guy from Montana is going to pay the bill for the person living
in San Francisco, then he’s going to ask those questions.

CHAIRMAN WATKINS: Well, we thank you very much for
coming before the Commission and, in one case, returning before
the Commission. It’s been very helpful to us as always.

We stand adjourned now until tomorrow morning at 8:00.

(Whereupon, at 5:16 p.m., the above-entitled matter was
adjourned, to reconvene at 8:00 a.m.)

142

 
PRESIDENTIAL COMMISSION ON THE
HUMAN IMMUNODEFICIENCY VIRUS EPIDEMIC

FINANCING THE COSTS OF THE HIV EPIDEMIC
The Hearing was held at the
Interstate Commerce Commission Building
Hearing Room B
12th and Constitution Avenue, N.W.
Washington, D.C.

Wednesday, April 27, 1988

COMMISSION MEMBERS PRESENT:
ADMIRAL JAMES D. WATKINS (Ret.), CHAIRMAN
COLLEEN CONWAY-WELCH, PH.D.
KRISTINE M. GEBBIE, R.N., M.N.
FRANK LILLY, PH.D.
CORY SERVAAS, M.D.
POLLY L. GAULT, EXECUTIVE DIRECTOR
COMMISSION MEMBERS NOT ATTENDING:
JOHN J. CREEDON
THERESA L. CRENSHAW
RICHARD M. DEVOS
JOHN CARDINAL 0O’CONNOR
BENY J. PRIMM
PENNY PULLEN

WILLIAM B. WALSH, M.D.
P-R~-O-C-E-E-D-I-N-G-S
8:06 a.m

MS. GAULT: Good morning. Ladies and gentlemen,
distinguished witnesses, members of the President’s Commission,
my name is Polly Gault. I am the designated federal official
here and, in that capacity, it is my pleasure to declare this
meeting open. Mr. Chairman.

OPTIONS FOR CARE AND SOURCES OF FINANCING

CHAIRMAN WATKINS: Thank you. Good morning. Our
first panel this morning is one that consists of individuals
expert in the field of options for care and sources of financing.
They include: Dr. Arthur W. Feinberg, Professor of Clinical
Medicine, Cornell University Medical College, Associate Director,
Department of Medicine, North Shore University Hospital, and
Fellow and Regent of the American College of Physicians, on
behalf of the American College of Physicians; Dr. Harvey J.
Makadon, Medical Director, Ambulatory Services, Beth Israel
Hospital, Executive Director of Boston AIDS Consortium, Harvard
School of Public Health; Carl J. Schramm, President, Health
Insurance Association of America, Mary Nell Lehnhard, Vice
President, Office of Government Relations, Blue Cross and Blue
Shield Association; Dr. Gail R. Wilensky, Vice President,
Division of Health Affairs and Director, Center for Health
Affairs, Project HOPE; Ben Schatz, Director, AIDS Civil Rights
Project, National Gay Rights Advocates.

I’d like to welcome you all here and we’d like to
hear brief statements that you have prepared, starting with
Dr. Feinberg.

DR. FEINBERG: Thank you and good morning. The
American College of Physicians appreciates this opportunity to
present our views on the financing of care for patients with AIDS
and other HIV-associated illnesses.

Last month, the College, which represents 65,000
internists, announced two new position papers on the HIV
epidemic, one on financing of care and one on treatment, testing,
confidentiality and other related issues. I ask, Mr. Chairman,
that both of these papers be included in the record of these
hearings. My comments today will summarize the financing paper
only.

The AIDS crisis emphasizes inadequacies felt
throughout our health systems--millions of uninsured persons,
limited access for the poor and inadequate funding for preventive
health. Solutions to these general problems would obviously
contribute significantly to solving the specific challenges
raised by AIDS.

143
We believe that all Americans should have access to
high quality care, whoever the patient, whatever the illness,
but we hesitate to single out a particular disease for policy
purposes. But, because we can not assure this kind of care now
and because of the severe impact of AIDS, we feel it necessary
to move forward with our recommendations.

First off, the College does not believe that we must
invent a new whee] to pay for the treatment of AIDS. We propose
that a national policy be developed that uses all existing
mechanisms for health coverage and spreads the responsibility
and the financial risk. New resources must be added to each
component of the system so that each patient has health care
coverage throughout the course of his or her illness.

From this general principle, we make the following
recommendations. First, that financing the care of AIDS patients
should be assured through employer-provided coverage, through
individual health policies, MediCare, Medicaid, public health
and private grant funds.

Secondly, that inadequacies in all of the existing
mechanisms must be corrected through legislative or regulatory
action. Our position paper includes many specific suggestions
on how to close these gaps and I’1ll highlight some of them later
on in this statement.

Thirdly, mechanisms such as case management should be
developed to assure that patients take full advantage of all
available financing sources.

Fourth, care must be provided efficiently and must
incorporate practical approaches to community-based care.

Finally, strong central direction will be needed to
develop and coordinate the implementation of these needed
improvements. This last point is a critical one as far as the
College is concerned. Precisely because our recommendations
depend on our pluralistic decentralized system of health
financing, we feel that strong centralized planning and
direction will be necessary. To bring the pieces together to
weave a net, if you will, that will protect all AIDS patients,
requires strong national leadership. The College, therefore,
urges the creation of a successor body to this Commission to
provide this direction. This entity would be charged with
identifying weaknesses in each of the health financing
components, developing recommendations to correct the problems
and promoting and overseeing implementation.

144
 

 

In the remaining time, I’d like to highlight a few
of the specific recommendations of the College. The full list
appears in the position paper that we submitted to you.

For employer-provided group coverage, we recommend an
extension of the coverage period mandated by COBRA. Coverage
should extend at least until MediCare becomes available to
disabled individuals after the twenty four month waiting period.
Premiums should be subsidized so that coverage is not lost
because the patient can not afford the cost. Employers and
insurers should structure their policies to be appropriate for
AIDS, and that would include home health care, custodial care
and hospice services, for example.

Secondly, to make individual insurance policies more
widely available, tax incentives should be used to encourage
insurers to increase the availability of community-rated open
enrollment policies which individuals can purchase regardless
of their medical condition. We feel that risk pools should be
established for patients who are otherwise medically uninsurable
and that the federal government should promote their development.

In the Medicaid program, the waiver authority allowing
states to provide a wide range of home and community-based
services should be made more easily available. The federal
matching share for services to AIDS patients should be increased
to relieve the financial burden on states with the highest
incidence of the disease. Patients whose income is above the
eligibility standard should be allowed to buy in to Medicaid
coverage.

Now, with all of these recommendations about Medicaid,
it is not our intention that these recommendations divert funds
from other needy Medicaid recipients because, in a way, that
would basically just shift the burden from other sick people to
this group of sick people.

For Medicare, we feel that the twenty four month
waiting period for a disabled person to receive medical coverage
should be shortened. >

Finally, public health grants and foundation and
charitable funds should be used to provide incentive payments
to facilities that initiate or expand services for psychiatric
support, long term care, housing, assistance, for example, to
public hospitals that take a large burden of the AIDS problem
and for training support to counselors, care givers and others
who provide services.

Mr. Chairman, we offer these recommendations, clearly
not as final answers, but as a starting point for discussion.
The American College of Physicians is ready to work with the

145

 

 
Commission and with other public and private leaders to explore
these and other alternatives in order to craft a national
strategy to finance care for patients with AIDS and other HIV
illnesses. Thank you.

CHAIRMAN WATKINS: Thank you, Dr. Feinberg.
Dr. Makadon?

DR. MAKADON: Thank you, Mr. Chairman and members of
the Commission.

I speak today as a primary care physician responsible
for the care of AIDS patients and also responsible for the
organization of our program to provide primary care for people
with HIV infection in the context of a hospital-based primary
care practice.

I work at Beth Israel Hospital in Boston where I’m the
Medical Director of Ambulatory Services. I’m also the Executive
Director of the Boston AIDS Consortium at the Harvard School of
Public Health.

I would like to convey the urgency of the critical
problems we face as care givers and the need for a strong federal
effort to insure both the adequacy of payment for AIDS care as
well as the availability of benefits which match the continuum of
health care needs for people with AIDS so that we can provide
quality cost effectively.

Before offering specific suggestions, I would like to
suggest several compelling reasons why we must talk about AIDS as
a distinct issue apart from general issues of health care
financing and access to care.

On my way here today, I went past the Vietnam
Memorial, that elegant reminder of the stark reality of the
46,000 who died in Vietnam. It made me realize the enormity
of the scope of the 55,000 AIDS cases diagnosed since 1981.
Consider this: that in the year 1991 alone, we must prepare to
care for more than 75,000 new cases of AIDS and 50,000 deaths.
At some time during that year, more than 120,000 individuals
with AIDS will require care. An even greater number of patients
will develop other HIV-related syndromes.

Again consider these numbers in the context of the
current strain on our systems of care. New York City reports
long waits in the emergency departments of overcrowded hospitals
where AIDS patients occupy significantly increasing proportions
of in-patient beds. The hospital that cares for the largest
number of AIDS patients in Boston has had to suspend
appointments for new patients in its AIDS program. There is a
catastrophic shortage of facilities to care for IV drug users.

146

 
 

 

A recent phone survey of 193 internists in Boston revealed only
four who were willing to care for a hypothetical HIV-infected
individual calling on the phone.

A second reason why we need to consider AIDS funding
as a distinct issue is that it has become clear that our
reimbursement systems are not designed to incorporate payment
rapidly for new therapies necessary to manage effectively the
complex needs of AIDS patients. At the end of last year, six
states still had not included payments for AZT within their
Medicaid program. Our patchwork of health care payers, as all
of us know, makes it difficult for anyone to know when various
medications or therapies are covered. The catastrophic needs of
AIDS patients make these uncertainties and variabilities even
more problematic.

Finally, as I noted, there is a great reluctance on the
part of many health professionals to become involved in the care
of individuals with HIV-related illness. Often their reluctance
is based on fear and outright discrimination. We can not
compound the disincentives of fear and prejudice with additional
economic disincentives to provide care.

For these reasons, we must consider specific efforts
to fund care for individuals with AIDS and HIV infection. In
doing so, first, we need to recognize the relationship between
financing and both access to and adequacy of health care services
and explore how financing can be used to create structural
changes creatively.

Second, we must consider ways to provide benefits for
those who have neither health insurance nor entitlement to health
care benefits. Recognizing that the cost effective care of
AIDS patients requires a continuum that includes ambulatory,
hospital, home, chronic and Hospice care, we need to consider
how we can include these benefits and provide them adequately.
Medical case management programs, which Dr. Feinberg mentioned,
may provide one mechanism for doing this. These programs are
being used increasingly by employers as well as state Medicaid
programs to provide the needed range of care cost effectively.
These programs are still largely unstudied. They need to be
carefully and critically evaluated.

Systems such as the New York State Plan to establish
AIDS treatment centers using increased funding to encourage
provision of a wider continuum of care showed great promise.
These also need to be evaluated.

In developing these new programs, however, it is
important to consider how financing will ultimately influence the
organization and quality of services provided. We must evaluate
the advantages and disadvantages of developing AIDS specific

147

 

 
 

 

segregated approaches to care as opposed to utilizing approaches
which rely on traditional community-based primary care programs.
While specialized facilities could be models for care and
research, it is easy to envision a second class of care
developing for AIDS patients if funding for these special centers
does not meet clinical needs.

I also suspect segregated centers will not be as easy
to staff or will lead to greater staff burnout than would occur
if the care of AIDS patients were integrated with the care of
other patients and distributed over a greater number of health
care providers.

Finally, we must evaluate how to close the gaps in
coverage for health care. Given the similarity of issues
regarding financing AIDS care and general health care financing,
a comprehensive national health care financing program would
clearly be the best solution for AIDS and other diseases.
Although it has not been politically popular to speak about broad
reform of health care financing on a national level for fear of
cost, we must look to Canada’s health system as evidence that a
universal financing system might help contain and not inflate
health care expenditures and also lead to greater public
satisfaction.

Short of universal health care reform, we need to
consider a strong federal AIDS financing program. A federal
effort would allow national debate on the appropriate components
of a model program to demonstrate ways to integrate a full
spectrum of care and cost effective financing. While such a
program could be part of MediCare, it should be distinctly
different from the end Stage Renal Disease Program which was
developed without attempts to control costs or to develop
guidelines for the appropriateness of care.

Given political realities, it is likely that we shall
have to turn to incremental and continued patchwork reform of our
health care system. To do this, the needs of AIDS patients again
require that we bridge the gap between the time when individuals
lose private insurance and they become eligible for MediCare on
the basis of disability. Many have proposed extending COBRA
benefits to the time when MediCare eligibility occurs. That
leaves out a large group of patients who, even though they may
have been employed, still are not eligible for COBRA benefits.

I have a patient who was diagnosed with pneumocystis
pneumonia the day before he took a new job as an investment
banker for a Boston company. He had absolutely no insurance
because of a pre-existing condition exclusion in his new
insurance policy and, for the year that he had AIDS had

148

 

 
 

 

absolutely no insurance coverage whatsoever. If he had not
taken the new job, he would have been eligible for COBRA
benefits but, because he had taken his new job, he wasn’t.

Second, we must look at the development of an AIDS
care fund for individuals who both do not have private insurance
and whose income and assets make them ineligible for Medicaid.
It will be important to be able to tax self-insured employers
currently protected by ERISA in order to do this.

Finally, we must examine carefully the ability of the
Medicaid program to meet the needs of this epidemic. Currently,
benefits are very variable, payment levels are often poor and
eligibility requirements with respect to income and assets are
inconsistent. This kind of variability is not well suited for
the crucial care needs of an epidemic. Development of uniform
standards for eligibility, a benefit package that matches the
needs of AIDS patients and payment levels that provide incentives
for physicians and institutions to provide care are critically
important. There must be a new level of expectation with respect
to Medicaid coupled with increased federal sharing and support
for AIDS initiatives of state Medicaid programs.

As I conclude, my thoughts go back to the Vietnam
Memorial and the palpable reality it gives to the lives of those
who died. What is clear to me is the reality of this epidemic
and the vast needs of those affected. We can not avoid the
future. We must meet the challenge of AIDS with a commitment to
assess critically the alternatives and rapidly implement changes
necessary to insure access to quality of care for all.
Thank you very much.

CHAIRMAN WATKINS: Thank you, Dr. Makadon.
Mr. Schramm?

MR. SCHRAMM: Thank you, Admiral. It’s a pleasure to
be here this morning on behalf of the 350 member companies which
provide over forty percent of all non-government health benefits
and cover about 75 million people.

AIDS is obviously having a significant impact on the
health insurance industry. In fact, a Congressional Research
Service report estimates that private health insurance has so
far been the major source of funding for the medical care needs
of AIDS patients.

In 1986, our member companies reported that seven
tenths of a percent individual and three tenths of a percent of
group health and disability claims were due to AIDS. Today, I’m
able to release preliminary figures for the first six months of
1987. During that period, AIDS accounted for one percent of
individual and seven tenths of a percent of group and disability

149

 

 
 

 

claims, representing a significant and important increase in the
total claims cost experience in our industry.

The health insurance industry has approached AIDS
relying on four basic principles. The first is that all health
care, including that for HIV-related conditions, should be
paid for by a pluralistic system that includes individual
beneficiaries, employers and taxpayers, with risk pooling and
subsidies provided by a mix of public and private third party
payers.

