October 12, 1978
Page 36065
Mr. TALMADGE. Mr. President, I yield 3 minutes to the distinguished Senator from Nebraska.
Mr. CURTIS. Mr. President, as the distinguished chairman, who is in charge of this bill, has pointed out, the Finance Committee went into this very carefully, and it was defeated rather decisively.
I concur in what has been said here by the Senators — Senator SCHWEIKER, Senator PERCY, and the chairman. Price controls have not been the answer to anything. Price controls without wage controls, and wage controls without price controls, are just inviting trouble. It will not be successful, as the distinguished Senator from Pennsylvania pointed out.
Also, I point out that this exemption for hospitals with not to exceed 4,000 admissions a year is not very much. That is about 11 admissions per day. So there is no great advantage to that.
Furthermore, Mr. President, this is not voluntary. It is voluntary — or else; and then it is no longer voluntary. It is the same as when you have the draft. You have a great many voluntary enlistments in the National Guard. It is voluntary because they volunteer — or else. So it has an element of coercion all the way through. It does not affect the big item of cost of hospitals — the wage cost.
It goes beyond the point we have a right to go. The committees having jurisdiction of this have jurisdiction over Government medical programs. We do not have jurisdiction to impose price control across the board for non-government medicine.
Mr. TALMADGE. Mr. President, I yield 3 minutes to the distinguished Senator from Kansas, the ranking minority member of the subcommittee.
Mr. DOLE. I thank the chairman.
Mr. President, I commend Senator NELSON for addressing a very serious problem.
The Senator from Wisconsin indicated that he would save $34 billion. I do not know how that figure was arrived at, but the most recent estimate is $23 billion. So I suggest that there is a difference in what can be saved, based on probable inflation
Mr. MUSKIE. Mr. President, will the Senator yield?
Mr. DOLE. I do not have much time.
Mr. MUSKIE. I think it would be useful at this point to put that table in the RECORD.
I have shown this to Senator NELSON. These are the latest CBO figures, which are consistent with the ones the Senator from Kansas uses.
I ask unanimous consent to have this table printed in the RECORD.
There being no objection, the table was ordered to be printed in the RECORD, as follows:
[Table omitted]
Mr. DOLE. The point is, we do not know how much money will be "saved." We are not certain whether we have a good program or a bad program.
I note that everybody on the floor is trying to be exempt: "If you exempt Maine, you have my vote." "If you exempt Florida, you have my vote." "If you exempt Hawaii, you have my vote."
I am not certain what hospitals are left. Everybody talks about Federal mandatory controls. They are great, "if you don't include my State." That is the trouble with this approach.
I am not certain how you are going to have a test. There are no hospitals left.
I think every State is trying to devise some cost control program. Why not give them a chance? This is a Federal control program. If we find in the future that the hospitals do not comply with their voluntary programs, then perhaps we will have to do something.
I think the very weakness of this program has been demonstrated on the floor today by one amendment after another: "Take me out of the program, and I'll vote for it."
The Senator from Pennsylvania hit the nail on the head. If you are not exempt, how do you get exempt? You call your Senator, and he will get hold of somebody in HEW and will get you exempt. We will exempt this hospital in Topeka ; we will exempt this hospital in Pittsburgh; we will exempt this hospital in Jackson, Miss.; and maybe, sooner or later, everybody will be exempt.
This is the wrong approach. Either it applies or it does not apply. Nobody is left. If we need four more votes, let us exempt Kansas and Pennsylvania. If we need six more votes, let us exempt Georgia. If we need eight more votes, let us exempt Mississippi. That is the weakness of the program.
Mr. President, earlier this year the American Hospital Association, the American Medical Association, and the Federation of American Hospitals initiated a voluntary effort to control hospital cost increases. The sponsors of this voluntary program have stated that the program is "intended to achieve a significant reduction in the rate of increase in health care costs."
Specifically, the program aims to reduce the rate of increase in hospital expenditures by 2 percentage points a year for this year and the next, insure that no net increases in hospital beds occur during 1978, and reduce new capital investments during the coming year. The program is to be administered in large part at the State level.
Sponsors of the voluntary program believe that they can meet the objectives of their cost containment program; and, they believe it can be done without the threat of Federal intervention as outlined in the Nelson proposal. I believe that they must be given the opportunity to prove it.
Therefore, I oppose the amendment as introduced by Senator NELSON.
ECONOMIC CONTROLS
The Nelson amendment purports to represent a compromise between the administration's "CAP" proposal and the Finance Committee's reimbursement reform proposal. But make no mistake about it, it is a form of a cap. The main difference is that it would only go into effect if the voluntary effort failed. It seems to this Senator, that the proposal for standby controls could serve to undercut the voluntary effort.
