CONGRESSIONAL RECORD -- SENATE

August 7, 1969

Page 22930

HEALTH MANPOWER PROGRAMS

Mr. MUSKIE. Mr. President, on July 11, 1969, President Nixon warned the Nation of a "major crisis in health care unless something is done about it immediately."

In view of the President's statement, supported by Secretary of Health, Education, and Welfare Robert Finch and Dr. Roger O. Egeberg, the newly appointed Assistant Secretary for Health and Scientific Affairs, I am deeply concerned over the administration's proposals for funding the Health Manpower Act of 1968.

The financial condition of our medical schools and teaching hospitals is becoming more and more precarious. Greater demands are being placed on them in the face of rapidly mounting operating costs and less adequate financial resources for the maintenance of programs and the construction and renovation of facilities. It is imperative that we in the Congress concern ourselves with maintaining the present position of American medical education and our contributions to the medical sciences while simultaneously moving forward to meet the mounting demands for health services.

I shall discuss with the Senate a few of the items in the Public Health Service budget which are of utmost concern to me. I point out that there is a considerable gap between the administration's rhetoric and its proposals. This gap is especially apparent in the following table:

[Table omitted]

The central source of Federal support of the national effort to increase the existing supply of professional health manpower is the Health Manpower Act of 1968, the successor to the Health Professions Educational Assistance Acts of 1963 and 1965. Three sections of the Health Manpower Act authorize: First, matching grants for construction or rehabilitation of medical, dental, and other health profession schools; second, direct operating grants to these schools; and third, loans to the students enrolled in the schools. If we are substantially to increase the number of professional health personnel, a better balance must be struck between short-term savings and long-term need than the proposals put forth in the budget by the Nixon administration.

All health professions schools need additional financial resources. Many are in serious financial difficulty, and many are threatened with loss of full accreditation because of lack of sufficient funds to maintain the basic quality of their educational programs. Concurrent with these problems are demands on the schools to substantially increase enrollments and to become more involved in health activities of the community. Grants under the program of institution grants have assisted the health professions schools in offsetting a financial crisis of unprecedented severity. Yet President Nixon has requested only $101,400,000 for this program -- a reduction of $15,600,000 from the amount authorized.

In 1964 the Congress authorized financial assistance to diploma schools of nursing. This program was designed to offset a portion of the increasing costs to diploma schools because of the enrollment of federally sponsored students. It was administered on a formula grant basis to schools applying for such assistance. Under the Health Manpower Act of 1968, the formula grant payment was terminated, but the institutional grant program was broadened to include diploma, associate and collegiate schools of nursing to assist them in meeting the costs of strengthening and expanding their training programs.

Thirty-five million dollars is authorized for this program for fiscal year 1970. However, funding for special projects grants for the improvement of nurse training and institutional grants are lumped together. The Health Manpower Act specifies that no institutional grant funds can be made available until $15 million is obligated for special project grants. Since the President's budget requests only $7 million for these two programs, funding for the institutional grants program is completely eliminated and the special projects grants are seriously curtailed.

Schools of public health prepare the majority of the graduate public health specialists for service throughout the country. They are a fundamental resource for public health consultation and research to all State and local health agencies as well as Federal agencies. Seven million dollars in institutional grants to schools of public health was authorized for fiscal year 1970. The administration has requested $4,554.000.

Mr. President, enrollments in schools of public health over the past 5 years have risen by more than 50 percent, from 1,682 to 2,637 in 1967-68, and the number of graduates has increased from 851 to more than 1,200 during the same period.

Project grants for graduate public health training are awarded in recognition of the national need for special institutional assistance to schools of public health, nursing, engineering, medicine, dentistry, hospital administration, and others, to initiate, strengthen, and expand specialized public health courses at the graduate level. These trained individuals are essential in the development of new academic programs so essential in meeting changing social and health needs, in relating to new health technologies, and to improve utilization of scarce health manpower. The Health Manpower Act carries authorization for 1970 of $8,500,000 for special project grants. The administration has requested $4,917,000 to carry on this important program.

I point out to Senators that institutional grants to the allied health professions have been reduced by President Nixon from an authorization of $20 million to $9,750,000.

Constantly changing social needs, changing technology in the health sciences, concurrent changes in staffing requirements for the delivery of health services require continuing study of the education and training of health specialists. The Health Manpower Act provides for project developments grants in these areas and authorizes $4,500,000 in 1970. President Nixon is recommending only $1,238,000 for the program.

