“THE NATIONAL HEALTH SCENE"

By

Irving J. Lewis*

Deputy Administrator

Bealth Services & Mental
Health Administration

Department of Health,
Education and Welfare

Washington, D.C.

Prepared from remarks

delivered at
Regional Medical Programs
Conference on Allied Health
Afrlie House, April 20-29, 1970

*In September, 1970, Mr. Lewis left the Federal government to become
Professor, Department of Community Health at the Albert Einstein
College of Medicine of Yeshiva University in New York City.
When we talk about the health care scene in America we cannot ever
forget that Americans devote $60 billion of the gross natfonal product to
varfous functions of health. With a Federal contribution to that $60
billion {n 1971 of about $20 billion, we must understand that health cannot
be nonpolitical. Therefore, the way in which problems get solved in the
last analysis involves some political answers. Otherwise, one has great
difficulty in understanding why his proposals do or do not have any
particular result. If it fs true, as I am quite certain ft fs, that the
Federal Government cannot ignore the political aspects of health care in
the '70's, I have to talk a little bit about the Nixon Administration, and
how the political levels of government are going to be looking at health.

The first thing we have to know are the over-riding themes of the
Nixon Administration. I am a career official, so this 1s not a partisan
assessment. Political decision-makers do have a method to their madness,
though it may sometimes be difficult to discern. Of all the broad themes
and strategies the most dominant {s contro] of inflation. This fs the
primary target. The strategies for its control determine many other
strategies in the Nixon Administration.

Within the frame-work of contro] over inflation the first major unify-
ing strategy on the domestic scene has been called the New Federalism. It
is not just rhetoric to avoid action. It represents a conscious effort to

establish a divisfon of labor between levels of government in the solution
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of social problems. (Incidentally, this is a convietion of many Democrats
as well.) For example, a principal subtheme of New Federalism is the
distinction between income support, on the one hand, and services, on the
other. Payments that transfer funds to support people in their daily lives
are regarded by this Administration as a Federal function paralleling similar
centralizations in all major federal systems in the world. Rendering of
services to people is seen as a function of state, local and metropolitan
governments and of other public organizations. The obvious example of this
strategy 1s the new Family Assistance Plan. The services programs within
that proposal would be run by other than Federal levels of government, while
the Federal Government would pick up the check for income.

Another subtheme of New Federalsim is decentralization, or intergovern-
mental relations. An example {s the President's Manpower Training Program
proposal, which involves a selective but far-reaching delegation of power
to state and local governments, provided that they can meet appropriate
standards. To establish and support service programs at the state and
local levels, New Federalism has another subtheme, namely, revenue sharing.
Revenue sharing 1s based on the twin assumptions that the Federal fund-
raising efforts are better than those of state and local governments, but
that state and local governments are in a better position to determine how
the revenue should be utilized. This theme is not a minor innovation and
it has bipartisan support. In time it could involve a shift of some
$4 billion from the Federal sector of the local sector. The Family
Assistance Plan will involve increased Federal expenditures of a sinimum of
$4-1/2 billfon. With expenditures of this magnitude to back up New Federalism,

it can hardly be seen as only rhetoric.
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A second major theme of the Administration {s the nature of the income
strategy itself. The Family Assistance Plan involves supporting about
23 millfon people compared with about 10 million now on welfare because
{t does try to strike at the problem of the working poor. Despite some
Administration denials, it 1s a guaranteed income approach. Another aspect
of the income strategy is to de-emphasize “in-kind” programs, such as
Medicaid and food stamps. In time the Administration will apparently try
to phase out “in-kind” programs and substitute cash payments instead. In
fact, the proposed Health Insurance Plan may be the first major step in
this direction. This change rests on the principle that people themselves
can make the best choice of their dafly expenditures, and 1s extended’ to
areas of service such as day-care. I am not judging the theme; I am simply
trying to set it out.

A third major theme of the Administration is the attempt at rational {za-
tion of Government. The field of health offers many examples of a bewilder-
ing array of programs, few of them fitted to each other, either in design
or in execution. Outside the field of health there are the same phenomena.
One way by which rationalization is achieved is by grants consolidation and
simplification, which buttresses the earlier strategy of decentralization
and the principle that state and local governments carry out the service
programs. Another way of rationalizing programs is to set the same personal
eligibility criteria for interrelated programs. In the welfare and food
stamp programs, for example, which are administered by different departments,
there fs an attempt to establish the same eligibility criteria. The Family

Assistance Plan has that concept built in.
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Finally, another broad theme firmly announced by the Administration
is emphasis on what the President calls the "quality of life." A better
environment ranks very high on his priority list. We can anticipate a lot
of disagreements as to how to achieve it, but I belfeve that this Adminis-
tration will make many attacks on the environmental front.