Second, HIV-related condition should be treated by
third party payers just like any other chronic disabling illness.

Third, everyone should be covered by health benefits
providing access to an acceptable level of medical care. Private
health benefits should be available to all employees. Government
programs should expand to cover all those who are poor, and new
risk pooling mechanisms should be established to cover those who
are uninsurable due to very high expected health care costs.

Finally, by dealing with the adversities imposed by
the HIV epidemic, providers and payers alike can learn valuable
lessons in meeting the needs of those with chronic disabling
conditions and illnesses of all kinds, needs which are growing
steadily with the aging of our population.

I’d just like to point out a few considerations that go
into the industry’s thinking about AIDS. About 80 to 85 percent
of private health benefits are provided by group plans which are
normally experience rated and where individual health risk is not
a factor in determining coverage. By and large, for those
covered by group plans as well as the fifteen to twenty percent
now covered by individually underwritten plans, HIV-related
costs are being paid and will be paid. When employees under
group plans become unable to work and lose their benefits, most
can continue coverage for eighteen months by paying their own
premiums under the provisions of COBRA.

New applicants for individual coverage who are HIV
positive are uninsurable because, regardless of their current
symptoms, their expected health care costs are much greater than
those who are HIV negative. The same situation exists for people
with other serious health problems such as diabetes, cancer and
heart disease.

In a few cases, some employers may impose caps or
exclusions on HIV-related benefits. Insurance companies will
normally provide any benefit package an employer wishes within
the constraints of state law. Some states prohibit HIV-related
exclusions, prohibit the use of sexual orientation in
underwriting and place other controls on insurance company

150

 

 
practices related to this issue. However, self-insured plans are
not subject to these regulations due to the exemptions provided
by ERISA.

To summarize the coverage issues and the coverage
problems, there are two key points. The first point is related
to those who are currently employed who lose private coverage due
to HIV-related disability. For those not eligible for COBRA
benefits and those between the end of the COBRA period and the
start of MediCare disability, high risk pools can provide a
solution. For those who can not afford COBRA or risk pool
premiums, need based subsidies may be appropriate.

The second point is related to new applicants declined
for individual coverage. The solution for this group is properly
funded risk pools, probably operating at the state level, with
premiums subsidized for those unable to personally afford the
premiums.

What is the insurance industry doing? I would outline
some initial steps we have taken. The first is that two and a
half years ago, the American Council of Life Insurance, and the
Health Insurance Association of America established a high level
task force of chief executives to coordinate our AIDS efforts and
activities. One group working under that task force has produced
the claims data that we have cited earlier. The second group,
which will report to the task force on May 3rd in Chicago, is
considered a comprehensive alternative to financing which we will
be releasing at that time.

/ In June, we will bring together AIDS case management
experts from our member companies to review the extent and
effectiveness of case management techniques being pioneered in
the insurance industry. The case management conference will be
the first step toward assessing the feasibility of developing an
AIDS cost data base from insurance claims files that are held by
our companies.

Finally, we, along with the American Council of Life
Insurance have worked actively with the National Association of
Insurance Commissioners to develop their guidelines prohibiting
the use of sexual orientation in underwriting. We urge the
adoption of these guidelines in all states and we have worked
aggressively to see to their adoption and to police our industry
in conforming to the guidelines where they have been adopted.

I’d like to conclude with a few policy considerations
as to things that might be done. As you all well know, we
operate in a vacuum of information and it is difficult at this
time to make specific policy recommendations. Nevertheless,
certain steps clearly seem the routes of promise.

151
First, we must make state risk pools for medically
uninsurable individuals available everywhere, pool losses in
these pools to be funded by general revenue or any other broad-
based mechanism.

Second, we must expand Medicaid to cover all of the
poor and to pay the full costs of appropriate care.

Third, we must consider incentives and subsidies to
maintain private insurance for those who become disabled and lose
employee-related benefits.

Fourth, we must encourage case management in private
and public benefit programs.

Fifth, we must enforce laws against discrimination in
employment since employment provides access to group benefits.

Finally, we must prohibit the use of sexual
orientation in underwriting.

Some final thoughts I’d like to leave with you relate
to the calls that you’ve heard before and that are now voiced
widely, that national health insurance should finally be imposed
in response to the problems related to financing the HIV
epidemic. That response is completely unwarranted. Rejecting
the pluralistic structure of our system with its mix of public
and private sector roles in financing care for all is neither a
necessary nor an advisable approach to these problems.

To a considerable extent, the problem of financing AIDS
care is the problem of the uninsured for which our association
has recently proposed a comprehensive solution. That solution
follows the principles I have stated today and we have included
for the record an outline of our proposal adopted by the Board of
the association in February.

Finally, I would call to all of our minds that many of
the problems we face in providing and financing care for HIV-~-
related conditions are also experienced by persons with other
chronic disabling illnesses. The prevalence of these problems
will increase with aging of our population. What we learn from
dealing with AIDS can help to prepare us for the future, a future
in which hopefully the AIDS epidemic will be a thing of the past.
Thank you very much.

CHAIRMAN WATKINS: Thank you, Mr. Schramm.
Ms. Lehnhard?

MS. LEHNHARD: Mr. Chairman, members of the Commission,
I’m Mary Nell Lehnhard, Vice President of the Blue Cross and Blue
Shield Association.

152
 

 

The Association is the coordinating agency) or
organization for the seventy seven Blue Cross and Blue Shield
plans, We appreciate this opportunity to testify once again.

The Blue Cross and Blue Shield system is very directly involved
with many of the problems associated with AIDS. Our plans
provide coverage to those who have been diagnosed as having AIDS
and they’re very actively involved at their community level in
helping to control the spread of AIDS through community education
efforts.

We’ll continue to do our best to develop mechanisms for
dealing with the problems associated with AIDS, however, we
believe the nature of this disease makes it necessary that both
the private and public sectors work together to resolve the
problem adequately. In support of this we’d like to offer three
recommendations.

First, we believe that voluntary state risk pools
provide an effective mechanism for providing insurance to those
high risk people who are deemed uninsurable by private insurers
yet they’re not eligible for Medicaid. Although we believe these
pools are a good way of increasing access to care, we recognize
that the need for such pools will vary state by state. In states
where Blue Cross and Blue Shield plans offer open enrollment with
no medical underwriting, there’s no need for such a high risk
pool and indeed it’s counterproductive.

In states where pools are needed, we believe that the
federal government should provide the states with flexibility to
design and finance these pools on an equitable basis. You’ve
heard several references to this this morning. Because these
pools cover high risk individuals, the cost of this coverage is
extremely expensive. If these premiums were based on the actual
cost of providing coverage, very few individuals could afford the
premiums. All of the fifteen states that have these risk pools
have recognized this problem and their general solution has been
to cap these premiums and finance them through a subsidy. This
subsidy, in all cases but one, comes from a tax or a levy on
insurers. Because of ERISA, only employers who buy coverage
through insurers are affected by this additional cost. ERISA
prohibits states from regulating self-funded employee benefit
plans and, as a consequence, employers who self-fund their
benefits avoid the cost of supporting or subsidizing these pools
to make them affordable.

Our second recommendation is to enhance Medicaid
coverage for those unable to afford private coverage. We have
a two part strategy for this. First, we believe the federal
government should require states to adopt a minimum income
eligibility level for Medicaid. In 1987, twenty two states had
Medicaid income eligibility levels below fifty percent of the

153

 

 
 

 

federal poverty level. We recommend that states increase these
levels beginning with a minimum of sixty percent of poverty and
phasing up to a hundred percent over time.

Second, Medicaid eligibility should not be linked to
welfare categories of the aged, blind, disabled and members of
family with dependent children. Anyone, including working
individuals and their families, should be eligible for Medicaid
if their income is below the designated income threshold. This
is particularly appropriate because so many individuals with AIDS
are categorically ineligible for Medicaid for two years.

Finally, we recommend that any future financing
mechanisms use case management to keep the cost of providing
care to AIDS patients as low as possible and also to enhance
the quality of care. Our experience with case management to
date provides very positive evidence that it can accomplish
both of these goals. Current Blue Cross and Blue Shield plan
estimates of AIDS-related costs are proving to be considerably
lower than initial predictions, in part due to the increased use
of ambulatory and home health care.

For example, Blue Shield of California found that
implementing a managed care program for its AIDS patients saved
a total of $183,000 in the treatment of twenty patients over an
eighteen month period. This is an average savings of $8,000 a
patient.

Equally important is the fact that by emphasizing
outpatient sides of treatment like home health and hospice care,
case management offers a much more humane alternative to extended
hospitalization.

Mr. Chairman, members of the panel, those are our three
recommendations in summary form. We appreciate this opportunity
and we’d be glad to continue to work with the panel.

CHAIRMAN WATKINS: Thank you, Ms. Lehnhard.
Dr. Wilensky?

DR. WILENSKY: Thank you. Thank you for inviting me
to testify before this Commission.

I’m the Vice President of Health Affairs at Project
HOPE and an economist who has spent considerable number of years
worrying about the problems of the uninsured and only recently
about some of the problems of financing AIDS care. As you have
heard, AIDS is exacerbating many of the weaknesses which are
inherent in our system of health care. Most of the suggestions
that I am going to be making this morning will be to reform these
weaknesses and not be limited to people with AIDS.

154

 

 
 

 

As you have also heard, we have an employer base system
of health insurance for the under 65 population. There’s a
little bit of direct insurance coverage. We have Medicare for
the elderly and Medicaid for some of the poor. When we look at
this particular system of health insurance, this uniquely
American mixture of public and private insurance, we find that it
has several implications for people with AIDS. First, while most
people have insurance, many, thirty to thirty seven million
individuals, do not. Second, since most of the insurance for the
under 65 is related to employment, any event that disrupts that
employment places the insurance in jeopardy. Third, the United
States has developed a system of publicly financed hospitals and
other direct delivery services to provide care for those who do
not have health insurance, but what you have in the services that
are covered vary tremendously according to where you live as an
individual.

Under our current strategies, we find that AIDS is
being financed in part by private insurance, in part by Medicaid
and the residual by uncompensated care, that for which there is
no direct sponsor. Unfortunately, it is not really clear how
much is being financed by which source. The estimates vary
widely with a low of seventeen percent of health insurance being
provided by the Androulis Study and a high of fifty percent
indicated Blue Cross Blue Shield coverage in the Deaconess
Hospital in Massachusetts.

Similarly, estimates of Medicaid coverage range from
twenty percent to seventy percent. If we want to know who is
paying what share now or who will pay what share with various
alternatives, we are simply going to need to have better
information than we have at the present time.

I would like to talk about four strategies that
represent alternative ways of funding health care for people
with AIDS. In doing so, I am going to distinguish the first
two strategies as being most appropriate for individuals who
have some income and assets when they begin their illness and
the second two strategies for people who are either near or in
poverty at the beginning of their illness.

For people who have insurance coverage at the time
that they contract the disease, I think it is important to try
to build on the strategy that the COBRA provision has set forth,
that is, an ability for individuals to continue their group rated
coverage for a period of at least eighteen months following
employment. Unlike most of the employed population, however,
individuals who are no longer working must use their after tax
dollars to pay for the premium rather than the pre-tax dollars
the rest of us get to use.

155

 

 
 

 

In order to rectify that situation, I would like to
recommend a refundable tax credit should be instituted for all
individuals who do not receive any employer-financed health care.
This tax credit should approximate the tax subsidy on average
which those of us who receive employer-financed health insurance
receive and we do not have to include the premiums that our
employers pay in our taxable income. I think it would make it
much more likely that people would take advantage of the COBRA
provisions than they now do. The refundable tax credit, however,
should not be limited just to people with AIDS. It should be
available to any individual who is not receiving employer-
financed insurance but could only be used for the purchase of
insurance.

A second strategy is one that you have heard mentioned
several times. That is the use of subsidized insurance pools for
the medically uninsurable. There are some fifteen states that
already have such pools. Another thirteen are considering then.
They have not had a very good reputation and the reason is
because they have been associated with very high premium levels
and very high deductibles so that they only cover a small
fraction of the individuals to whom they were directed, even in
the fifteen states that use them.

The problem is that we have not been willing to
recognize that if they are to be limited to high risk individuals
and are to be affordable, however we wish to define that concept,
they will need to be subsidized. As has been indicated, the
subsidy that has typically been used is a tax on insurance
companies who write insurance for employed individuals. This
leaves out a large sector, that is, the self-insuring sector.
Several people have mentioned trying to amend ERISA in order to
be able to tax the premiums of all companies. While this is
one strategy and, for those who have great patience, can be
attempted, I think we have to recognize that there are other ways
to have broad based financing and we should not hang the ability
to have medically uninsurable pools to our ability to solve the
ERISA problem. There are other broad based taxes such as excise
taxes, taxes on all employers, or the more common broad based
taxes on income that we use to finance other state activities.
These are to be considered as a way to finance the subsidy for
the medically uninsurable pool.

The third and fourth strategies are ones that are
designed for individuals who are in poverty and therefore, can
not be expected to make major contributions or even modest
contributions to their own health care when they are receiving
health care as a result of their illness.

The third strategy is one that has also mentioned and
that is putting a floor below which we will not allow states to
go in setting their income eligibility for Medicaid. Under the

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current situation, individuals tie Medicaid eligibility to their
AFDC levels and their AFDC levels are set at the discretion of
the state. As an alternative, both for people with AIDS and for
the many poor people in this country who are not eligible for
Medicaid under existing rules, a floor should be set sixty,
seventy, seventy five percent, whatever level the Congress would
be comfortable doing, and not allow states to go below that
level. While this would not solve all of the problems for people
without health insurance, it would take away some of the most
distressing circumstances such as states that have income
eligibilities at levels of twenty five and thirty five percent
of the poverty line.

Finally, I would like to do something to protect the
Medicaid program. As many of you know, Medicaid is already being
charged with becoming a long term care financing program for the
elderly. If, by extending Medicaid coverage to many of those
who have AIDS, we were also to have this program now become
primarily a program of long term care funding and a_ funding of
AIDS, we would push out those for whom the program was initially
intended, that is, women and young children.

To protect that, I would like to propose having a block
grant program which would serve as a type of stop loss for the
Medicaid programs. This program would be a block grant from the
Health Resources and Services Administration of HHS and would be
initiated whenever the share of spending on Medicaid for AIDS
exceeded a certain pre-specified limit. It would function as a
trigger mechanism, somewhat similar to the one that is used for
supplemental unemployment benefits, which extends unemployment
benefits for an additional twenty six weeks whenever: the
unemployment level in a state exceeds a certain level. I think
this protective mechanism for the Medicaid program is an
extremely important one if we are to preserve the purpose for
which Medicaid was initially extended.

In summary, therefore, there are four recommendations
that I would like you to consider, two that are for those who
have income and assets, the refundable tax credit to be used for
purchasing insurance by people who do not receive any employer-
financed insurance, a subsidized risk pool for the medically
uninsurable. Then, for those who are in poverty, to put a floor
underneath Medicaid eligibility below which states would not be
allowed to go and a block grant stop loss provision for Medicaid
which would be triggered whenever the proportion of Medicaid
spent on AIDS exceeded a certain pre-determined level.

Thank you, Admiral.

CHAIRMAN WATKINS: Thank you, Dr. Wilensky.
Mr. Schatz?

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MR. SCHATZ: Good morning. My name is Ben Schatz. I’m
the Director of the AIDS Civil Rights Project, a public interest
law firm with National Gay Rights Advocates in San Francisco.
Thank you for inviting me to testify a second time. I don’t know
whether that means I did a good job last time or if you didn’t
understand anything I said and you want me to try again.