DISINCENTIVES TO VOLUNTARY EFFORT
For example, let us consider the hospital which has been efficient in the past. This hospital has little so-called fat to protect them if economic controls are put into place, based on their historical performance. This hospital may believe that their costs are so minimal that they will have little effect on whether or not the trigger is pulled. If they have been efficient in the past and the trigger is pulled because of the failure of the rest of the industry to hold down costs, they, too, will be faced with economic controls, so their efficient performance in the past will not protect them. On the other hand, they may also believe that if they increase their costs, they again will have little influence on the overall program, but would be protecting themselves by building up an increase in anticipation of a trigger being pulled. Their behavior may be mirrored by many other small hospitals and lead to the demise of voluntary effort.
WAGE AND PRICE CONTROLS
Mr. President, our experience with wage and price controls such as the ones suggested, has shown that they are ineffective in the long run and may actually result in increasing inflation.
Similarly, attempting to bring hospital cost increases in line with an arbitrary goal based on the general inflation rate may have the same effect, because hospitals provide a unique set of services. The causes of cost increases in these services are tied not only to general inflationary trends, but also the changing quality and quantity of care provided.
Using a general rate of inflation, even with an attempt to look more carefully at those market basket items which a hospital utilizes in particular, there is still the imposition of an arbitrary numerical limit and the inherent inefficiency that may result.
QUALITY AND QUANTITY OF HEALTH CARE
Unfortunately, the imposition of an undifferentiated revenue ceiling which causes hospitals to seek out areas where hospitals can be controlled, may result in a loss of quality and quantity in health care. We cannot assure citizens that the fat in hospital expenditures, which Secretary Califano so gleefully described, will be the area where the hospitals choose to make their reductions. We may, in fact, see the elimination of vital services and a reduction in the quality of care.
Certainly, there may well be waste in unnecessary expenses. But it seems to me that we need to develop a system that sorts out the efficient from the inefficient hospitals and not settle for simple solutions in an area as complex as health care. It is argued that the incentives for patients and doctors also determine the behavior of hospital administrators. In fact, Harris argues that policymakers sometimes forget that "the hospital" is actually two separate "firms" — a medical staff that orders services and an administration that supplies them. Consequently, they also forget that the administration's control over hospital cost is limited. According to Harris, "the medical staff and administration are locked in a non-cooperative oligopoly-type game ..." Frequently, the only way to resolve conflicts over the control of hospital capacity is for the firm to get bigger and more complicated.
Our current regulatory policy toward hospitals is too one-sided. Attempts to control expenditures or restrict the supply of investment funds to hospital administrators without accompanying it at the level of the physician/patient relationship will lead to bitterness and bad medical care. Neither patients nor physicians have strong economic incentives to control hospital costs when 90 percent of such expenses are paid by insurers or the Government: most patients pay little, if anything, out of pocket for additional hospital services.
Both patients and doctors have good reasons to use more, and better, hospital services. Patients want to get well, and tend to trust their physicians' judgments about the best treatment.
Physicians prescribe hospital services for a variety of reasons. One consideration is that in a fee-for-service system they are paid according to the number of services they deliver. Other factors which influence doctors to prescribe hospital services are: Their ethical responsibility to provide "the best possible care" for their patients, concern for the professional prestige attached to the use of high technology and specialization, and a wish to protect themselves from malpractice claims.
SHORT-TERM LIMIT VERSUS LONG-TERM REFORM
I, too, have a deep concern for the impact which escalating health care costs have had on all Americans. There is no doubt that serious budget pressures have come to bear on the medicare and medicaid programs, and on the population as a whole. But the Senator from Kansas believes that the best action we could take at this time is for the Federal Government to first address the problems of the reimbursement methods presently used by its own medicare and medicaid program. Improving the operating efficiencies of these programs while insuring that costs are not just shifted to non-Federal payers, will be a significant contribution to reducing escalating health care costs.
The Federal Government has contributed substantially to the shift from patient payment to third-party payment of hospital costs through the medicare and medicaid programs. Part A of medicare provides hospital insurance financed out of social security taxes for over 99 percent of those age 65 and older, approximately 25 million persons. Medicaid is a mix of Federal and State programs for the poor, each State has its own benefit levels and eligibility requirements.
Medicare and medicaid systems reimburse hospitals for the portion of the hospitals' total cost attributable to their insured patients. Cost limits are established each year for the routine cost portion of hospital costs — essentially, the costs related to bed and board. Limits on ancillary services have not been established. Individual hospitals are assigned to one of various groups, depending on the hospital's size and the per capita income of the area where it is located. The cost limits of the hospitals in each group is set by a formula that establishes the limit high enough to permit the routine costs of well over 80 percent of the hospital to be covered in full.