It 1s my view that initiatives in the health care field through the
‘70's have to take account of these themes and broad strategies. I am not
prepared as of this time to say whether the strategies are directly appli-
cable to health, and I have some doubt that the complex private-public mix
which characterizes health can be fitted {nto them. So we can expect that
in Congress and in the Executive Branch there will be a debate to see whether
the public-private “mix” fn health problems is reconcilable with the strategies
or whether it requires a different strategy. Perhaps we will discover how
strongly held is our social value of a public/private “mix.”

One of the fundamental problems with designing new health care initta-
tives is thet the professfonals do not really know what they ought to be.
They wish they did but how we can square our professional or expert views
with the political system has thus far eluded us. In short, we do not know
where to put our money in order to deal with the so-called health care
crisis. When a President surveys the Federal budgetary scene, given the fact
that his number one target 1s control of inflation, I do not think fit ought
to surprise us that he might well put the limited money available into the
areas of environment or crime control where he can see more precise and
immediate pay-offs in terms of response to needs of the American people

than in what we call the area of health care.
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Those are a few general thoughts about the so-called general health
care crisis. It is a health care crisis, but until it is a political crisis
there is not going to be any governmental action.

In the past, as we looked at the health crisis our first concern was
to see the response of the consumer. Why are people not receiving the
benefits of what we know today? The consumer wonders why our nation is
fifteenth in the world in infant mortality and twenty-second in life
expectancy for males. He asks why the mothers of half of the babies born
in public hospitals have had no pre-natal care, or a poor child should have
four times the risk of dying before thirty than does the non-poor. The big
question {s not how much money should go into health. After all, who can
say what life {s worth? The big question is whether, as expenditures rise,
we will be better off at $100 billion, which is the best estimate for 1975.
I doubt that we wil? without great changes.

To understand where to go in the future, we ought to understand where
we came from. We have to know about history if we are to understand what
we could do in the '70's. The first need is to understand the mythclogies
we have followed. After the failure of the National Health Insurance pro-
posals under President Truman in the late 1940's, we embarked on a major
effort in bio-medical research. There was a popular view that massive
governmental support of bio-medical research would set in motion a chain
of events that would automatically improve health care for all. We had
privately supported research and a number of brilliant advances in science
and technology resulted. We helped shape the medical schools, for good
or il]. We helped shape the hospitals by the way in which we held out our
dollars. In the process we produced a technology which is extremely
costly. But then as we moved into tne ‘60's, we found the other America
which we had not been looking at. ke began to think about our middle-
class selves, and we realized that the massive advances in bio-medical
research by themselves were not going to bring about health for those who
needed it most. In fact, they were not necessarily going to bring the
advances even to people who could pay for it. So we succumbed to a second
myth, believing if the only thing standing between the other Anerica and
the best in health care was the lack of money, we could pour our resources
and our good intentions into providing money tickets into the system through
programs like Medicare and Medicaic.

In 1955 expenditures for health for this country were $17 billion; in
1965, $37 billion. Now they are $60 billion. By 1975 the estimate js
$100 billion. The significant point is that Medicare and Medicaid account
for most of the increase. We must never forget the tremendous socfal
insurance gains made in these programs, but neither can we fgnore the key
disastrous characteristics in the present financing programs.

First, they have overburdened the capacity of the system to respond.
This overburdening has been one of the major causes of the price rises in
the medical market, which hurts the middle class every bit as much as it
hurts the poor.

Second, the present financing arrangements through money tickets actually
inhibits better and newer methods of health care delivery. In fact, they

even produce reimbursement barriers to innovative methods of health care.
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The Watts Neighborhood Health Center may not be the best center fn the
world, but it fs a well-run $5 millfon operation that effectively serves
the poor. Although the group includes 30% Medicaid eligible, less than
10% of the Watts budget fs reimbursed by Medicaid because of the nature
of the Medicaid financing rules anc regulatims and State control.