I submitted nine recommendations. I’m not certain
whether you have received them yet, but they’re here. Most of
them concern insurance. I did also submit a recommendation
having to do with the importance of developing block grants for
cities and states that are funding a disproportionate share of
health service costs. People talk about San Francisco as an AIDS
model and San Francisco will not be able to remain a model in
terms of health care if the city goes bankrupt in the process.

I think also I’d like to agree with other panelists
here who recommended the importance of standardized minimum
benefits for Medicaid. Since time is short, I’m going to focus
my remarks on insurance and try to give a somewhat different
perspective on the issue of insurance.

It has been my experience that the AIDS crisis has
really brought a crisis in terms of AIDS and insurance. I’ve
received literally thousands of calls from people with AIDS-
related insurance problems. I have to conclude from this that /
at least part of the insurance industry has responded to the AIDS/
crisis by simply trying to do whatever they can to wash their
hands of paying for AIDS-related claims. Now, it’s hard to
generalize about an entire industry and I’m not trying to do so,
but I think there are certainly major elements within the heal h
insurance industry that are simply behaving in an irresponsib ‘e
manner in terms of paying or, more appropriately, not paying /for
AIDS. Of course, you all know this, but it needs to be pointed
out explicitly that, to the extent insurance companies do not pay
for AIDS-related claims, these costs do not disappear. These
costs are passed on to the taxpayers and to already strapped
programs such as Medicaid and Medicare and public hospitals.

Insurance companies have attempted to limit their
AIDS-related claims in essentially two ways. The first is by
underwriting in terms of determining who to insure, who not to
insure and how much to charge. There are two concerns that we
have in terms of underwriting by insurance companies. I do
appreciate Mr. Schramm’s statements in support of prohibiting
sexual orientation discrimination. This continues to be a major
problem. The Office of Technology Assessment just recently
released a study in which they found that thirty percent of
insurance companies actually admitted that they use sexual
orientation in the underwriting process in spite of the fact that
the National Association of Insurance Commissioners has said that
this is simply unacceptable. Now, if thirty percent of these

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companies are admitting it, I shudder to think what is happening
in reality.

My office is now involved in a law suit, just to give a
particularly blatant example, against an insurance company that
distributed AIDS-related underwriting guidelines. They developed
an AIDS profile and those people who were in the AIDS profile
who were to be denied insurance were unmarried males without
dependents who work in occupations not requiring physical
exertion. In case anyone missed the point, they mentioned
antique dealers, interior decorators, florists, people in the
jewelry or fashion business. I don’t think I need to say any
more about that.

Another underwriting mechanism which is increasingly
being used by insurance companies is the HIV antibody test. I
can’t possibly cover that one in five minutes. I did, in my
summary, essentially include six reasons why I believe that this
is socially dangerous, including the lack of counseling
accompanying testing, the fact that such testing is applied
discriminatorially and results in discrimination, the presence of
false positives, the fact that if insurance companies use the
test this obviously discourages people from taking the test
voluntarily. I can go into that in more detail if anyone wants
to ask me.

I think, though, what I’d like to focus on more is
the problem of what happens to people once they actually get
insurance. Now, many insurance companies are paying their
claims. I don’t want to say that they’re not. But, there are
major problems with people who have insurance who think that
they’re safe if they get an illness, and find out that they are
not. Basically, there are a few problems I’m seeing here.

One is abuse of the exception which allows insurance
companies to avoid payment for experimental treatments. We’ve
seen, for example, several insurance companies saying they won’t
pay for AZT even though it’s been approved by the FDA. There are
other problems as well in terms of experimental treatments.

I think the greatest problem has been with the
pre-existing conditions clause. Basically this allows insurance
companies, often legitimately, to say they will not pay for an
illness which a person had pre-existing the date of their
becoming insured. The problem within the context of AIDS is
symptoms can be very vague. I’ve seen among several insurance
companies a pattern in which they’ve said everything from "you
had diarrhea a year and a half before you obtained insurance,
therefore we won’t pay for your AIDS claim," to “you went to your
doctor two years before you got insurance and complained that you
were exhausted and therefore, we won’t pay for your AIDS claim."
There are some companies, it’s quite clear to me, that are

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routinely going through their AIDS-related claims and trying to
find any excuse to not pay and asking people for six months, send
us your medical chart, nine months, even a year, trying to get
evidence. At least that’s the official line. I think, in many
cases, there’s just a hope that a person with AIDS will be too
ill or demoralized to fight then.

There is a third problem which I think is particularly
blatant that was also mentioned by Mr. Schramm. That is the
problem of insurance companies excluding coverage for AIDS.
They’1ll say yes, we’ll pay $500,000 for cancer. Yes, we’ll pay
for heart disease, automobile accidents but, if you get AIDS,
you're out in the cold. I think the motivation for this is a
combination of panic about costs and also of simple prejudice.
I’1l give you one example. I know of one self-insured trust in
southern California that says they will pay for AIDS but only if
you're under thirteen or acquire it through a blood transfusion.

I also think it’s important to mention that there are
problems with COBRA, in terms of people who are not able to
obtain COBRA benefits. I think that the debate about AIDS and
insurance highlights the fundamental irony of an insurance system
run exclusively for profit, which is that those who most need
insurance to pay for medical care are the least able to obtain
it. Because of that, I would have to disagree with Mr. Schramm
on the issue of national health insurance. There are various
ways of doing this, including something similar to the
Massachusetts model which mandates health insurance coverage
for all employees, including use of the private sector. We
might be able to agree somewhat on that.

Let me just mention very quickly some of the other
things that we recommend. I also agree with Mr. Schramm that
all state insurance departments should prohibit anti-gay
discrimination by insurance companies as recommended by the
National Association of Insurance Commissioners and I’m looking
forward to working with him in terms of trying to get the states
to implement them because most of them have not. I would urge
the Commission to recommend that insurance companies should not
be allowed to use the HIV antibody test. I would also urge that
all state insurance departments should prohibit insurance
companies from categorically excluding or limiting coverage for
AIDS. At this point, I haven’t opened today’s mail yet, because
we just filed some complaints, but we now have twenty six states
so we’ve got a bare majority. I’m looking for twenty four more.

Self-insured employers should also be barred from
excluding or limiting coverage for AIDS. That also gets us
back into the ERISA question. The need to amend ERISA is not
only for the purpose of funding risk pools, but is also because
self-insured companies are exempt from insurance department
regulations which would say, for example, that they have to

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cover AIDS or which would prohibit anti-gay discrimination. I
would also support amending COBRA to allow disabled employees to
purchase group insurance until they are able to qualify for
Medicare. Also, I think that state insurance departments need to
do much more work in terms of vigorously monitoring the pre-
existing condition defense and how that’s being used by insurance
companies. I think we need some form of national standards so
that we can have some determination that merely testing HIV
antibody positive or having diarrhea or exhaustion or some other
vague claim does not constitute a pre-existing condition for
AIDS. I thank you for listening to me again.

CHAIRMAN WATKINS: Thank you, Mr. Schatz. I’11 open up
with a couple of questions to break the ice this morning, and
then I’d like to start down the line here with Mr. DeVos.

Primarily, we’re trying to focus during these two days
on financing options for care and identify sources of financing
but, in the discussion this morning, it’s difficult for me to
pass up a couple of opportunities. I’m not sure who to address
this to so I’1l open it up to whomever would like to answer.

How are we going to prevent discrimination in
employment when an individual who is turned down for health
insurance because of an HIV test has to explain to his employer
why he was turned down? The issue of discrimination is an
extremely important one to the Commission. It’s an obstacle to
so many things to get on with the kinds of testing we would like
to do openly where people felt comfortable if they could come in
and get tested, both for their own and for the public. Maybe
Mr. Schramm could give a crack at this question. I don’t see how
we're going to get out of the discriminatory aspects of a person
being turned down for health insurance because of an HIV positive
test and their employer not figuring this out. How do we handle
that because it laps over into the employment and other potential
discriminatory acts against the individual.

MR. SCHRAMM: Mr. Chairman, the test is generally
applied only for individual coverage, not employment-related
coverage. I don’t know what data you rely upon in terms of this
discrimination impact on subsequent employment. Our mechanism
operates in the case of individual applications which, as I
indicated in our testimony, are a very small part of the
commercial world. About ten percent of our business is written
on an individual basis. That’s where the dispute about the
testing is raging in the state legislatures, for example.

Data pertaining to individual applications are kept

confidential by insurance companies. How they could affect
employment decisions later on down the stream is not clear.

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CHAIRMAN WATKINS: We have witnesses come forth and
say that they don’t believe that confidentiality is all that
well protected. So, it’s a point, but from the individual’s
point of view, it seems to be we have another deterrent to
getting tested.

We heard a witness yesterday tell us about the wonders
of a new insurance policy which was going to give full coverage
for AIDS after one year without use of the HIV test. But the
question then came up, what if the person is HIV positive, knows
they are and gets the policy. Could he keep the insurance
policy? The question was not answered well. I’m worried now
about the test for HIV being a very significant problem for the
individual coming forward to seek the health insurance for fear
that it’s going to lead to other discriminatory things because
the information is going to leak out through the system. Maybe
Mr. Schatz has some comments.

MR. SCHATZ: Yes, not surprisingly, I have a comment.
First of all, I think it’s important to note that testing is done
in the small group context. It’s not just in the individual
context. If you work for a small employer -- I was individually
screened when I applied for my job so that factually there is a
danger that people who work in a small group environment will be
turned down for insurance and then face very difficult questions
in the work place. Some people are good liars and some people
aren’t. It’s unfortunate that people have to confront that kind
of situation, however.

I think, also, in terms of the confidentiality
problems, there have been several lawsuits involving results
being released by insurance companies so that confidentiality is
a goal but it is not a reality. The American Council for Life
Insurance told the National Association of Insurance
Commissioners in 1985 that they certainly would never go to blood
banks to ask them for their test results because that would
discourage people from taking the test voluntarily or from
donating blood. My response to that is if you’re not going to
ask the blood bank or the testing centers for those results, it’s
just as bad to ask the test of people themselves. I think that
the disincentive to testing is indeed a very real issue.

CHAIRMAN WATKINS: Yes, Ms. Lehnhard.

MS. LEHNHARD: I wanted to respond to one of the
problems I believe I heard you raise in terms of employees who
work for an employer that wants to exclude coverage for AIDS. We
have had a couple of Blue Cross and Blue Shield plans have this
come up in their dealings with employers, typically in large
groups. An employer will tell you how he wants you to insure or
to tailor his employee benefit program. We, I know on a couple
of occasions, have had employers tell us they don’t want coverage

162

 

 
 

 

or they want a cap on coverage for employees with AIDS. This has
been a concern to us and we have sought clarification from the
state insurance commissioner. In the cases I know about, the
state insurance commissioner said that this could not be done.

CHAIRMAN WATKINS: What could not be done?

MS. LEHNHARD: Any type of cap. This one happened in
California, an exclusion in the employer group. The difficulty
is that this is only part of the market, the insured market
that’s protected by state insurance commissioner and his
regulatory powers. The self-funded employees are completely out
from under that. In fact, what happened to the account that we
told we couldn’t put a cap on for AIDS patients self-funded and
was able to do so anyway.

CHAIRMAN WATKINS: Yes, Dr. Makadon.

DR. MAKADON: Just a sort of peripheral comment, but
I think as some of the current studies looking at treatment of
asymptomatic individuals with HIV infection, if they begin to
show some promise, there will be greater numbers of people who
actually need to go and get tested in order to begin taking
available medications. I think that’s going to make the need for
antidiscrimination protection for both insurance and employment
extremely important because these people will be entering the
health care system voluntarily in huge numbers once there is any
medication which is available for people in their asymptomatic
phase.

CHAIRMAN WATKINS: Let me just follow up on that a bit.
Mr. Schramm, we’ve had witnesses come forth here who have
suggested that HIV testing is probably the first step to exclude
Americans from private insurance coverage. The logic train goes
like this. We are developing, in this country, incredibly
complex predictive models in our technology that can look ahead
to the potential for heart disease, the potential for a lot of
things, that may be five, ten years downstream. An HIV-infected
individual, let’s say you identify them in the first six months,
may have another seven years before we begin to see the symptoms
explode into something that’s clinical.

It seems to me that we have a deterrent to getting
tested, when at the same time we’re trying to get the individual
tested for his own health monitoring over time. It seems to me
that we are hearing the kind of obstacles to providing insurance
for individuals with AIDS and ARC, but we haven’t talked a lot
about HIV positive which is the real concern. Witnesses here
have encouraged us to please get rid of the distinctions between
AIDS an HIV.

163

 

 
 

 

The ability to predict with certain genetic markers or
whatever that you have a proclivity for heart disease, you have
proclivity for this, you have perhaps proclivity for diabetes
downstream because, after all, your family and the track record
and the probability. So, I’m just worried that this is exposing
some of the insurance problems that we’re going to have under
very sophisticated future technological developments. What’s
your comment about that?

MR. SCHRAMM: Well, Admiral, that’s a splendid
question. In fact, in many respects, AIDS does open the door to
the whole question of the interface between medical technology,
our ability to discriminate one individual’s risk from another.
It’s much more than conceivable. I suspect that when a person
has a baby ten years from now, upon leaving the hospital the
pediatrician will present a profile of the risks connected to
that specific individual in terms of its proclivity to heart
disease and so forth and recommend to the parents a diet and
exercise regimen in the first five days of the baby’s life to
increase its chances for a longer life.

I think what this highlights is essentially the
mechanisms by which private and Blue Cross and other forms of
insurance operate, and that is our attempt to understand what
the risks are in any given insured population. In many respects,
the ability to screen an individual in a population for HIV
exposure is really no different than other tests. It’s more
sophisticated, to be sure. It’s a very accurate, reliable
laboratory test. It provides much more information about the
liklihood of certain health events than many other tests, but it
really is in the context of the ability to screen for diabetes,
heart disease and so forth, all of which, in our view, are
essential to identify higher cost individuals. In many
instances, just like in AIDS, the vast number of employed people
who are covered in the private market are covered under group
plans where there is no interest by the private insurance
mechanism to test. It is in a group contract where the law of
large numbers essentially protects the insurance mechanisn.
That, I think, is a paramount consideration. Our interest in
testing in the group market is zero because we have enough
individuals over which to spread the risk.

The issue about testing is essentially one of setting
prices and premiums in the individually underwritten market,
sufficient to carry the load of claims experience downstream.
That is why it is our sense that around the state testing issue
we have to understand what is at risk. Essentially what’s been
going on is an attempt by insurance commissioners to operate,

I believe, in the stead of legislators to off-load in the
individual market, a very different market from the group market,
to off-load public responsibility onto private insurance. Let’s
think about this by comparing life and health insurance.

164

 

 
In the life insurance business, we know that a person
who is HIV positive has a much higher than average probability of
being terminal in seven years. If that person pays a premium for
a short time and then his or her estate makes a claim, the estate
receives a windfall because the person’s risk was not reflected
in the premium paid. I think that strikes virtually everyone as
an unfair gamble.