I do believe it is necessary to reform our current mechanism for reimbursement. It is for this reason that I feel that the most sensible and reasonable approach toward hospital cost containment is represented by H.R. 5285, which contains the Finance Committee's provisions for medicare and medicaid reimbursement and administrative reform. This legislation, sponsored by the distinguished chairman of the Finance Health Subcommittee, Senator HERMAN TALMADGE, and a number of other Senators, including the Senator from Kansas, provides a long term structural answer to the problem of rising hospital costs. This effort, in addition to the continued efforts of the voluntary program, designed by the American Hospital Association, Federation of American Hospitals, and the American Medical Association, may not result in an immediate drastic reduction of health care costs but will, in the long run, help to alter hospitals' behavior while reforming the system. The end result will, without question, be cost savings.
ADDITIONAL EFFORTS TO CONTROL HEALTH CARE COSTS
Utilization review programs offer a second means of regulating health costs. The nationwide system of professional standards review organizations to review care provided to medicare and medicaid patients is beginning to show very positive results. The PSRO's which are community- based and operated by private physicians, are charged with insuring that payment is made only for services that are medically necessary; compatible with professionally recognized standards of care; and, in the case of inpatient hospital services, not as effectively provided on an outpatient basis or in a less expensive inpatient facility.
Clearly, PSRO implementation alone is not apt to cause significant changes in either hospital utilization or associated governmental expenditures, but it is an additional effort, Mr. President, one that we should give a chance.
STATE RATE CONTROL PROGRAMS
As of April 1978, 15 States have enacted legislation which requires the disclosure, review, or regulation of hospital rates or budgets. Additional States are considering such action. In some States these programs will be mandatory, in others, voluntary. There is a trend for individual States who are certainly more sensitive to their own population and needs to begin to consider more seriously efforts with respect to hospital costs. All of the plans that have been presented to us, Mr. President, suggest that the States have an opportunity to consider such action and, if successful, to be exempt from any Federal program. I believe that the best cost containment and cost control program will be the one which has the least Government interference.
I believe we can also count on the States to respond to the need for some action. State programs, coupled with reform in medicare and medicaid, coupled with the other activities in the area of hospital costs, certainly including the voluntary effort, will undoubtedly produce a positive result. A Federal triggered program is not necessary at this time, Mr. President, and is unwise to even suggest.
CONCLUSION
Mr. President, as I have indicated in the past, I do not believe we need to single out hospitals at this time for economic controls. I do believe, however, that reimbursement reform is in order and appropriate. I also believe that the private sector is making a real effort to keep down the rate of hospital increases and should be encouraged. I therefore, propose that we encourage these efforts — not by hovering and waiting for them to die — but by taking careful watch of and encouraging its progress.
If the voluntary effort should fail, if the States should fail to respond to our plea, if reimbursement reform is unsuccessful, we could then move to consider other alternatives to moderate hospital costs. Let us not move precipitously, the health of the Nation should not be treated lightly.
I appreciate the efforts made by the distinguished Senator from Wisconsin.
Mr. NELSON addressed the Chair.
The PRESIDING OFFICER (Mr. HOLLINGS) . The Senator from Wisconsin.
Mr. NELSON. Mr. President, I appreciate those delightful remarks by the distinguished Senator from Kansas, even though nothing he said was a fact. [Laughter.]
With respect to the question of the savings, it is correct that in the statement I released some time ago, I used the figure $30 billion to $34 billion in savings. Those were the CBO and HEW estimates. As time went by, the CBO made another estimate, with additional facts in hand, and the estimate now is $23 billion.
Mr. CURTIS. Mr. President, will the Senator yield for a question?
Mr. NELSON. I yield.
Mr. CURTIS. How much of that saving was voluntary?
Mr. NELSON. I am advised by a staff member that CBO has factored out those elements based upon the voluntary effort alone.
Mr. President, the new figures by the CBO are $23 billion.
Mr. MUSKIE. Mr. President, will the Senator yield?
Mr. NELSON. I yield.
Mr. MUSKIE. The table I put in the RECORD begins with fiscal year 1980, so it does not assume any savings attributable to the hospitals' voluntary efforts.
The fact is that the assumptions as to what hospital costs would be in 1980 through 1983 without any controls, voluntary or otherwise, were lower than was assumed in the earlier estimates. Now there are more recent figures, and it is on the basis of those recent figures that the latest table, with which Senator DOLE and I agree, was produced.
Mr. NELSON. I say to the Senator from Kansas that I corrected my remarks, before he made his remarks on the floor, to incorporate the latest CBO figures, which were received today.
However, that is an interesting point made by the Senator from Kansas: $23 billion will be saved by this measure. Of that, $8.980 billion are in Federal savings, Federal appropriations. In medicare, savings are $7.950 billion; Federal medicaid, $1.30 billion; and other savings, private sector and others, would be $14.680 billion.
This is a larger saving than has been made by any action of this Congress — perhaps any action of Congress so long as anybody can remember — in one proposal.
Furthermore, it is the most important contribution that we can make in the fight against inflation.