Third, we have short-changed the youth of America. Sixty-five
percent of the Federal health budget goes to the aged, all of Medicare
and a substantial part of Medicaid. Only 10% of the Federal expenditure
of close to $20 billion can be said to go for children and youth. Sixty-
eight percent of Medi cade goes to institutional care, heavily for nursing
homes for older people. We have learned to our bitter regret that in many
places entrance into the medical care system does not exist and {s as much
a problem for the middle class as for the poor. The added purchasing power
of Medicare and Medicaid has probably led to the dilution of quality of
care, it increased cost, and moved more people into the hospitals and
institutions in the health care system.

For the Federal government to get at the basic elements in the health
care scene there must be a goal, a sense of purpose. There is need for
more all-embracing programs than the Federal government has set in motion.
It is useful to have in mind the necessary basic elements of the health
care system. It is not difficult for health experts to define these
and they have been expounded by the HEW Task Force on Medicaid. They in-

clude at least these elements:
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1. The health care system ought to provide for comprehensive
services ranging from preventive to long-term institutional
care, and it ought to provide continuity.

2. Medical care systems at local levels ought to be dealing
with defined populations.

3. The systems ought to provide for integrated management of
a variety of institutions and individuals. ’

4. There ought to be a broadly-based risk Sharing, achieved
through insurance mechanisms in one form or another, heavily
weighted in the direction of per capita prepayment or payment.

Opponents of health insurance, public of private, too often take a
simplistic approach. They say the system is not ready to respond, we have
to wait until the system has the capacity. If we do than, in the long run
we will all be dead, and the system will never be able to respond. I would
Suggest a concept of investment as opposed to consumption, which is what
the present Medicare-Medicafid systems are. More important, the concept
would establish firmly what too many advocates of national health insurance
have not recognized: that the system is not capable of responding and that
the financing systems cannot be allowed to go on independently of the
capacity producing systems.

If we are to move in the direction of some of the elements, including
broad risk-sharing, the financing system must include within {ft the basis
for investment. We can improve the management of our financing systems.

We can offer all sorts of incentives to increase efficiency and to lower
costs, but as long as we lfve in a reasonably affluent soclety we should

net assume that incentives alone and tinkering with financing systems will
bring about the kind of change we are talking about. Creating a health
care system is no minor fix-up operation.

What is investment? It {4s the diversion of resources from current
consumption tn order to achieve the benefits in the future of the invest-
ment. Ke may have to put our financing first into investment, inte programs
such as Regional Medical Programs as an institutional device for bringing
the changes about. This kind of program might even have to be financed out
of payroll taxes, an obvious departure from traditional methods of budgeting.

The Federal budget for health in 1971 will be $2 billion higher than
it was in 1970, and it will be all in Medicare and Medicaid. We need the
concept of investment in the capacity-producing side of the health care
system, but we do not have the concept linked firmly to our financing
system to pay the bills. Blue Cross and the insurance companies do not
have it; the Federal government financing systems do not have it. We
witl pot get there overnight just by knocking on President Nixon's door
saying we would like another $100 billion. To get this kind of concept
adopted there has to be a strategy of investment which will insure that
financing mechanisms will get the hospital to move into ambulatory care.
Investment is needed to produce the ambulatory care service.

To get there, a number of fundamental questions pearing on institu-
tional problems have to be faced. A lot of people are still moving away
from these questions. Here are a few of them, as I see it.

In the light of national health care needs and resources, can we cling
to the principle of Fee for service as a general rule? This is not a ques-
tion of medical care administration for just the experts tc work out. It

is a fundamental political and social problem for the American people.
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Can we in our legislation follow the freedom of choice principle as
far as we would like to?

Can we leave such programs as Medicare and Medicaid uncontrolled?

Can a community hospital continue to operate its “business” on the
basis of just filling its beds, or must it reach out to organize and
serve community ambulatory needs?

Investment means more than just money for services. Unfortunately,
no social or political body has real authority to plan and manage the
organization and delivery of health on the community scene. I deliberately
stress "no real authority to plan and manage." If we are to effect change
and not have a nationalized system like that of Great Britain perhaps the
most critical requirement is the creation of new community organization
and the investment of funds to support it. We have a bewfldering array
of individuals, agencies and institutions, and an equally bewildering array
of government programs which support the disparate efforts of all these
autonomous entities. We do not have a responsible focal potnt for exercis-
ing community trusteeship of health resources, unfortunately, there is no
consensus in society that we ought to have one.