Health insurance is different in the sense that we
regard health insurance as absolutely necessary for access to the
health care system. Nobody would assert that it’s an absolute
right or a necessity of life to have life insurance, but it’s
different with health insurance in large part because of our
confusion in terms of a right to care and a right to access the
care. Now I would submit that what is implicitly being proposed
is a right to financing in the private sector which is, it seems
to me, a very dangerous thing, and it is of concern to us. We
are part of a health care financing system, and we play an
important role, but it is important to realize that this epidemic
is @ifferent from all others in the history of this republic in
terms of where the public payer has been. In state after state,
there are efforts in the individual market to off-load those
known risks into the private health insurance pool by state
legislatures and state insurance commissioners, where the public
sector, state political leadership has now taken a leading
position, for the first time in the history of the republic, with
regard to a communicable disease epidemic not to pay directly for
care. I think that’s a very important point. I think it is the
underlying point that relates to individual testing and it over-
arches everything else.

To be sure, there are problems with confidentiality.
you know the position of our industry and its lead trade group is
absolutely opposed to any breach of confidentiality. I think, by
and large, we have protected those confidences well.

In the individual market, where there are horror
stories, we have to analyze those horror stories. If an
individual has been rejected for individual insurance, that
information is totally outside the loop of a decision of a
subsequent employer as to whether or not to hire that person,
when a person seeks individual insurance it suggests that he
is a low-wage worker or a self-employed worker. When that
status changes and he seeks coverage in a group employment
situation, information about previous individual insurance
applications would be shielded and absolutely unavailable to
subsequent employers.

CHAIRMAN WATKINS: Any other brief comments?
Dr. Wilensky.

165

 
DR. WILENSKY: I think that your questions point out
to the need for several strategies that interlock with each other
and, in particular in this case, the concept of the medically
uninsurable risk pool. The issue that you have raised is what do
you do with individuals who have a very high expectation to be
high medical care users. As Carl Schramm has indicated, one of
the problems that you get into is that insurance is predicated
on the notion of high cost, low probability events that are
uncertain in their nature. You now have a case where you have
an individual that has a very high probability associated with
a very high cost.

When you have a very large group, as for most of us
who have group insurance, that has not been so much of a problem
because there are so many people to spread that risk over. But
it is precisely why the concept of a pool for the medically
uninsurables, people who, by their very nature, have high
expectations toward medical use, is such an important adjunct
if we are in fact to maintain our system of employer-related
group insurance for the eighty five percent of the under sixty
five population who have private insurance.

So, the concept of having a mechanism where you would
have a subsidy that would recognize the facts that: these are
people with high expected use; they could not in fact afford to
pay the actuarial fair premium, it would be an astronomical sum
for that small group of people; it has a direct subsidy so that
these individuals are paying the share of expenses that the
state, or it could be the federal. Although they usually regard
it as state because the state is a large enough entity, this
becomes an extremely important mechanism if we are indeed to
continue with our system of private employer-related health
insurance.

CHAIRMAN WATKINS: Ms. Lehnhard.

MS. LEHNHARD: I support what Dr. Wilensky just went
through but I want to clarify for the record that Blue Cross and
Blue Shield plans who represent about half of our enrollment
don’t assess someone’s medical risk before they offer coverage,
even in the individual market. They don’t ask you if you’ve got
any medical problem. They may do that for the purpose of the
pre-existing period, which every insurance program has to have,
including Medicare. But, once you are past that pre-existing
period, say six months, they’ll insure you for anything. You can
call from the hospital bed with AIDS and get coverage. I would
also mention, although I think it’s been about six months since
we did the survey, no Blue Cross and Blue Shield plan is
currently using the HIV test to screen as a condition of
applying for individual coverage. Some of our plans do medically
underwrite for individual coverage but they’re not using the HIV
test at this point.

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CHAIRMAN WATKINS: Yes, Dr. Makadon?

DR. MAKADON: I guess I just wanted to respond and say
that, as a clinician, I don’t think that epidemics recognize the
existence of individual markets and that patients who have
problems have them regardless of who their payer for health
insurance is. They have the same problems, the same need, the
same kind of care. Segregating people out by being in small
groups or larger groups makes it really hard when an individual
goes from one to another and it makes it hard on providers and
institutions providing care when you’re trying to provide a
reasonable level and reasonable consistency of care.

I think that the epidemic points to the need for much
more standardization in the kinds of benefits that are offered.
Epidemics in the past have caused us to have very extraordinary
responses in terms of recognizing major problems in our health
care system. The cholera epidemic made us realize that we had
no way to take care of the poor in this country when public
hospitals began to develop in the mid-nineteenth century. I
think similarly AIDS points out many of the major flaws in our
health care financing system, many of which relate to, I think,
some of the gaps in coverage between one system and another.

I say that even if you want to stay with an employer-
based insurance or private insurance industry, there need to be
some form of standards for the benefits they should provide.

In addition, I believe the federal government does need to get
involved in trying to enforce these standards and help finance
it. At the very least, some sort of re-insuring system so that
private insurers could continue to take care of patients with
AIDS without being at any disadvantage, and with no incentive
to discriminate against people who are HIV positive, would be

a reasonable thing to explore.

CHAIRMAN WATKINS: Dr. Feinberg?

DR. FEINBERG: Admiral Watkins, you raised a very
important question at the opening of your remarks and that is
the problem of discrimination. It’s troubled me as I’ve been
listening to many of the responses because I don’t think any of
us have really tried to take that particular question on. As I
thought about it, I realized that, although we’re faced with this
terrible epidemic and with great concern about protecting the
rights of the individuals who have HIV-related illnesses,
nonetheless I don’t know that this is particularly different
than the problems of anyone who has an illness in our society.
The patient with diabetes, the patient with epilepsy, the patient
with cancer has exactly the same problems of trying to get
employment, of trying to get insurance, of trying to maintain
confidentiality, of trying to be a member of our society.

167

 

 
 

Unfortunately, our society looks askance at ill people, has
always done it, it may well be part of the fiber of our being.

I recognize the problem as you state it and I’m troubled by it,
but I’m not sure that there are ever going to be any real answers
to this particular question.

CHAIRMAN WATKINS: Well, I would disagree. I think
this is unique in many ways. We’ve been told that by countless
witnesses. It isn’t quite the same as the other diseases that
you mentioned which have grown and evolved over time to a
certain degree of acceptance. I think that clearly there’s
overwhelming, compelling evidence that it’s very difficult for us
to encourage seroprevalence data gathering, and the best kind of
health care for people who are HIV asymptomatic at this time
because people are afraid of what will happen to them. I think
we have a new ball game that’s exposed a lot of additional
problems. We’re trying to solve two dilemmas, care for the
individual and protection of the public health, and both are
involved here. It seems to me if the goal is to try to get to
the point where people are willing to come forward -- let’s say
we had the cure today. I think it would make most of this
discussion moot. Okay, but we don’t. It seems to me that we’re
in that portion of this particular disease of rejection,
denial, condemnation and so forth. Clearly, we’re in that right
now. I don’t like to throw it on the heap of we can’t do better.
I really believe that that’s a cop out on this particular
disease.

DR. FEINBERG: I agree, sir, but, at the same time, I
think that historically it’s only been when there’s been valid
treatments available for these other diseases that they come out
of the black cloud of discrimination and all the rest of it.
Maybe our efforts in relation to confidentiality and
discrimination should be directed more towards the research end
of things and trying to find some --

CHAIRMAN WATKINS: Well, certainly we’re doing that,
too, I believe. Everything goes in parallel here. Mr. DeVos.

MR. DevoS: I think the insurance industry is being
very consistent. You’ve been discriminating against my teenage
kids ever since they drove. So, I don’t think there’s any
inconsistency in that at all and if you are a private carrier,
you have to figure out where your risk is and what you’re going
to do. But that’s only one form of payment here and people can
buy it or not buy it. In the corporate world, which is another
form of your major payer, we buy it but it still comes out of the
hide of the people that work every day. If they buy it from you,
it comes out of them. If it comes out of the government, it’s
going to come out of their hide, too. So, no matter where we go
as we search for solutions as to how to pay for this, the poor
guy that goes to work every day is going to pay the bills. Now,

168

 

 
they’re all trying to scramble to get somebody else to pay more
of it. That’s what you have. You have a shifting. Some
witnesses suggest that we ought to expand Medicaid, that the
government ought to do according to the College of Surgeons, but,
on the other side of that, we don’t talk about how we’re going to
control fees and costs. 1'm not being critical. I’m just saying
we've got all this dilemma of everybody trying to dodge the
bullet and come to an answer.

Maybe you two guys can help me resolve it. One of you
says we need an AIDS specific policy and the other says we ought
to just stick with a general policy. I tend to agree with you,
Dr. Feinberg. We’ve got millions of people with all sorts of
diseases who’ve got similar problems. Maybe Dr. Makadon could
tell me why you’re going for a specific policy. I’ve heard some
of it here but how are you going to take care of all the rest
of the people in this country? When you talk about home care,
we're going to pay $100 a day, $50 a day, what are all the
people who’ve got handicapped children or who’ve got other
responsibilities -- every mother should be paid if they have to
stay home and take care of a sick child every day. You’re going
to have an awful problem with that if you get AIDS specific. I
just wonder where you want me to take that.

DR. MAKADON: I think it’s an important question. I
did say that my preference in terms of an approach would be to
look at a universal system to care for everybody because I think
that without that we’re always going to have gray lines, gaps and
problems where people get inconsistent care because they’re
somehow covered in different kinds of systems. I said, short of
that, from my perspective as a clinician and someone who cares
for patients, I believe that there are issues of discrimination
that are present in this epidemic that are not true for people
with other diseases. I think that some of that relates to fear
and prejudice. I think a lot of it relates to economic issues at
this point in time. If we could overcome the economic issues, it
would be much easier for people to provide care for AIDS patients
and to feel comfortable doing it.

So that’s why I think, short of a universal system
which would apply to everybody, we need to look at AIDS specific
initiatives in order to confront what is going to be a major
problem three years from now. We are not going to have a major
increase in the number of people with cancer. We’re not going to
have a major increase in the number of people with heart disease.
We are dealing with taking care of people who are coming to our
hospitals needing care and now they are beginning to be turned
away. This is a major problem that has to be faced by this
committee and by this country if we are going to be able to be
proud of ourselves several years from now.

CHAIRMAN WATKINS: Mrs. Gebbie.

169
MRS. GEBBIE: Two areas I’d like to get some
clarification on. The first relates to increasing our
understanding of what’s going on today and our need to get
better predictive models. It’s not clear to me from the
testimony we’ve heard so far how vigorously the insurance
companies are involved with groups such as the Rand Corporation
from whom we heard yesterday, mathematical modelers, research
organizations which are trying very hard to both analyze existing
data and set up consistent categories for future data collection
that would facilitate that process. Are you in on that or are
you outside of it? If you’re not in on it, what’s going on?

MR. SCHRAMM: Commissioner, we are in the middle of
looking at the feasibility right now of a joint claims data file
tnat would be shielded in every conceivable way and coded in
every possible way inside the insurance industry that we feel
would be useful for our purposes in terms of getting a sense of
the most therapeutically efficacious and efficient ways of
offering care. We have discussed this project with a number of
groups and individuals, including your witness yesterday from
the Rand Corporation.

This would be the best source of data in terms of
being able to profile the nature of the disease, at least as it
is covered, a population that we could follow. Of course, given
that there is a demographic change in the nature of the epidemic,
the number of persons who will be privately insured appears to be
eroding over time as the epidemic changes. We are right now in
a feasibility study to see if we can bring the companies together
to create an encrypted and coded data base. It would be
available, of course, to Rand or anybody else.

MRS. GEBBIE: And, in setting it up, are you in
consultation with those people outside the insurance industry
who have been struggling with this problem who already have some
senses about data sets or definition of terms or that kind of
thing? Or, are you doing your own thing first and then you’re
going to make it available to others?

MR. SCHRAMM: No, I think our record is clear that
we're communicating with virtually everybody in this area through
the American Society of Actuaries and directly with researchers
of every stripe.

MRS. GEBBIE: Dr. Wilensky, you’ve worked with some
of this data. Is this getting mixed in to the general pool of
information?

DR. WILENSKY: I think the bigger concern that has
existed among people in the research community is the need for
broad base research that gets beyond the direct user population.

170
 

 

I think it would help with what Mr. Schramm has indicated to have
insurance records that would go. It is an issue that would
require an enormous amount of sensitivity of working with
providers of care and people with AIDS directly. I think we are
going to have great difficulty knowing where we are and knowing
the cost of alternative options which any responsible commission
or group of people is going to insist on knowing before they make
recommendations without going out and doing population base
studies that are not just dependent on users. You certainly
would want to over sample in various parts of the country, but I
think we are going to have to face the problem that if you want
to know who you don’t know about, you really need to do
population-based surveys. It would require a lot of care.

We do spend a lot of money on other things gathering
information. We have put almost no money to date into this
particular issue of knowing who is out there, what kinds of
expenditures they are incurring, where they receive their care.
There have been very spotty studies. There is one study underway
now to try to arrange some protocols on the research basis but
there is no funding at this point that is in evidence in terms
of getting that information out. I think that, while this is
certainly a piece of information to help, it will by no means
satisfy the basic information needs.

Just as a follow on, we who are asked to propose
alternative strategies for financing were asked to put costs
associated with them. That is a responsible request on the part
of the Commission. The fact of the matter is, based on our
almost complete lack of reliable data, any attempt to seriously
put a cost estimate on any broad based strategy such as the ones
that have been mentioned at this table would flying in the dark,
to put it kindly.

MRS. GEBBIE: To close this question, I would direct
this specifically to Dr. Wilensky and Mr. Schramm, but also to
any other panel member who had ideas on this. If there are
specific recommendations which you think we ought to make about
that need for future data, either policies about data collection
or content of data or groups that should be assembled, if you
would write those down and send them to us, it would be very
helpful. We made the same request of other people concerned in
this area. Your perspectives, I think, would broaden that whole
issue for us.

DR. WILENSKY: We would be glad to submit that
separately.

MR. SCHRAMM: Commissioner Gebbie, I might just add one
other thing. This relates to the problem of stigmatization that
has been raised by Admiral Watkins and Commissioner DeVos. We
know that last year we paid well over $100 million in claims.

171

 

 
 

 

Obviously I’ve shared some indications with you as to what our
profile looked like in ’86 versus ’87. There’s no question,
however, that what we know inside our insurance data system is
a serious underrepresentation of the actual claims because, as
you know, with this disease, and like many other diseases, there
is a conspiracy on the part of the patient and the physician
to misrepresent the diagnosis, not for the recovery of
indemnification, but for other social reasons that connect to
it.

The first issue that we are facing inside insurance
is to see if there is some way we can assure physicians that the
payment decisions will not be impacted once a person has active
AIDS symptomatology so we would stimulate physicians so that we
could at least get a better handle on the data in order to
provide a better profile of people that are being treated and
covered.

MR. SCHATZ: I just want to comment on the comment.
I agree with you, Mr. Schramm, that people often do not want
insurance companies or others to know that they have AIDS for
broad social reasons, but I can tell you I get an awful lot of
number of calls from people saying, "My God, do I have to tell my
insurance company that I have AIDS? I’m afraid they’re not going
to pay my claim." So, I think that in fact there is a more
direct relationship and that does cloud the issue. The problem
is it’s hard to get data on costs when people don’t want to
report that they have AIDS.

