use the services, without regard to the payment of contributions. About 80 percent of the costs of the service are met from general revenues. There is attached a brief summary description of the National Health Service, prepared by the British Ministry of Health. This summary provides information with regard to the financing of the system and the organization of the services. It will be noted that the organization of hospital services differs from the arrangements now prevailing in the United States or that would prevail under H.R. 4700. The organization of services around hospitals on the one hand and "family doctors" on the other reflects certain methods of practice of long standing in Great Britain, but which differ from the usual practice in this country. Specialists and consultants in the British Isles have always worked part or full time as salaried doctors practicing in a hospital setting quite apart from the family doctor who sees patients in his surgery (office) or the patient's home. The family doctor has never provided care in the hospital. The means of making diagnostic tests, X-rays, and so forth have also always been located in the hospital; patients are accustomed to the system of referral to these centers by the family doctor. This is a feature of the British system sometimes criticized by U.S. physicians who are accustomed to having such aids to their medical practice available in their own offices or close at hand. The cost of the British National Health Service was about 53 percent higher in 1957 than in 1950, the first full year of operation. Total expenditures for health and medical care in the United States increased by 61 percent during this same period. Like the United States, England and Wales have experienced population growth in the past 11 years which would in itself cause some increase in expenditures under the program. Other increases in costs have arisen as the country recovered from the wartime shortages in personnel, hospital beds, etc. Like the United States the British have improved wage scales in hospitals and are making use of newly discovered drugs and medical techniques which are more costly than those formerly in use. We have found no documentation to validate claims of great overutilization of services under the British system as a cause of rising costs. NATIONAL HEALTH SERVICE EXPLANATORY NOTE The National Health Service started on July 5, 1948. The National Health Service Act, 1946, which received royal assent on November 6, 1946, makes it the duty of the Minister of Health "to promote the establishment in England 44432-59 It seems to me that they should be looked at in the light of the data that we have now brought together and also in the light of the pos sibility that the principles involved in those proposals can be applied just to the aged and not to the total population. That is one of th reasons why I feel that kind of exploration should take place and wi take place in the next few months. Mr. ALGER. It will certainly help the consistency of our position matter what action you take. I want to thank you for your statement. If you will provide answers, at least for myself, I will appreciate it. Secretary FLEMMING. We shall be very glad to supply them for record. (The answers provided by the Department are as follows:) 1. Additional personnel needed to administer H.R. 4700. 2. Methods of payment and participation of doctors. 3. British National Health Service. 1. Additional personnel needed to administer the program The DHEW has not made a detailed study of the personnel that would be n to administer a program of hospital and surgical benefits. The number of pe required would vary over time and according to the method of carrying o provisions of the bill. As in almost any new program, there would be a large initial nonconti workload involved in handling inquiries, providing certificates of eligibility ing new claims, making agreements with hospitals and others, etc. While it be necessary to employ a number of additional personnel immediately, th impact of the program would be spread over large segments of the curre sonnel of the Department. Very little, if any, additional staff would be needed to collect and reco contributions. The continuing workload required to operate such a program would inclu maintenance of agreements with hospitals and medical societies, arrange for reimbursements of the providers of service, auditing and payment o determinations of eligibility of beneficiaries for services, etc. The num personnel required within the Department would depend of course on the to which the administration were contracted out to nonprofit organization number of personnel in the Department would be less if administration contracted out, although the administrative costs might well be greater.) The medicare program, under which some 2 million persons receive be including out-of-hospital physicians' services as well as hospital and st benefits, is operated with a total staff of fewer than 400 persons. There persons in the headquarters staff. The Army audit staff may spend the e lent of 5 man-years on this program and the agents (Blue Cross, Blue S Mutual of Omaha, and State medical associations) have about 300 persons ing on the program. Taking into account the size of the beneficiary rolls and the procedure would be involved in the administration of H.R. 47000, a rough estimate additional staff needed, including any persons employed for this purpose by izations acting as agents if this method of administration is adopted, mi about 4,000 persons. A more precise and reliable estimate would require de management studies. 2. Methods of payment and participation of doctors Under the majority of voluntary health insurance arrangements that ap surgeon's and other physician's services, it is customary to establish in an a list or schedule of the fees that will be paid for each of the many proce surgeons perform and for other services physicians provide. With know of the frequency with which these different surgical procedures will oce population of a given age and sex it is then possible to determine costs in In order that the fees thus established may constitute payment in surgeon's or physician's charges, it is customary for the plan or the group purchasing the insurance to arrive at tors that they will accept the amounts shown in the full and not submit a bill to the patient for additio |