As I said once before, I hope the voluntary effort succeeds across the board, and maybe it will, and we will all cheer if it does.
One thing that will help improve the chances of the voluntary effort succeeding is for all the hospitals to know that if the national standard is not met then there will be mandatory controls and that those States that have a program of their own and those States that meet the national target will be exempt and the rest will come down.
For heaven's sake, who can argue that to control increases in cost at 1½ times the national rate of inflation is unreasonable? The fact of the matter is that for 10 years, the average over that 10-year period has been a rate of increase in cost at 2 to 2½ times the rate of the national increase in inflation.
What is so peculiar about hospital costs that they have to go up twice or 2½ times the rate of other costs in the whole economy? Why does it happen?
Well, they are all paid by third party payers. That is why. The Federal Government pays it. The insurers pay it. Someone else pays it but not the person who is going to the hospital, except indirectly in his taxes or in his insurance.
And about 5 percent of it is paid by that poor soul who does not have any insurance or is not covered by medicare or any other program.
So where is the discipline to require them to control costs? There is not any. When there is no discipline to control costs, of course, they will go up.
In those nine States that went ahead and put in a program, they are running at a 12-percent rate right now and they probably will be down below the national target in July.
If they can do it, why should not they all do it? And if they go ahead and do it on their own, this amendment does not affect them at all.
If we are going to save this country from being destroyed by inflation, there has to be something done about it. And all this amendment says is, go ahead and do it yourself, but if you do not, we are going to hold you to at least 1½ times the national inflation rate.
I do not think that is unreasonable. And it is a very important factor in expenditures in this country with hospital costs rising from the mid-1960's total of $12 billion to $68 billion last year. Someone has to stop it some place, and I am puzzled by the reaction of so many Members in this body and the other one who give marvelous speeches about how we have to stop spending, slow it down, stop inflation, but when you ask them to do something about it they all run for cover with excuses of one kind or another. Oh, we cannot do that, they say. We cannot do anything. To every proposal you make, someone has a marvelous excuse not to do anything. So the inflation and cost go on and on and on.
Mr. MATSUNAGA. Mr. President, will the Senator from Wisconsin yield for a question?
Mr. NELSON. I yield to the Senator from Hawaii.
Mr. MATSUNAGA. One of the greatest concerns I think of Members of this body is that cost control might bring the quality of hospital care down. Will the amendment, as modified, of the Senator from Wisconsin favor cost cuts over quality in hospital care?
Mr. NELSON. No; as a matter of fact, what we did in this amendment was adopt what the American Medical Association and the American Hospital Association said were the goals that they could get to. So we took what the doctors said and what the hospital administrators through their association said and we said: "All right, we will make that the target. If you meet it there are no controls."
So I am satisfied that the doctors and the hospital administrators would not set a target of more than 1½ times the inflation rate if they thought it was going to interfere with or in any way compromise or reduce the quality of medical care.
Mr. MATSUNAGA. So the answer is no, that the quality of hospital care under the Senator's amendment will not be reduced.
Mr. NELSON. That is correct.
In one of the finest clinics in America, and one of the largest ones, in the city of Marshfield, Wis., in a hospital with 155 doctors, there is magnificent medical care. If my memory is correct, they are down to a rate of about 9 percent, and there is no better care given in any other place or in any other hospital or in any other clinic that I know of in this country.
The PRESIDING OFFICER. The time of the proponents has expired.
Mr. MATSUNAGA. I thank the Senator from Wisconsin.
Mr. NELSON. I did not hear the Chair.
The PRESIDING OFFICER. The time of the proponents of the amendment has expired.
Mr. NELSON. Does the Chair mean to say I am going to sit here and never be able to respond to the Senator from Kansas?
Mr. CURTIS. Mr. President, will the Senator yield?
Mr. TALMADGE. I yield.
Mr. CURTIS. Mr. President, no one can project costs 5 to 6 years in this inflationary period and say how much you are going to save.
Here is a guess that came out of HEW. It is dated August 1, 1978. Five-sixths of the savings under the Nelson proposal comes from the voluntary program. Five-sixths of it. I think probably the Nelson mandatory part will do more to spur prices, to get on while they can, than it will ever accomplish. This is the guess of the HEW.
I hope that inflation disappears, but there is no one who can guess on these things and so I do not submit it other than as a guess.
Mr. EAGLETON addressed the Chair.
The PRESIDING OFFICER. Who yields time?
Mr. EAGLETON. Mr. President, will the Senator yield to me?
Mr. TALMADGE. I yield to the Senator.
Mr. EAGLETON. Mr. President, in 1965. Mr. President, $41 bought a day's stay in the average American hospital. Today, just 13 years later, that amount buys a patient less than 6 hours of hospitalization. The rising cost of medical care commands increasing public attention, and it makes the general inflation of our economy look like small change.