DR. WILENSKY: It is why I think that, away from the
paying mechanism and away from the testing mechanism, doing a
independent, very carefully designed population-based survey is
the only way that you are going to get accurate information.
There are historically, surveys that have been done on some
incredibly sensitive areas where, if they are done with people
who know what they are doing in the survey business, you can in
fact provide enough sensitive assurance to the individuals you’re
surveying that they will tell you about a variety of very
sensitive issues, including drug abuse problems and including at
least what historically have been very sensitive issues.

I don’t want to discourage Mr. Schramm in any way from
what he’s doing. If we are going to know about the incidence and
the costs and the alternative sources of care and be able to use
that kind of information to make sensible policy and to know what
we’re getting into before we adopt a new type of fiscal or
delivery system, we are going to have to invest some money in
getting some nationally representative data and that is just not
being done. But I would very pleased to give you some more
information about how to do that.

MR. SCHRAMM: Mrs. Gebbie, to make my point clear, I
endorse Dr. Wilensky’s approach as the foremost need in terms of

172

 

 
Gata. Our data set will always be inadequate to address all the
important questions and the only way to do this is with a broad
population-based, controlled study. There’s no question that
that’s the best way to travel.

MRS. GEBBIE: The second area I’d like to hear you
explore briefly is a follow up to some things we started talking
about yesterday. A number of witnesses and some of you, and I
don’t remember now which ones, have suggested that moving toward
quicker enrollment on Medicare or ways to smooth the passage to
enrollment on Medicare is an ideal thing that we ought to be
doing. However, it hit, at least me, like a ton of bricks that
that has in it an enormous flaw because MediCare, as it is now
structured, fails to cover several of the critical services for
people who have this disease, prescription drugs, some of the
outpatient care and so on. It almost starts sounding like a
false promise to move in that direction.

On the other hand, states who are burdened with the
cost of Medicaid find that appealing because it’s fully federally
financed and gets you out of an economic bind. It strikes me
we're going to have to find something that’s neither one nor the
other but a mix. I would appreciate some more comment on that.

DR. WILENSKY: I think that you will hear probably in
your next panel an even more compelling reason why Medicare
ought to be looked at with some concern and that is the fact that
we are heading toward a real fiscal problem in our basic Medicare
system because of the aging of the population as it stands any
way. To put an additional burden on the MediCare system when its
financial viability after the mid-1990s is already questionable
strikes some, particularly people like Dr. Roper, as not a very
wise idea.

It was really for that reason that I had raised the
issue of using a stop loss provision for Médicaid that in fact
did not depend on the Medicare system, that is using a block
grant trigger mechanism that comes in when more than a certain
share of Medicaid dollars is spent on AIDS. I think, in
addition, the issue you are raising that the coverage under
Medicare may not be ideal is legitimate, but the first and
foremost question is is it reasonable to burden a system that is
struggling as it adopts catastrophic insurance and that bill is
in the conference right now trying to remain budget neutral but
even so, with the particular year in some question, by the late
1990s heading for some real problems. That just seems to not be
the right move to do unless we are willing to make some major
financing changes with regard to Medicare, also. Then, we have
to recognize it’s not Medicare really that’s helping us out.
It’s whatever is going to finance the additional cost to
Medicare. I think that may look like an easier solution than
in fact it will be.

173

 
 

 

DR. FEINBERG: Commissioner Gebbie, I think that,
recognizing all the limitations of Medicare coverage, there still
is one area that Medicaid does provide coverage and that’s for
hospitalization. It would seem to me that, at least some of the
people with the acute AIDS syndrome who are ill who require
hospitalization and who fall into that period of time where they
have no insurance coverage, that this at least is some coverage
where none may exist altogether.

MRS. GEBBIE: May I just stop and push you a little
bit on that because what that sounds like to some people is
adding to the perverse incentives to use the most expensive
option available rather than looking at other options.

DR. FEINBERG: Yet there are some AIDS patients that
Dr. Madakon can well support who under no circumstances are going
to be able to be taken care of at home or in alternate settings
like Hospice. They really need hospital care. They’re
desperately ill. And if that option is not made a little more
easily available by shortening the time span before they’ re
eligible for Medicare, which any other disabled person in this
country is entitled to. I think we’re not sharing the burden.

MRS. GEBBIE: Dr. Makadon?

DR. MAKADON: Yes, I think that you raised an
important issue and I agree with Dr. Wilensky that it is a
Medicare -- the Medicare program is in trouble financially in
the future, but we do need to look at a major new way of how we
finance health care. I look at the financing mechanism somewhat
separately from the benefit package. Medicare would make a
lot more sense for everybody, and in response to what Mr. DeVos
asked earlier could probably be a much more cost effective
program if more care could be provided out of hospitals. I
would first look at Medicare to see how to make that happen.

For example, I understand that under the catastrophic
program there is a consideration of adding home antibiotic
therapy to the Medicare program. It’s hard to send an elderly
patient home even if they want to go, if we can’t provide the
medications for them at home that we can provide in the hospitals
here. So you’re absolutely right about that.

But I think that the Medicare vehicle is an
appropriate to look for to look at for AIDS patients. We may
need to change the benefits. And there is no questions that
there needs to be an additional way of financing that program
whether it’s through additional taxes or other kind of federal
efforts. It certainly makes sense though as a mechanism, and it
certainly would cover a whole range of people within one program
without requiring that they go from program to program and

174

 

 
 

 

therefore change benefits from time to time. It doesn’t seem to
make sense to me to have someone on Medicare for a period of

time and then transfer to Medicaid. It would make much more
sense to have them all covered within one program. Then you can
develop a reasonably consistent benefit package based on some of
the data which is very badly needed in terms of the kinds of care
that people need and the kinds of costs that we need to
experience.

MRS. GEBBIE: Ms. Lehnhard:

MS. LEHNHARD: I would reinforce your concern about the
benefit package under Medicare being too acute care oriented.
For example, the home health benefit, and we administer, I think,
about 90 percent of the Medicare program by the government’s own
decision, is a very limited benefit, and in fact many people who
stabilize can’t stay on the home health benefit because you have
to be improving all the time, and clearly many AIDS patients will
reach that point where they’re not improving.

We supported, like Dr. Wilensky said the Medicare
program, getting rid of the categorical link and raising the
income standard, but I think it’s also very important to put ina
strong incentive for the states to use case management or you’1l
be back to the acute care model.

Some of the states have experimented with, I don’t know
whether they’re calling it case management or home care, but we
have numbers we’d be glad to provide to you showing that case
management is not only a tremendous savings, but it lets the
patient stay where they want to be.

MR. SCHATZ: Yes. I wanted to point out one of the
ironies about Medicare when we’re talking about people with AIDS
that is the vast majority of people with AIDS don’t survive long
enough to qualify, so where this issue is moot in most instances.

So I think this is one of the important problems in
terms of Medicare. The obvious answer to that is to try to get
some changes in Medicare while we’re trying to change everything
else that we’re trying to change and put it on our wish list.
But I think also there is a problem of what happens to people
after they drop off. And that’s literally what happens after
COBRA.

People say, okay, well, they have to wait from between
18 months and 29 months. -- people without access to health care
don’t just sit around and wait -- what happens is people who
don’t have access to health care is they die. So that certainly
in the absence of a more systemic solution such as national
health insurance, getting people, extending COBRA or amending
COBRA to allow more people to be eligible for COBRA, on to the

175

 

 
 

 

point where they get on to Medicare, it’s better than leaving it
the way it is, but it sure leaves a lot of problems as well.

MRS. GEBBIE: Thank you.
CHAIRMAN WATKINS: Dr. Lilly?

DR. LILLY: The first thing I need to know is in this
morass of mechanisms that hardly anyone understands, and I am
among those who do not, I would like to have COBRA explained to
me. What is it and what are it’s limitations?

DR. WILENSKY: COBRA, first of all, the term is
Consolidated Omnibus Budget Reconciliation Act. It was passed
in 1986. My understanding is that it was somewhat of an
afterthought sneaked in before some of the people who were going
to get impacted by it realized what had happened. I don’t know
whether that’s true. Carol can indicate it. What it does is
allow for an extension of employment-related coverage. An issue
that is not by any means one that has only come up as a result of
AIDS, since we rely on employer-related insurance --

DR. LILLY: That much I’ve understood.

DR. WILENSKY: There are two pieces, the first part
says that anyone who has been laid off their job or lost a job
can purchase for a period of up to 18 months the insurance that
they had had under their employer provided the employer is of a
certain size. I believe it’s 25 employees. They can purchase
that insurance and the employer can charge them a premium of 102
percent, slightly more than the premium that they are employer
plus the employee was paying. It is at the employer’s discretion
as to whether or not the employer continues to finance any of
that.

If you are a widow or a divorcee or a dependent, you
may purchase this group insurance for a period of up to 36
months, again at 102 percent of the group premium. So it is a
way to allow individuals either because they have lost their job
or because they have lost their attachment to the person who had
group-related insurance to continue with the group policy at the
cost of the group policy, but not making the employer finance it.

DR. LILLY: This is not applied to firms that are self
insured, is that correct?

DR. WILENSKY: No, this is national legislation and it
supercedes all other laws. So somehow, and we raised this in
other discussions, somehow this is not deemed to violate ERISA
and the pre-emption that ERISA provides. This is for all
employers that have at least 25 employees.

176

 

 
 

 

MR. SCHATZ: Actually a correction. It doesn’t apply
to the federal government, which I believe has more than 20
employees, and to religious organizations. And also another
important point which Harvey alluded to earlier is that once you
have another job, you lose your COBRA benefits. So there can be
a dis-incentive to getting a job under COBRA because most jobs
will exclude payment for pre-existing conditions. So if your
new coverage is less than your old coverage, you still have to
automatically drop your COBRA coverage.

DR. LILLY: Okay. I’d like to ask Dr. Makadon a
question. We’re here to deal with AIDS. In your presentation
you -- oh, I’m sorry, it’s Mr. Schramm who said this. In your
presentation, Mr. Schramm, while we’re supposed to be considering
AIDS, one of your recommendations is to prohibit the use of
sexual orientation in underwriting. Why do you put that into
this session?

MR. SCHRAMM: Precisely because you are dealing with
AIDS. It is an issue that transcends AIDS obviously, but I think
AIDS highlights the issue, and it’s a practice that should be
prohibited.

DR. LILLY: I’m just trying to get on the record what
the relationship is between AIDS and your recommendation
specifically. In what way would this help with the AIDS crisis?

MR. SCHRAMM: Well, I think it goes to some of the
concerns that Mr. Schatz has raised today in terms of queries as
to sexual orientation.

DR. LILLY: Well, maybe Mr. Schatz could answer the
question.

MR. SCHATZ: Yes. I served on the AIDS Advisory
Committee of the National Association of Insurance Commissioners
and we developed guidelines. It was largely members of the
insurance industry as well as people from consumer groups. And
we developed those guidelines because of the tremendous
discrimination by insurance companies against gay people in
response to the AIDS crisis regardless of their medical status.

So we’re still seeing that problem as a tremendous
problem, but I think, you know, I do appreciate the support of
the HIAA in, at least, officially opposing it, although I haven’t
seen yet vigorous efforts to get the insurance departments to
pass those guidelines.

I want to say also something related to that. We were
talking about employment discrimination, and one of the things
that actually --it’s too bad Mr. DeVOS isn’t here because he
could hear me agree with him on something. But we were talking

177

 

 
 

 

about the problem of discrimination in general, and one of the
things that I’m concerned about is the use of experience rating
against employers and how that creates an incentive for employers
to discriminate not only against people with AIDS but against
people with a variety of handicaps.

Because what happens is employers have a sense that
this person who is handicapped in a variety of ways is going to
raise my premiums and therefore that obviously is a dis-incentive
to hire that person. So I think that is an issue which needs to
be considered also in the interplay between insurance and
employment discrimination.

MR. SCHRAMM: Mr. Lilly, could I follow up for one
second. I’d just like to say for the record, we and the ACLI
were parties to that treaty before the NAIC. We’ve encouraged it
and we are lobbying aggressively for the adoption of those
standards by each state insurance commissioner. And I think it’s
fair to say and it’s important to public policy making. Ben said
that this was invented to deal with the myriad abuses by
insurance companies, and I think it’s proper to say by the
punitive abuses.

I think it’s important to point this out and I
apologize. My own background is that I have been a professor
of public health at Johns Hopkins for 14 years before taking this
seat. And in making public policy we can always find people in
markets who feel abused and they have a sense of abuse, and who
may or may not have been really abused.

Indeed the report of 100 people or 1,000 people or
5,000 people, each being a dramatic recitation on an individual
basis, I think we have to examine every single one of those cases
very carefully and see whether or not there is systematic abuse
and systematic abuse that is grand enough to energize a whole
public policy systen.

Anticipating that the incentives for abuse are so
strong in this area, we have endorsed an NAIC guideline that Ben
worked on, and in fact we lobbied for it’s passage and adoption
by every state insurance commissioner.

DR. LILLY: The most disturbing statistic I’ve heard
this morning is what Dr. Makadon told us, and I think I’m
quoting you correctly, that in a phone survey you found only 4
of 190 physicians, is that correct --

DR. MAKADON: It was a phone survey done by a
community health center which cares for many AIDS patients in
Boston, actually to attempt to get them to be able to achieve
medically under served status and be eligible for national health
service core physicians. And they were looking at the need for

178

 

 
physicians to care for AIDS patients in the Boston area. They
did a phone survey and called a thousand internist’s offices and
spoke to 193. Of those four clearly said that they would see
patients. Four said that under certain conditions they would see
somebody who was HIV positive.

DR. LILLY: How much of that is for financial reasons?
Seeing AIDS patients is not ruminative.

DR. MAKADON: Well, there are a lot of reasons. I
think a lot of it is financial. A lot of it is fear. A lot of
it is concern about not knowing how to take care of patients.

In order to help us prepare to take care of patients, we need to
deal with all of those issues.

DR. LILLY: Again, that was the most disturbing
statistic I’ve heard this morning out of a large number of
disturbing statistics.

DR. FEINBERG: May I comment, Commissioner Lilly? I
think you’1l find that there are geographic differences though in
the way AIDS patients are handled. It’s my understanding in
having attended some meetings out in San Francisco, there are
many physicians, for example, in the San Francisco area who are
knowledgeable about AIDS, have no concern about having AIDS
patients in their private practices, and take care of them the
way they take care of any other patients. The east coast is
somewhat different. Some of it is related to the fact that much
of AIDS, for example, in New York where I’m from it’s a drug-
related illness and it’s a considerably harder to find physicians
who are knowledgeable or willing to take on those kinds of
responsibilities --

DR. LILLY: Is it really a coastal matter in San Jose,
for example? Which extreme would you be closer to, the San
Francisco extreme or the 4 out of 193 extreme?

DR. FEINBERG: I don’t know the answer to that.

DR. LILLY: I’m not sure that San Francisco isn’t the
exception rather than the 4 out of 193 rule. Once you get out of
the eastern half of San Francisco, I would have to say that
basically it’s the other end on the whole.

CHAIRMAN WATKINS: Dr. Lee?

DR. LEE: None of the options are obviously
satisfactory to anybody in the panel, and none of the options
are easy for us. But we do have to face it, and the statistic
yesterday was 37 million. Now, if you disagree with me, just
stop me. 37 million Americans, no insurance, no private
insurance, no Medicare, no Medicaid. So they are our problen.

179
Now, this is obviously a subject for a five-day
seminar, but let me dive directly to one point. Personally I
can’t imagine that private insurance is ever going to be the
answer for the reasons stated by Mr. Schramm. It’s a problem
that I don’t think we can expect the insurance industry to pick
up, and it’s not going to pick it up anyway because it looses
money and they are not charity institutions.