Mr. President, the key ingredient in delivering health services to those who need medical care is health manpower. We are all well aware that the Nation faces a severe shortage of trained personnel in the health manpower field. For instance, the dentist-to-population ratio was 1 to 1,730 in 1943; today it is 1 to 2,100. In January 1968, the physician-to-population ratio was 1.5 to 1,000. In view of these facts, it is incomprehensible to me, and I am sure to many of my colleagues, that President Nixon proposes to reduce the nursing student loan program from an authorization of $20 million to $9,610,000. He proposes to reduce the health professions student loans from an authorization of $35 million to only $15 million.

I ask unanimous consent to have printed at this point in my remarks a table which illustrates the striking differences in Federal awards for dental student loans and scholarships from the 1969 appropriation and the 1970 budget requests.

There being no objection, the table was ordered to be printed in the RECORD, as follows:

[Table omitted]

Mr. MUSKIE. Mr. President, it is all too likely that many students who have received loans from this program in the past will be unable to continue receiving them, as there will be no available funds. This is a critical situation for students who, in their second, third, or fourth year, find themselves unable to continue because of lack of financial support. I do not believe the claim that the decrease in loan funds will be offset by increases in the number of health professions students receiving Office of Education guaranteed student loans. But the fact is that current demands on this program are much larger than it can handle. Further, we all know that with the prime interest rate at a high 8.5 per-cent, students will find it exceedingly difficult, and often impossible, to secure these commercial loans at the authorized Government guaranteed interest payment of 7 percent.

Mr. President, the manpower pool in the field of mental health represents a major resource for dealing with many of the critical social problems of the day. This group of specialized personnel not only deals with the crucial problems of mental illness in the traditional sense, but they are becoming increasingly involved in such social problems as the treatment of alcoholism, the control of drug abuse, and the understanding and amelioration of many of the problems of urban living. Psychiatrists, psychologists, psychiatric social workers, and psychiatric nurses are the core personnel now serving in the many community mental health centers developing throughout the country. These centers have broadened our horizon regarding the potential scope and effectiveness of treatment and social intervention.

There have been impressive increases in mental health manpower to meet these needs. At the same time, however, there has also been an increasing pressure to train additional personnel to meet the rising demand for mental health services and to deal with the exacerbation of social problems. This added pressure, for example, is represented by our national commitment to develop a full network of community mental health centers throughout the country. Each of these community mental health centers will use approximately 30 new core professional personnel. Thus, the 50 to 70 new centers started each year will immediately create a need for additional 1,000 to 1,500 professional staff, who, through these facilities, will serve an additional 8 to 12 million Americans.

At this critical point when new service resources are being created, the current budgetary constraints imposed by the Nixon administration are severely curtailing the manpower production vital for their development. For example, the budgetary increase necessary for fiscal year 1970 to maintain the adequate additional production of mental health manpower would require $15 million over the $109,046,000 appropriated for fiscal year 1969. The incremental amount actually proposed by the administration in the hearings before a subcommittee of the House Committee of Appropriations in March of this year was only $3.5 million. This increase is more than offset by a $5,997,000 increase in expenditures necessary simply to maintain the continuation of existing programs.

In view of the long-standing and continuing shortage of mental health manpower, it is essential to sustain the goal of 4,000 to 5,000 additional mental health personnel obtainable with the $15 million increase. Instead of providing this necessary support for additional personnel, there will actually be a level of support which at best will produce 250 fewer professional persons in training next year than the 12,000 supported in 1969.

At a time when we have developed an increasing capability for the effective professional services by mental health personnel and a capacity for organizing more adequate methods of mental health service delivery, it would be especially tragic if any delay in providing additional mental health resources were created by a major curtailment of the modest, but necessary, budgetary growth required to insure adequate development of such personnel.

Mr. President, I am dismayed to discover that President Nixon has entirely eliminated the allied health training centers construction program, the health research facilities construction program, and the medical library construction program. In addition to this, he has reduced by $10,781,034 the amount appropriated in 1969 for nursing school construction. Federal support for the construction and renovation of educational facilities is essential if we are to meet the health manpower needs of this country. Funds are required to replace facilities which are obsolete or unsuited to programs under development. Established schools will require new space to accommodate increased enrollments and revision in their educational programs to make them more relevant to changing health needs.