The nature of the missing organization fs not well defined but some
of its ingredients seem clear. It has to be a private-public mix with
strong consumer involvement. It has to be based on a principle of
geographic responsibility. It must be authoritative enough to exact from
the medical resources of the ares (physicians, hospitals, and others) the
performance of defined health care functions on a geographic basis. That

sort of body gets right into the battle as to whether planning and regulation
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are to be combined. It {]luminates --or will-- the mission of the Federal
government in the health area. There {s ample confusion as to whether or
not the Federal government has a defined mission to organize and create

a health care system to meet the needs of all Americans. The debate in
the American society has really not yet focused on such a mission for the
Federal government. Although society does not yet say that ought to be
the mission of the Department of Health, Education and Welfare, I have
some personal views that it ought to be.

The level of debate over medical care has moved from the question of
paying bills to the question of how society organizes and delivers health
care. How do we make sure that the $100 billion in 1975 will not be just
a transfer payment but will actually be an expenditure by the American
society to bring about changes in the system and delivery of a larger
quantity and higher quality of service? The two or three years ahead are
essentially years of increasing debate such as {s going on fn this meeting,
rather than the arrival at solutions.

Regional Medical Programs were a response to a particular need at a
particular time as were Comprehensive Health Planning, Mental Retardation
Programs, Community Mental Centers and so on. In the meantime, the Federal
government is trying to develop a uniform policy to cover all programs.
Several main legislative initiatives have been taken, and it even looks as
{f the government knew what we were doing. Under the present congressional
system we deal with a host of different committees -- House Ways and Means
Committee, the Senate Finance Committee, the House Interstate and Foreign
Commerce Committee and the Senate Labor and Welfare Committee being the
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principal aims of congress in health. In the Department of Health, Educa-
tion, and Welfare we developed a set of bills dealing with financing,
facilities, planning, organization and delivery of health services. The
financing amendments are called the Health Cost Effectiveness Amendments

of 1970 cr the President's economy measure or messare. Facilities appear
mainly in the Hill-Burton Amendments of 1970. Planning, organization and
delivery are in the Health Services Improverent Act of 1970 and the Gommunity
Mental Health Centers Act. Clearly, all are cesigned to get at particular
health care problems without actually takéng on the institutional settings
involved.

A key indicator of the proglem is physician distribution. In the
urban core in 1943 we had one doctor for every 50C persons. In the suburbs
we had one doctor for every 2,000. Today we fave one doctor for every
10,000 in the urban core and in the suburbs we have one doctor for every
500. The urban core does not have the dectors, the suburban core does.

We have to provide for redressing that {mbalance. We need institutional
arrangements for working on capacity. Regional Mecical Programs are
hopefully trying to bring the doctors where the people live, stressing the
ambulatory as opposed tc in-patient care.

In our legislative proposals we had several rain points to make. The
Health Services Improvement Act maintains that Regional Medical Programs,
Health Statistics and Health Services Research and Partnership for Health
have a common objective, the improved organization and delivery of health

care. We also proposed a variety of model systems under that act. We also
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established requirements as to the planning agency. Then, when we came

to the Hill-Burton Amendments we tried to stress ambulatory care, and
encouraged alternatives to acute in-patient care. We tried to change the
emphasis from grants to loan guarantees because there is $300 or $400 million
coming to hospitals now out of the Medicaid-Medicare Program which was not
coming during the period of big grants. We also attempted the same approach
in the Community Mental Health Programs, namely, incentives and better
matching arrangements not only to continue those facilities which had been
organized, but to move them into the poverty areas where the facilities

are not now being afforded.

The Health Cost Effectiveness Amendments provide incentives to states
to control costs. Under the new proposals there are incentives to all sorts
of organizations, including profit-making ones, to provide ambulatory care.
The Health Maintainence Organization proposal cannot be divorced from the
proposal that states be given a higher matching ratio for services which
are rendered in an ambulatory care setting as opposed to services which are
rendered in an institutfonal setting. To many the HMO is the first health
initiative to square with the Nixon themes, in this case, the reliance on
a market strategy. These several proposals all link together with the
proposal under the Health Services Improvement Act that we try to develop
model systems of health care for which a certain amount of money is
reserved.

In concluding, I would like to add: "Is health care an entity in
itself?” Are we ultimately concerned only with the prolongation of life
and the improvement of physical and mental health, narrowly défined? Such
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purposes may well motivate the individual researcher, or the practitioner,
but society's vision, and I think yours collectively, should be greater
and move to a higher plane. I would suggest that our ultimate purpose fs
to enhance the quality of living in all its dimensions. Everything we do
should be viewed in this context. Thus viewed, the effort to organize
effective action at the community level is part of the necessary action
by a responsible citizenry to demonstrate faith in the democratic model

of government.