Now, is a high risk pool going to work? I can’t
imagine that it will mainly because it would be terribly
expensive and because of the patient population we’re dealing
with. As Dr. Feinberg says, we have drug abusers, and we have
unemployed gays who are down on their luck to put it mildly.

Now, I’m not worried about the doctors. When I look at
unemployed people, people with no housing, and'drug abusers, as
Dr. Feinberg and Dr. Makadon know, the hospitals end up picking
up these problems, they end up picking them up in their clinics,
both the city hospitals and the academic medical centers in New
York City. Every hospital I’m aware of runs an AIDS clinic, and
you can walk in there. I know it happens at Cornell where
Dr. Feinberg and I are. You can walk in there and the social
service people figure out the money. The doctors really don’t
deal with it.

Most private doctors are not going to deal, Dr. Lilly,
with Medicaid and since Medicaid paid for 70 percent of the
cases, they are going to end up in the hospital. And the reason
you don’t want to mess with Medicaid is the paperwork alone will
kill you, never mind that you’11 lose money hand over fist.

So they end up with the hospital. Now, I’m worried
about the hospitals. As far as I can see, it has to be a
Medicare or Medicaid solution. Right now, just Blue Cross-Blue
Shield basic policy is, if you pick it up yourself almost too
expensive for me. How much does it cost? $150.00 a month?

MS. LEHNHARD: I believe individual coverage in New
York is about $80.00 a month.

DR. LEE: Well, I just recently had to field it for one
of my employees and it certainly was a lot more than that. I’d
say it’s close to twice that. Maybe it’s a slightly better
progran.

Now, drug abusers and unemployed people can’t pick up
those types of premiums. I mean no matter how you structure it,
they’re not going to pick it up. So I have to think that
Medicare and Medicaid is where this thing is going.

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I’m a little, Dr. Wilensky, discouraged by Medicaid
too, because the states are not dependable, and AIDS walks and it
goes where Medicaid pays. So New York and California, we've
listened to the mayor of San Francisco and the mayor of San Diego
and they are in deep trouble financially. So Medicaid as it’s
currently structured, I don’t see it working either.

So Medicare or a combination of Medicare/Medicaid seems
to be the answer, and whether we can pay for it or not, we/’re
going to have to face it. I think we’re going to have to face
it, and as the other commissioners have said, Medicare is going
to have to pick up out-patient. I don’t understand why in God’s
name the national insurance programs don’t encourage out-patient
coverage when it’s so much cheaper. And I would think that we
would really stress that.

Your business about refundable tax credits and all
this, Mr. Wilensky, they’re great for me maybe, but not for the
drug abusers. These people, they don’t know what planet they’re
on, and their sex partners are already welfare dependent,
completely confused by the system. You have to be a genius to
work out the systems as it stands now. So I would think the
answer is Medicare/Medicaid, and mainly Medicare and we have to
figure it out. Now, what does the panel think about that? Where
do you disagree with me?

There is one other thing that a fellow brought up
yesterday which was good and that’s philanthropy. Maybe the
Gay Men’s Health Crisis, the AIDS organizations we saw in San
Francisco are doing a whale of a job in their voluntary --
they’re philantrophic organizations. I mean you can get better
answers through these organizations than from the government at
the present time. Well, anyway, do you disagree with me?

DR. WILENSKY: I disagree with part of your statement.
I think that the drug abusing population and individuals who are
either, because they have drug-related problems or who are
otherwise very poor, are not going to be able to be taken care of
by the first two mechanisms I spoke about, and that indeed they
will require entirely or almost entirely public sector support,
and we can decide whether it’s Medicare or Medicaid. So I don’t
question that.

I think it is important and you have heard these
statistics much more than I have to remember that the rest of the
country is not New York, and that while New York is being hit
with a very severe drug-abusing population as a majority of its
cases of AIDS, that appears to vary according to where you are in
the country. I don’t know whether we know what will happen with
increasing number of AIDS cases say in Texas, Florida, Chicago or

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in Detroit, whether or not they will be primarily drug abusing
and therefore people who are going to be primarily or entirely
public sector or not.

I raised the first two in part of some earlier
conversation that I had with Mr. Schatz and other people that I
have been speaking to as a way to try to protect individuals with
AIDS who are not poverty stricken when they start the disease.
They have some income and assets, and who I think deserve a way
to try to maintain some sort of financial stability as best they
can in the face of this terminal illness. And it was really to
try to provide a way to allow them to make use of some of the
devices that exist and continue coverage such as through COBRA
and the refundable tax credits so you at least get to use pre-
tax dollars, or through a --

DR. LEE: But Dr. Wilensky, I was addressing the 37
million that have nothing.

DR. WILENSKY: Okay. Well, now that is an area in
which I do claim a fair amount of expertise. And the fact of the
Matter is most of those people could indeed be dealt with by
private insurance. The majority of these individuals, not all,
but the majority of these individuals are employed, they are not
old, they are not sick. There is a question about how to get
insurance to these individuals who primarily work for small firms
and who are not now currently offered health insurance.

There is debate probably among us at this panel as to
whether we can do it through a voluntary incentive base system or
whether or not we need to have a mandatory system such as the one
that’s under the Kennedy and Governor Dukakis suggestion, but at
least two thirds and maybe as many as 70 percent of the
uninsured population can be picked up by private insurance.

Now, that says even --

DR. LEE: Two thirds?

DR. WILENSKY: Two thirds. Fifty percent are workers,
70 percent are either workers or dependents of workers who are
uninsured people. They are healthy, they are young, they are not
offered health insurance, and we have to figure out some way to
get it to then.

There is another group who are poor, who are the down
and outs, who are the homeless, who are the de-institutionalized
mentally retarded, who are people with muitiple problems, either
they are just very poor or they have other multiple problems that
make them likely to be entirely dependent on society and for
whom we will have to have publicly-funded answers.

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But when you talk about the whole uninsured
population, the fact of the matter is that most of them are
workers, are members of that population. They are not mostly
poor. They are above the official poverty line, no more than one
third --

DR. LEE: You’re talking about the gay population?

DR. WILENSKY: No, I’m talking about, you asked me
about the 30 some million. There is some debate about whether
it is 31 or 37, but is 30 something million people. Most of
those people are not poor. They do not have to have purely
public-financed solutions, and they are not gay either.

When you talk about the gay population and you talk
about the population with AIDS, again there are those who have
some income and assets when they go into this illness. I think
it would be appropriate to find some way that they do not have to
financially devastate themselves in order to receive some public
assistance. There are others among them for whom that is not
relevant, and I believe they will --

DR. LEE: Well, the fact is that 60 to 70 percent of
the people with AIDS are on Medicaid. Their health bills are
being paid by Medicaid and that by definition means they are in
bad shape.

DR. WILENSKY: I’m sure you’ve seen these numbers, and
there is an issue about how much Medicaid is being used ranging
from 20 percent to 70 percent.

DR. LEE: The poverty level is bad shape, Dr. Wilensky.
Don’t you agree? :

DR. WILENSKY: I’m sorry, I didn’t hear you?

DR. LEE: You’re talking about 25 or 75 percent of the
poverty level?

DR. WILENSKY: No, no. I’m saying that the numbers as
I understand them, and certainly if Mr. Schatz or others on the
panel have later statistics my understanding is that the
estimates to the amount that is being covered by Medicaid of the
AIDS population ranges from 20 percent to 70 percent. There are
debates about this, just as there are debates about whether
private insurance is covering 17 percent of the costs, although
reportedly Blue Cross/Blue Shield is alone covering half in
Massachusetts.

The fact of the matter is, we do not know how much
Medicaid is covering, and some people think it’s only covering
a little, and some people think the public hospitals, the

183

 

 
 

 

uncompensated care, is covered the bulk of the expenditure. That
is, it’s being cost shifted to the rest of us who have private
insurance and/or picked up by public appropriations to the

public hospitals, and that Medicaid throughout the country is, in
fact, covering only a relatively small share of the bill. There
are other people who claim Medicaid is covering as much as 70
percent.

I’m sure in New York it’s a lot higher than it is
elsewhere, but I don’t think right now we know that, or at least
my understanding is that there are major disputes about how big a
role Medicaid is playing in covering AIDS expenditures at the
present time.

DR. MAKADON: My only concern was that we not talk
about uninsured AIDS patients in exactly the same context as the
37 million uninsured Americans because a far greater percentage
of those uninsured patients, that is to say people with AIDS, are
not working and are ill. So therefore, the same kinds of
mechanisms that we would look at for the 37 million may not be
exactly as applicable, and more of them are really going to need
a lot more assistance than would people who could be --

DR. LEE: But my comments would seem to be more
applicable to the AIDS cases.

DR. MAKADON: I agree.

DR. LEE: Yes. I can’t see insurance doing it. Can
you see it Mr. Schramm really? I mean can you see it really
happening for the Blue Cross Ms. Lehnhard?

MR. SCHRAMM: Well, I think, Dr. Lee, I must be clear
that we see our role as serving a well defined market that’s
quite limited. And you know better than I the nature of the
epidemic defines a large number of people at risk as being
outside of the purview of working people who would be covered
through their employment by a private mechanism, be it a private
company or a Blue Cross company.

DR. LEE: Dr. Feinberg, what do you think?

DR. FEINBERG: I must say, Dr. Lee, I do agree with
you. Watching what’s going on, you know, in our particular
area, there’s no question that the public sector is taking a
major responsibility. I think that the College’s position has
been carefully thought out in regard to the fact that we think
there is a place for all of the different segments, but if you
were to say how much the private insurance industry would
contribute to the financing of the AIDS epidemic, I would have
to agree with you that at best it could only be a relatively
small portion of it, that much of it has to go --

184

 

 
 

 

DR. LEE: And the hospitals are having a rough time.

DR. FEINBERG: The hospitals are taking a beating on
it. MThere’s no question about that.

CHAIRMAN WATKINS: Dr. Conway-Welch?

DR. CONWAY-WELCH: A side issue that anyone could
comment on. Many of you identify the need for case management
as a cost-effective way of monitoring costs. Could you expand
briefly for me who you see as case managers and how those case
managers are salaried or paid?

MS. LEHNHARD: I can speak to that. Blue Cross and
Blue Shield plans will typically use a registered nurse to manage
the case or particular care of an individual person. And what
they try to do is single out someone who looks A-typical and
would end up in a very expensive setting like a hospital and
with some kind of expenditure that’s outside the normal policy
the benefits covering the policy could be at home.

For example, they might decide to build a ramp for a
wheelchair in the home, provide a ventilator at home, and these
things are things that would not normally be covered, because
they go outside the range of covered services. When the benefits
run out, these people often help that person find alternative
sources of financing in particular areas.

DR. FEINBERG: We, in our institution, North Shore
University Hospital, a large general hospital, we put most of
that responsibility in the hands of the medical social workers.
They take the responsibility, coordinate with the discharge
planning office and the home care office. So that all of this
is kind of coordinated that way and they take the responsibility
for each case and manage it that way.

DR. CONWAY-WELCH: And how do you reimburse those
individuals, by salary?

DR. FEINBERG: They are salaried employees of the
hospital, yes, which I’m sure part of their salaries are included
in our reimbursements rates and so forth.

DR. MAKADON: I think one thing, it’s always important
to clarify what we’re talking about when we talk about case
management because I’ve been in rooms where ten people talk
about it and everybody means something different.

I think with respect to AIDS patients what’s important
is that there be an independent person who can evaluate the needs
of the patient and then can go to the payor and say let’s make an

185

 

 
 

 

exception to your usual benefit package so that we can get this
person home or we can do this, or we can provide personal care
attendant when it’s not necessarily covered as part of their
eligibility. That individual usually should be a clinician who
can adequately assess the patient’s needs, working closely with
the primary-care physicians, and generally should be reimbursed
separately from, either whoever the pair is, whether it’s the
state Medicaid program or the private insurance company.

DR. CONWAY-WELCH: Part of my concern is the use of
case managers who are not clinicians. Social workers who
admittedly do a very good job in a certain area, but they don’t
have the total perspective in order to be able to identify
certain risks that suggest themselves early on. And I was
interested in how you all were defining that.

It seems to me as well that the idea of a case manager
as an advocate for the patient to assure a flow and less
fragmentation of care and continuity of care is one use, but the
other use is as an advocate to the person or people financing the
care to expand certain benefits. And I agree with you, I think
people don’t necessarily think of both of those uses in the same
context when they talk about case management.

DR. MAKADON: I mean there is clearly a danger that
case management can be used to narrow benefits, or to send
someone home inappropriately just by making some minimal amount
of coverage available at home, and therefore, it’s important to
realize who the person is working for.

MS. LEHNHARD: I think a good example of why you need
a clinician involved or a physician ultimately involved in case
management is, for example, home infusion therapy, the
methodology is good, the therapy is good, but you have to make
sure you have a very qualified therapist and that the risk of
that person being at home is not so great that they shouldn’t be
there.

DR. CONWAY-WELCH: Thank you.

CHAIRMAN WATKINS: We need to close this panel out.
Dr. Wilensky, I’m taken by the thoroughness of your statement
to us, your formal statement, and some of your very specific
recommendations. The only thing that disturbs me when you’re
talking about your four strategies. It hasn’t been costed out.
This is very difficult to cost out. It’s going to be very
difficult for us to make recommendations we can’t cost out.

I’d like very much, if you would be willing, to come
and meet with the executive director and myself and let’s discuss
a fifth strategy which is how to find the cost of the four
strategies. Would that be agreeable to you just to sit down and

186

 

 
chat about it because we really need to take a hard look at what
we’re talking about, and how do we get that data, and can we get
it in time for our report. Even if we were to assume the four
strategies are the valid strategies for the nation, it would be
very difficult for us to just pick them up without knowing the
cost.

DR. WILENSKY: Yes --

CHAIRMAN WATKINS: We may discourage a lot of others,
but again we’ve already been accused of throwing dollars at the
problem, which we don’t think we have. We think we’ve done it
responsibly and we would want to do this responsibly. I take
it from the other panel members, you are also nodding when
Dr. Wilensky is talking, that she has some items of merit here,
and if that’s the case, then we need to work harder at getting
to the costs. Would that be agreeable to you?

DR. WILENSKY: Yes, I would be very pleased to assist
you.

CHAIRMAN WATKINS: Thank you. Thank you very much.
It’s been a very important panel and we appreciate all of you
taking the time to come before us today.

FEDERAL APPROACH TO FINANCING CARE

CHAIRMAN WATKINS: We’d like to move right into the
next panel. We have some time constraints on certain members.
I don’t believe Dr. Roper is here yet and will not be here until
about 10:30. So we’d like to proceed with Dr. Sundwall,
Administrator of Health Resources and Services Administration,
HRSA, and Deputy Commissioner for Program, Social Security
Administration, Mr. Louis D. Enoff.

And when we complete your statements, we will, if
Dr. Roper has not arrived yet, we will continue with the
questioning, and then as soon as Dr. Roper arrives, we will
move into his statement.

(Whereupon, a recess.)

CHAIRMAN WATKINS: We’1ll proceed with the hearings now.
We’d like to have the first statement from Dr. Sundwall.

DR. SUNDWALL: Thank you, Admiral. I’m delighted to
be here again to meet with the Commission and pleased for this
chance to comment on the financing of care for persons with AIDS.