I echo President Nixon's statement that we do indeed face a major crisis in health care, a crisis for which his administration will be largely responsible due to neglect of the needs of the health manpower field.

I recommend to Senators an article entitled "Health Field's Money Famine," published in the June 27, 1969, issue of Medical World News. I ask unanimous consent that the article be printed in the RECORD.

There being no objection, the article was ordered to be printed In the RECORD, as follows:

HEALTH FIELD'S MONEY FAMINE

A medical student living in a Chicago slum walk-up says he will have to drop out of school next fall because he can't get a loan to continue his education. Another would-be physician in California reports that tight money will either force him to suspend his medical schooling or put off his sister's start in college. A multispecialty group of 36 physicians at the Oklahoma City Clinic, unable to postpone construction of a $3-million new clinic, may have to raise fees to pay interest charges almost sure to be 7½% for a mortgage loan. A Catholic hospital in Illinois, saddled with a new 8% building mortgage, isn't sure that it can pay its bills in the months and years ahead.

All these people and institutions are victims of an inflationary crisis that became dramatically worse this month when major banks in the U.S. raised the prime interest rate by a full percentage point, from 7½ % to a 20th-century record of 8½ %. Individual physicians also can expect the money squeeze to hit their practices soon, if it hasn't already. Patients who owe doctor and other bills will have to pay almost prohibitive interest charges, ranging from an effective annual rate of 13 % to as high as 19 %, to get debt consolidation loans. And because average personal income in the U.S. has not kept up with inflation in the past ten months, physicians' collections are likely to get slower and more difficult from patients without medical insurance. "Pediatricians," says one expert, "will probably be the hardest hit."

The hardest hit in the health-care field as a whole, though, will be students or young professionals who must borrow to complete their training, and any hospital, group practice, nursing home or other facility that needs to build and has to borrow to do it. Medical students may suffer the most from the tight-money, high-interest crunch. The problem for them isn't so much paying the interest as it is finding banks willing to lend money. The two biggest guarantors of medical student loans, the AMA Educational and Research Foundation and the federal government, both operate with a 7 % ceiling on the interest a student must pay. In the case of the AMA-ERF, this ceiling is generally set by state usury laws, while under the U.S. Higher Education Assistance Act of 1965, which empowers the government to insure tuition loans, Congress has specified that no higher than 7 % can be charged.

Now that major banks are charging their best business customers 8½% on short-term loans, bankers are either refusing or are extremely choosy about extending credit to students for seven to ten years at 7% under the AMA and U.S. guarantee programs. The nation's biggest bank, the Bank of America in San Francisco, says that despite the primerate increase, it is, for the moment at least, continuing to renew 7% student loans, both under the AMA-ERF plan and under the federal guarantee program.

But the big New York banks simply won't make new loans of this kind. "Because of the complicated paper work involved in getting the college's and the government's approval." explains Chase Manhattan Bank vice president Philip Smith, "we feel that it costs us 12 % the first year to process a student loan." First National City Bank vice president Cedric Lane says that his institution, the second largest in the nation, will make loans to students only on the regular consumer installment loan basis, which requires the borrower to begin paying back monthly, starting the month after the loan is made and at an effective annual interest rate of 13.3%. A medical student, intern, or resident would be unlikely, he says, to qualify except in the final year before entering practice.

An exception is the Continental Illinois Bank and Trust Co. of Chicago, which has done the lion's share of lending under the AMA-ERF plan. "In the past several years we have had over 2,000 AMA-ERF loans maturing each year, and when you consider that about 8,000 medical students are graduated annually, you can see how many we have been helping," says Continental Bank second vice president James A. Matthews. "But with the Illinois usury-law ceiling of 7% interest and the prime rate now at 8.5 %, the spread is so big that we have told the AMA that we will have to limit our commitment. In fact, I don't know how long we can remain in this program."