I must admit to you that I’m a bit intimidated after
that first panel. They are the real experts on health care
financing. My knowledge is limited but I’m glad to share with

187

 
you what I do know from my perspective as Administrator of the
Health Resources and Services Administration of the Public Health
Service.

As you remember from the last time I appeared before
the Commission, I had the honor of chairing, at the request of
Dr. Windom, the Assistant Secretary for Health, a government-
wide task force on health care delivery for AIDS patients. This
consisted of representatives of not only HHS but also the
Department of Defense, the VA, the State Department, and Housing
and Urban Development. The thing that characterized that working
group was that we didn’t have any acrimony or philosophical
differences or debates, because when you discuss how you provide
care for people with AIDS, there is agreement that it should be
done with compassion and humanity as well as economically and
efficiently.

Nonetheless, having said that, I think the AIDS
epidemic has exposed the obvious flaws in our health care system
that relate to long-term care, some of which you’ve talked about
today.

As we deliberated on that task force, we did have good
input from the Health Care Financing Administration. Clearly my
work in the delivery of services is tangential to HCFA; HCFA is
where the real money is. I would suggest that you consider, as I
proceed with my limited remarks, that our task force agreed with
HCFA not to seek specific changes in the Medicare and Medicaid
laws at this time.

The reasons for not seeking specific changes clearly
relate to equity and cost. But even more important than equity
and costs, we strongly endorse the position that AIDS patients
should not be treated differently under these programs than other
persons with life-threatening illnesses.

Although the task force report was issued as recently
as January of 1988, there has been progress on many of the
recommendations. One of our recommendations was that there was a
need for intermediate and long-term care facilities for persons
with AIDS. In an effort to learn more, we convened a meeting of
outside experts on this particular issue to look at what we need
for sub-acute care facilities, or facilities not in the hospital
setting.

Several concerns emerged from this panel and I/11 just
cite three of them. The first was cost. There are some
subsidies or grants from the federal government, such as the ones
that HRSA now administers under section 1610 (B) of the Public
Health Service Act, totalling approximately $6.10 million for
this fiscal year, to facilitate renovation of long-term care
facilities to accommodate persons with AIDS.

188
 

 

The operating revenue requirements for these
facilities are high, unfortunately more than we are accustomed
to in other long-term care facilities.

A second concern that was raised is that the
traditional nursing home setting as we know it may not be the
ideal setting for AIDS patients. We’ve, been surprised at the
lack of interest among the nursing home industry nationally in
getting into this area. There are some shining examples in very
few regions of the country, but nonetheless nursing homes have
been very slow to get involved in providing long-term care
facilities.

There may be good reasons for that. We’re not
altogether clear on why, but nonetheless with the nursing home
shortage, generally in many of the areas of high incidence of
AIDS, this is a problen.

The third thing that we learned is that many homeless
and intravenous drug abusers are forced to stay in hospitals much
longer than necessary because there is no place for them to go
that could provide sub-acute care. Of course this is extremely
costly to Medicaid, and it seems like bad long-term policy when
we have these patients locked in hospital settings.

Related to our need for sub-acute care facilities,
there is one other issue I’d like to bring to your attention.
That is the situation with a person with AIDS who has a
fluctuating illness, first ill and then well, and then ill and
well, remissions and exacerbations as we say in medicine. That
does not lend itself to reimbursement under our traditional
settings.

The AIDS epidemic, inherent with episodic illness,
has exposed this problem with linkage of reimbursement in the
facilities where patients can be cared for. What we believe we
need more of, and it’s proven so effective on a very limited
basis in New York, is the Bailey House where patients can live
when they are ill, but don’t need the hospital setting. A real
barrier to this approach is the licensing requirements for these
facilities which differs in many regions of the country.

For some patients their health improves to the point
where they’re able to work for a time and can contribute to the
cost of their own board and shelter and provide partial support
for living expenses. This situation has positive implications
both to the patient’s mental attitude and their psychological
well being. A problem which currently exists in this situation
is that patients who are earning money may exceed the income
requirements and thus become ineligible for subsidized insurance

189

 

 
 

 

or federal-state coverage. So that is another barrier. The
task force also addressed the need to learn more about the
viability of risk pools for the uninsured and recommended that a
national conference on AIDS patients be held.

Now, I was late coming in here this morning, and I’m
not sure that Carl Schramm and others on the first panel didn’t
talk about the recent IOM study. Was that discussed this
morning, the HIAA, HCFA, IOM study? Okay, well, that was a spin
off, I’d like to think, of our task force report, and they did
meet as recently as two months ago and had an excellent
conference.

Two of the things that they recommended from the
Institute of Medicine we think are worthy of your consideration.
The first is risk pools, and I guess there is some difference of
opinion on whether they’re affordable, but the IOM conference
did suggest that risk pools operated by states should be further
explored, and the experiences of the existing risk pools should
be carefully studied.

We thought that they did provide an attractive
alternative for uninsured infected patients where there may be
other economic barriers. The second thing from the Institute of
Medicine study we felt was noteworthy was, where possible private
insurance coverage ought to be maintained for as many persons
with AIDS as possible.

One way of doing this would be to have the federal
government pay the premiums when the individual is no longer
eligible for private insurance, or to extend the current 18
month period of time an individual would be eligible to
participate in the group insurance plan of his/her previous
employer.

I would like to discuss briefly with you some of
the financing activities related to our agency’s service
demonstration grants. In my previous appearance before this
Commission I described the HRSA AIDS service demonstration
grants. One of the lessons we’ve learned to date from our
demonstration projects is that many provide but a small fraction
of the total cost of the AIDS service delivery program. In
other words, our HRSA grants are just a nucleus. We believe
that they’ve been extraordinarily valuable as a catalyst to
bring other money together. They provided the needed financial
leverage to attract private contributions from foundations,
from state and local city governments, and so we do support the
federal government continuing to make what we consider seed
money available.

HRSA is currently conducting a descriptive evaluation
of our four initial grantees, Miami, New York, Los Angeles, and

190

 

 
 

 

San Francisco. While this study is not focusing specifically on
financing, it will give us additional insight into the financing
issues associated with the care of AIDS patients.

HRSA plans to award a second contract in June of this
year to tabulate data on service delivery costs in the four
community-based delivery systems. This will be one of the very
few studies funded to date looking specifically at costs to
support persons with AIDS.

I think the fact that I have to appear before you and
tell you it’s the first cost analysis we are able to do in our
own service demonstrations is a dramatic underscoring of what we
need to improve in health services delivery. We don’t think
there have been adequate resources devoted to that, and of course
the President’s budget is seeking an increase in that for 1989.

We hope that these new reports will provide a basis for
making some sound projections on out-patient care costs over the
next several years, provided there are no major changes in the
characteristics of the disease because of some new and improved
therapeutic interventions. And, of course, that’s something that
keeps this very much a moving target.

Finally, let me just say that any new developments in
the management of care in AIDS patients may render current models
for projecting costs obsolete. Given the fact that patients are
living longer with improved therapeutic interventions,
appropriate models for developing economic projections may be
more closely aligned with those that are developed for chronic
illnesses as opposed to what’s been normally the course with
persons with AIDS.

In closing, I would like to emphasize that the AIDS
activities of the Health Resources and Services Administration
are tangential in many respects to the key financing questions
that are the responsibility of Dr. Roper and the Health Care
Financing Administration. Our activities are designed to be able
to provide services for AIDS patients in the most cost-effective
Ianner possible.

Our service demonstration grants focus on delivery of
care in out-patient settings, and our education and training
centers, designed to train primary care physicians, health nurses
and professionals in the proper care of persons with AIDS, again
focus on economical and efficient care. The financing problems
which this epidemic poses are probably the most difficult issues
we will all have to address collectively. I want to applaud you,
Admiral, for all the work you’ve done in this Commission. I
think you and your staff have done an excellent job and we’re,
again, willing to help you in your efforts.

191

 

 
 

 

CHAIRMAN WATKINS: Thank you, Dr. Sundwall.
Mr. Enoff?

MR. ENOFF: Thank you, Admiral. I am pleased to be
here today to discuss the Social Security Administration’s
involvement in assisting persons with AIDS.

As David Rust, the SSA Associate Commissioner for
Disability, explained when he was here with you in January, SSA
shares your concern about the needs of AIDS patients, and we are
committed to providing prompt efficient and compassionate
service.

I’d like to recapitulate some of the information that
Dave provided earlier and perhaps address some of the questions
raised during his testimony in January. First, the Social
Security Administration serves the disabled through two
programs. These are the Social Security Disability Insurance
program, or Title II of the Social Security Act, and the
Supplemental Security Income program, Title XVI of the act.

Two point eight million disabled workers receive
Social Security Disability Insurance Benefits each month, with
the average monthly payment for a disabled worker being about
$508.00.

Another 2.9 million disabled and blind Supplemental
Security Income recipients are paid each month, with the average
payment being $287.00 a month.

Under Social Security workers earn their disability
protection by working in covered employment or self employment
and payments are made effective with the completion of a waiting
period of five full months after the disability begins. On the
other hand, in SSI, being a welfare program, eligibility is
determined by a needs test based on income and assets as well as
the disability. There is no waiting period requirement before
payment in SSI.

Social Security Disability Insurance is funded from
the Disability Trust Fund, built up through employer and employee
contributions, while SSI is funded from the general revenues.

Under Social Security, benefits are generally paid
without regard to the person’s income from other sources such as
private insurance, savings or investments. Under SSI, a person’s
income and assets must be within certain specified limits. In
1988, the maximum monthly federal payment to an individual under
SSI is $354.00.

Disabled individuals covered by Social Security
Disability Insurance are eligible for Medicare coverage after

192

 

 
two years of entitlement, while those qualified for SSI are
usually covered by Medicaid immediately.

It’s important to keep in mind that an individual who
meets the eligibility requirements can qualify for both Social
Security and SSI for the same period of time. Often an
individual files claims for both programs at the same time and
is entitled to SSI payments during the 5-month waiting period
before his or her eligibility for Social Security begins.
Subsequently, the SSI payments are offset if individuals become
entitled to Social Security and offset is appropriate.

We receive over 2 million disability claims a year for
payments under these two programs, and about 35 percent of these
claims are approved. In comparison we have awarded benefits in
over 97 percent of the AIDS cases, and in 65 percent of the ARC
cases, an overall award rate of 93 percent for both categories.

I’d like to spend a moment talking about the
definition of disability just so we’re all current on that.
The definition is the same for both Social Security and the SSI
programs. Disability is defined as the inability to engage in
any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected
to result in death or which has lasted or can be expected to last
for at least 12 months.

Claimants with a documented diagnosis of AIDS, who are
not working, automatically meet this definition. If a person
does not have a definitely diagnosed case of Centers for Disease
Control (CDC) defined AIDS, such as a person with ARC, we
evaluate disability considering the effects of the person’s
impairment on his or her ability to work.

The Centers for Disease Control identified AIDS in
published criteria for identifying AIDS cases in the summer of
1981. In 1983 we issued instructions in Social Security to
disability adjudicators that a person with a documented diagnosis
of AIDS, as defined by CDC, should be found disabled as long as
the person is not working.

Also in 1983, we reminded the State agencies who make
these disability determinations for us that individuals with
confirmed AIDS should be considered for presumptive disability
payments under the SSI program. A person can be found
presumptively disabled based on an allegation of disability or
blindness when his or her medical condition is such that it
presents a strong likelihood that the person would be found
disabled under our criteria.

A presumptive disability decision allows us to pay a
person who meets all the non-medical eligibility criteria for

193

 
SSI, that is the means test, for up to three months while a
formal determination of disability is being made.

Then in 1985, we issued regulations authorizing local
field offices to make a finding of presumptive disability in SSI
AIDS cases aftera confirming contact is made with a physician or
other treating source. This instruction goes out to some 1200
to 1300 locations as opposed to the 50 some State agencies. And
these payments, again, can be made for up to three months.

CDC revised its definition of AIDS effective September
1, 1987, as you know, to reflect medical advances made since the
time of the initial definition. We have since incorporated the
revised more inclusive CDC criteria for AIDS into our disability
evaluation guides.

Now, for a few statistics. Through the end of calendar
year 1987 approximately 25,700 persons have been awarded Social
Security or SSI benefits as a result of the diagnosis of AIDS or
ARC. The breakout of benefits for these persons is as follows:
28 percent have received SSI benefits, but never a Social
Security benefit; 29 percent have received Social Security, but
not SSI; and 43 percent have received both Social Security and
SSI at some time.

At the end of 1987, 11,200 persons with AIDS or ARC
were alive and receiving benefits from these two programs. The
breakout for these 11,200 is 28 percent receiving SSI only, 55
percent receiving Social Security payment only, and 18 percent
receiving both.

These differences demonstrate how the number of persons
receiving benefits from the two programs can vary, and may give
you some indication of why it’s difficult to make generalizations
about how AIDS impacts these two programs.

Many AIDS and ARC beneficiaries receive SSI benefits
while completing the 5-month waiting period for Social Security
disability benefits. Upon completing that waiting period, they
become entitled to a Social Security payment large enough to
completely offset their SSI payment.

The number of new disability awards on the basis of
AIDS or ARC has steadily increased ever since 1982, and we
estimate that its rapid growth will continue. However, the
number of persons currently receiving Social Security or SSI
based on AIDS or ARC is less than one percent of our total
disabled population.

DR. LEE: Could you give me that statistic again?

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MR. ENOFF: I said the total number of persons
currently receiving Social Security or SSI based on AIDS or
ARC is less than one percent of the total disabled population
that we’re paying benefits.

Over $20 billion was paid to disabled workers and their
dependents from the Social Security Disability Trust Fund last
year. Approximately $45 million of these payments were to AIDS
or ARC beneficiaries.

Thus far, a person eligible for SSI due to AIDS
receives benefits for an average of 10 months after onset of
disability, at an average of $225.00 a month. This results in
a life-time cost to the program of about $2,250.00 per case.

Out of $7.6 billion paid in SSI benefits last year,
about $10 million was for AIDS or ARC recipients. High mortality
rates and changes in the income of the SSI case load recipients
impact significantly on our efforts to project the cost of AIDS
to this program. We did make projections of the effects of AIDS
on the Social Security programs for the 1988 annual report of
the board of trustees that will be released next week, and these
projections reflect the effect of AIDS on general death rates in
the U.S., on the number of deaths each year, on the size of the
living population, and on the size of the working population, as
well as the size of the Social Security beneficiary population.

Projections for the 1988 report are based upon
available estimates of the numbers of HIV infections, AIDS cases,
and AIDS deaths by CDC through 1991. While these projections are
very difficult to make, we believe that over the next four years,
the number of disabled workers receiving Social Security
disability benefits due to AIDS will increase to four to five
times the current level.

We are currently engaged in extensive study and
analysis aimed at further developing our long-range projections
of the effect of AIDS on both Social Security and SSI disability
programs, and I would note that the trustees who met yesterday
asked us to consider trying to develop these long-range
projections for next year’s report. It’s an annual report.

We have been consulting with the CDC concerning
possible alternative projections, and these projections will be
revised and updated as additional information becomes available.
I’1l run through those statistics rather quickly, and then I/1l
be happy to try and answer any questions that you may have.

CHAIRMAN WATKINS: Thank you, Mr. Enoff. I don’t see

Dr. Roper yet, so I would like to open up a comment and then a
question of Dr. Sundwall, and perhaps both of you.