William Simmons, chief of the Insured Loan Branch of the U.S. Office of Eduoation, says most of the $1.3 billion in federally guaranteed loans now outstanding to 1.5 million students in college and graduate school will be renewed while the borrowers are in school, and the government will continue to pay the interest for students whose families' incomes are less than $15,000 a year. But new loans will be hard to find because "the banks are in a real bind. The program is in big trouble unless it can be made financially more attractive to the banks"

Comments Charles Hewitt, executive director of the Student American Medical Association (SAMA): "The bank rate increase has made a difficult situation in the student loan field almost impossible." The medical students, says Hewitt, are being hit from two directions at once. Not only are sponsored commercial loans becoming almost impossible to get, but the U.S. is threatening to cut in half its low-cost direct loan program, which was designed to aid the most needy students in the medical, dental, and allied health fields. Under the Health Professions Educational Assistance Act of 1963, the government has loaned students up to $2,500 each per year, with ten years to pay back at an interest charge substantially below going rates. Ironically, Congress voted last year to reduce the interest from a fluctuating, Treasury-set figure of between 4 % and 5 % the last two years, to a ceiling of 3 % effective next month. But the Nixon Administration currently is proposing to spend only $8.9 million on the program in fiscal 1970, as against $14 million proposed by the Johnson Administration. Hundreds of medical students are now being told by their schools that the low-cost loans will no longer be available.

When combined with the great difficulty of getting even a 7 % bank loan, the cut in the low-cost loan program may spell curtains for an undetermined number of medical students for now, at least. And the supreme irony, notes Dr. Joseph J. Ceithaml, dean of students at the University of Chicago Pritzker School of Medicine, is that the less affluent student will be the hardest hit, because of his lack of credit standing. "We have been making efforts to recruit economically disadvantaged students," says the dean. "Now we have no idea where we are going to get the money to keep them in school"

To solve the dilemma, either state legislatures must raise usury law ceilings or Congress must relax the limit on federally insured student loans. As for hospitals, there is no rate ceiling. Such was their loan squeeze that even the cream of the crop -- nonprofit operations that have ample net income to service debt -- were finding it tough to borrow. The nation's largest bond underwriter in the hospital loan business, B. C. Ziegler & Co. of West Bend, Wis., carries about half a billion in mortgages on about 250 financially first-rate hospitals. President Thomas J. Kenney says his firm "is making no bond offerings until the dust settles -- and we have commitments with 100 hospitals over the next two years, running into another $200 million."

This could mean that dozens of highquality hospitals dealing with Ziegler will find their building programs delayed. If and when they do issue bonds, they will find their carrying charges higher. Kenney says that the effective cost of the ten-year hospital bond offerings that Ziegler had been arranging was 7 % to 7½ %. To that must be added Ziegler's commission, and trustee and appraisal charges.

Northwest Mutual Insurance Co. of Milwaukee, the country's largest hospital mortgagor, carries at least 100 hospitals on the books for about $150 million and claims its effective interest rate recently had been about 8½ %. Vice president Robert B. Barrows says that when the next hospital borrows from Northwest Mutual, it may be paying 9½%, and adds, "The situation is getting insupportable for hospitals that are undertaking major capital improvement programs."

Not all hospitals need to borrow, of course. Many institutions, particularly in the South and East, raise all the money they need through fund drives and Hill-Burton grants. A bill just passed by the House would partly replace grants with $300 million worth of guaranteed loans. "But who would make them now, and how would the government subsidize 3 % of the interest?" asks Northwest Mutual's Meyer,

One institution, St. Anthony's Hospital of Rock Island, Ill., is the first to qualify under the Federal Housing Administration's new guaranteed loan program for hospitals. St. Anthony's has received a $15.5-million loan to build a 350-bed annex to its present 240-bed hospital. The interest rate: a fat 8.1%. "Our first notes fall due January 1; says the administrator, Sister Mary Rose, somewhat shakily. "We certainly hope we can meet them."

Hospitals that borrow working capital are also in for a cost boost, to 8¼ % interest or higher. Massachusetts General Hospital's controller, Lawrence Martin, says he started heavy borrowing for working capital 18 months ago because of lags in third-party payments. The hospital now owes $3.5 million, and the prime rate jump means an extra $35,000 a year in interest payments.

Medical schools, too, says Dean William F. Maloney of Tufts, often borrow bank funds on the strength of pending research grants, and their interest costs will go up appreciably.

Most physicians who take out professional loans will similarly face an 8½ % rate or higher while the prime rate stays where it is. And even good credit risks such as doctors who want to build homes, says Saul B. Klaman, chief economist for the National Association of Mutual Savings Banks, will usually find that they must put up 25 % to 33 % in cash to get a conventional mortgage.

Klaman says that "the evidence is that the economy is slowing down, and by the end of the year, some interest rates will be lower. But there will be a backlog in demand for mortgage money persisting into next year at least."