195

 

 
 

 

We’ve heard before the statement made by Dr. Sundwall
that we should not treat HIV-infected individuals different than
those affected with other life-threatening diseases. There’s an
implication there, and I think you would agree, we’re not
treating people with other life-threatening diseases very well
today.

I think we’ve got to be very cautious because our
experience on this Commission has been that we’ve exposed some
significant flaws in the health care delivery system of this
nation. As a nation, we aren’t keeping up, and were we not to
have had AIDS, with some of the projected health problems that
the nation faces with its young and its elderly and the like,
we would still be in trouble.

This is an opportunity to get this nation on its feet
in a variety of ways that we have seen exposed through the HIV
lens.

Our experience has been that the normal mode of
operation, frankly is a wreck in many ways. It’s not that
people aren’t trying to do the best they can but it’s a sluggish
system. It’s slow. It’s an unresponsive system, whether it’s
drug development, drug abuse, health care delivery, fighting
discrimination, you name it.

So I’d just like to make that comment. I don’t know if
you agree with me or not, but I think most of our panelists have
agreed that we’ve got other significant flaws that many of the
people in your profession knew about, but frankly somehow we
haven’t been able to excite people that this is a real problem
for the nation before AIDS arrived. Do you agree with that?

DR. SUNDWALL: I agree one hundred percent. My
background is in family medicine, general internal medicine,
and I believe that the flaws have existed for a long time, and
they’re all secondary to third party reimbursement that has
favored the hospital setting and high technology.

The previous panel discussed case management, and you
asked for comments on that. That’s a buzz word now and it’s
kind of bandied about by different groups. I agree with the
one gentleman that there are different definitions for case
management, but I think it’s really quite clear that case
Management is appropriate care. When it’s appropriate it’s
less expensive generally, and it’s certainly out of the hospital
setting where possible.

We need very much to look at our entire value system in
health care, and I think the public has got to be educated. Our
biggest challenge, I believe, is in educating the public about
what’s appropriate care. In my opinion they are part of the

196

 

 
problem. I guess we fostered their misinformation about self
referral, the specialists, and wanting the latest treatment or
diagnostic tests in an acute-care setting. But that’s not
appropriate care, and I think the AIDS epidemic has underscored
that.

CHAIRMAN WATKINS: Let me go quickly to the next one
and then I’ll pass it on to Dr. Lee. We had a witness come
forth, and perhaps you were here for it, who urged us to adopt
four strategies which had not been costed out, and perhaps this
would have been better for Dr. Roper, but --

DR. SUNDWALL: I didn’t hear the first four?

CHAIRMAN WATKINS: Let me just remind you, they were a
refundable tax credit to be used for the purchase of insurance,
subsidized risk pool for the medically uninsurable, the
establishment of a floor under Medicaid and a block grant stop
loss provision for Medicaid. It was said these proposals would
substantially alleviate the fiscal problems.

Listening to that, do you have any comments about that.
Let’s stay out of costs now, and assume that we can find the cost
of them and they were acceptable, do you have any comments on her
four strategy recommendations?

DR. SUNDWALL: Well, as I referred to in my testimony,
our task force recommended two of those. One is the insurance -~-
private insurance should certainly carry more of the burden, and
the other was the risk pools, so they seem reasonable to me.

I’1l tell you if I were king for a day and if I were
in charge of Medicaid, I would tie Medicaid for entitled
beneficiaries to case managed care. This is being done, and I’m
sure Bill Roper could address this, in many states under what
they call waivers, where instead of reimbursing for customary
treatments and hospital care, they get an approval for HCFA to
pay for case managed care for Medicaid eligible people.

We’re learning through our HRSA demonstration projects
that case management care is really the best way to care for
these persons with AIDS, so I would add that as a rider to the
Medicaid or Medicaid reforms. But they seem to me to be
appropriate considerations.

CHAIRMAN WATKINS: Do you have sufficient
documentation at this point in case management projects so

that you could give us any early indication of what that funding
stream might mean?

DR. SUNDWALL: As I said, we’re --

197
CHAIRMAN WATKINS: To tie into that, then what are we
really talking about in terms of dollars?

DR. SUNDWALL: Right. We’re just beginning this for
AIDS patients and I should have that available next year,
unfortunately after the Commission expires, but the thing we do
have is very well documented cost savings for case managed care
for Medicaid patients, particularly for a pregnant at risk, a
poor pregnant woman at risk --

CHAIRMAN WATKINS: Has that already been made
available to the Commission?

DR. SUNDWALL: Absolutely. We can --

CHAIRMAN WATKINS: No, I mean do we have that already
in our hand?

DR. SUNDWALL: I don’t know that you have it already --

CHAIRMAN WATKINS: Would you provide that so we can
have that?

DR. SUNDWALL: Sure. We can get you the cost savings
for managed care for Medicaid patients.

CHAIRMAN WATKINS: Thank you. Dr. Lee?
DR. LEE: Mr. Chairman --

CHAIRMAN WATKINS: Let me just say before we start that
I have a note here that Dr. Sundwall has to leave by 11:00, so
if we can focus on him and try to give everybody a crack at him
before he has to leave.

DR. LEE: Just a note to Dr. Sundwall, you’re one of
the nicest guys that has come before us. I just want to say that
again.

DR. SUNDWALL: Gee, thanks. Nice guys finish last,
right?

DR. LEE: Now, having said that, Mr. Chairman, I like
Jo Ivey Boufford’s recommendations on how to fix these problems
actually a lot better than Dr. Wilensky’s. Jo Ivey Boufford
gave us very detailed material on how to help the hospitals that
are taking care of these people, and she has her hands dirty and
she’s in the middle of it.

This Commission is going to have to go back to New York
next week and take a look at Rich Yezzo’s cases in St. Clare’s

198

 
Hospital, take a look at the people lying in Bailey House, take a
look at the kids in Hale House, take a look at the cases in
Harlem Hospital and tell me if any of those people are going to
be accepted by a high risk insurance pool, or, if could they even
begin to figure it out.

Now, Mr. Enoff has said and has given us some figures
on Social Security. The fact is whether Dr. Wilensky likes it
or not, that 60 to 70 percent of the people in New York are
eligible for Medicaid. That means they are rock bottom poor, and
they cannot afford a high risk insurance pool.

As Mr. DeVos said, his kids are in a high risk
insurance pool for car insurance and he probably pays $1,500.00
a year for each. I have to think that the answer is going to
come from the government because the hospitals are losing too
much money, and the private insurers are not going to pick up
that much freight. The hospitals are going to be losing a lot
more money. I don’t know of any hospital administrator, and I’m
sure you’ll agree, who wants AIDS cases.

CHAIRMAN WATKINS: We haven’t seen any seeking them
out.

DR. LEE: Yes, please go away someplace else. And no
hospital does it without losing money. The Catholic church is
picking up a big tab with St. Clare’s and your figures on the
addition of AZT to the costs, blows the thing totally out into
the stratosphere. Dr. Sundwall, your department there is very
badly funded, isn’t it?

DR. SUNDWALL: For 1989, the President’s budget seeks
almost full authorization for funding with one exception, and
that’s the health profession section which has been cut. But we
are seeking full funding for our community health centers, our
migrant health centers, our maternal and child health programs.

We’re seeking $20 million additional for infant
mortality reduction. We have an AIDS budget which is maintenance
of effort of our previous appropriations which is new for the
administration to seek that. So we’re seeking at least $40
million for HRSA’s AIDS demonstration, health professions
training. Our construction costs --

DR. LEE: I may be stealing Dr. Lilly’s question here.
DR. LILLY: Yes, you are.
DR. LEE: Well, I’ve got to steal it. IE gotta steal

it. What actually are you doing? I put you in touch with the
head of Bailey House a long time ago.

199

 
DR. SUNDWALL: That’s right, we visited up there.

DR. LEE: And it was very helpful, but where can HRSA
come into this? I’m talking about poor people. I’m talking
about people who’ve got nothing and don’t have any way to figure
out the systen.

DR. SUNDWALL: Let me be real candid with you and
recognizing that I’m a soldier for the administration, I mean I
work for this administration and I certainly want to be loyal to
them and their budget, but there is a chronic ambivalence on the
part of the federal government run by Democrats or Republicans in
being involved in the delivery of health care. That may be
appropriate. All I’m telling you is that there is clearly, and
it’s both Democrats and Republicans alike, I believe, a kind of
reluctance to get the federal government into paying providers to
deliver services. That sounds to much like a national health
insurance or socialized medicine to some.

But, in fact, what HRSA has done through our
demonstration projects is hopefully fund projects which will show
people how to do it well. And as I mentioned in the testimony,
we’ve been a catalyst to bring some of those providers together.

DR. LEE: Are you providing a significant amount of
money? Take Bailey House as an example, were you able to help
them?

DR. SUNDWALL: Absolutely. They are very much
dependent on our HRSA money. In fact of our demonstration
projects, about the lions share has gone to the New York City
project and Bailey House is dependent on that. It certainly
isn’t all of their budget, but I think it’s a good example of
cooperative public/private sector effort. They’ve certainly
gotten some private sector money, but we have been a fundamental
part of their budget.

DR. LEE: Frank, let me turn it over to you. I know
you want to develop.

DR. LILLY: That’s correct, no go ahead.

CHAIRMAN WATKINS: Let’s continue to focus on
Dr. Sundwall, and Dr. Roper has now arrived and after we finish
with Dr. Sundwall, he’1l be able to leave on schedule and we can
get on with Dr. Roper’s testimony and then further questioning.

DR. SUNDWALL: Thank you.
DR. LILLY: I’d like to know just a little bit more
about other aspects of the community-based systems that your

agency supports. I’d like to know, do you have statistics on

200
just what fraction of the AIDS population has been served by
these community-based systems to date?

DR. SUNDWALL: No, I’1ll try and get what we have for
you.

DR. LILLY: Can you give your best estimate of that?

DR. SUNDWALL: I honestly don’t. We’re now funding 13
cities. We started out with the four, and that’s been expanded
to 13 different sites.

DR. LILLY: -- case for case management as an
approach, is that the approach that these community-based systems
take?

DR. SUNDWALL: Yes. The focus on these demonstrations
is to fill in that gap between the long term care, so we/re
focusing on out-patient, ambulatory, home care, respite care,
long term care to bring the various resources together that
exist to help support that systen.

DR. LILLY: Now, I assume that these community-based
organizations are very diverse even within a city --

DR. SUNDWALL: Certainly.

DR. LILLY: -- both in their patient population and so
forth, but on the other hand, now let’s see, I’m an indigent
person, maybe a drug abuser, and I need care, so I show up at a
community-based organization. To what extent do they help me
with all kinds of problems that I face, not just the medical
ones, but in trying to solve problems about where to go tonight?

DR. SUNDWALL: Well, ideally they would be able to do
just what we’ve heard discussed here, and that is identify what
in your community is available to you, whether it’s housing,
whether it’s some SSI, whether it’s Medicaid benefits, or whether
you have an opportunity to go to Bailey House or whatever.

DR. LILLY: Okay, so this is -- all of this kind of
thing is part of the case management model --

DR. SUNDWALL: Precisely.
DR. LILLY: -- you can help me with my social problem?
DR. SUNDWALL: Exactly.

DR. LEE: That’s impossible, Frank.

201
DR. LILLY: Speak for yourself, Dr. Lee. Several
things you’ve said here interest me, and let me just pick out
one, problems about intermediate care facilities. Your first
problem with funding the intermediate health care facilities is
their high cost. So you don’t want to do it because they cost a
lot, but somebody has got to.

DR. SUNDWALL: I guess it’s a relatively high cost.
Now, Dr. Roper can certainly correct me now or when he gets to
his testimony, but I remember in my former life when I worked in
the Senate as a staffer and we were trying to get home health
care legislation passed. The financing people were reluctant
because they were concerned that would be an add on. That’s
very probably true. But they did admit to me that one of the
cost savings they felt possible in Medicare law were the
intermediate care facilities, because in fact it is, although
expensive, less expensive than the acute hospital setting.

Now, I don’t know if that holds up historically, but
they felt like that really was a savings over time. But all of
the other good ideas that come down the road to save the Medicare
Trust Fund generally end up being an add on and that’s a real
problem for policymakers.

DR. LILLY: I’m going to pass and we’ll come back later
on due to circumstances.

CHAIRMAN WATKINS: Mrs. Gebbie?

MRS. GEBBIE: I always think I have the federal
organization chart in my head and then it slips off. The
Health Care Services Research Program Center.

DR. SUNDWALL: Are you talking about mine?
MRS. GEBBIE: Is it yours, that’s what I’m asking?

DR. SUNDWALL: Well, you’ve got the words a little bit
wrong, Health Resources and Services Administration. Are you
talking about NCHSR, National Center for Health Services
Research?

MRS. GEBBIE: Yes, that’s the one I’m looking for.

DR. SUNDWALL: That’s also part of the Public Health
Service.

MRS. GEBBIE: Is it a part of HRSA or is it --

DR. SUNDWALL: No, it is not. That reports directly
to Dr. Windom, the Assistant Secretary for Health. That’s a
separate unit.

202
MRS. GEBBIE: Okay. Perhaps I’11] direct the question
to you then and you might convey it back and help us get an
answer from someone else. More and more as we’ve listened to
panels, we trip across various groups struggling with research
related to this epidemic, modeling costs, modeling projections,
trying to calculate impact on this group or the other. And I am
more discouraged than encouraged at this point that we’ve got a
mechanism for having all those groups talk to each other so that
they are defining terms consistently, anticipating tomorrow’s
data needs and building data sets which are compatible.

Is the Center for Health Services Research a mechanism
that could at least bridge some of those groups, has it looked at
that with regard to this epidemic, or what is happening there?

DR. SUNDWALL: Yes, it has. In fact, our intra-
governmental task force highlighted the need, as you have
described it, for better data collection in common terms and the
national data base. They now have a very well defined agenda on
AIDS research. The budget for ’89 will be healthier for that
activity, and I could gladly provide for you a document that is,
in fact, their agenda for health services delivery in AIDS.

MRS. GEBBIE: Do you think they have an accurate
inventory of all of the major groups even within the federal
government which are attempting to do some modeling or research
in this area?

DR. SUNDWALL: I think they have the best that’s
available, and I suspect it’s quite complete.

MRS. GEBBIE: Could you see that we get a copy of that?
T’d like to at least compare it with the groups we stumbled
across in the course of testimony.

DR. SUNDWALL: Sure.
MRS. GEBBIE: Thank you.
CHAIRMAN WATKINS: Colleen?

DR. CONWAY-WELCH: Two questions, and one I’m not sure
is relevant, Dr. Sundwall, but let me try anyway. The Maternal
and Child Health Block Grant is familiar to me. One of the
issues that seems to be circling regarding the nursing shortage
is the need to get nursing education and nursing practice more in
sync in terms of what we produce in education and what we use in
practice.

One of the problems with Maternal and Child Health
Block Grant is that, of course, schools of nursing try to quality

203

 

 
 

 

for MCH block grant. Many times they don’t have the additional
funding to support a portion of the faculty who are practicing or
in a faculty practice.

So you kind of get a chicken and egg syndrome, and the
schools run into a stone wall as they try to look for different
ways of financing nursing education, of extending educational
opportunities to their students in a variety of culturally
sensitive and different types of practice arenas.

My understanding is that unless you’re involved with
Title V agencies as a school of nursing, you can’t qualify for
MCH Block Grant, but many schools can’t get into Title V because
they can’t afford the manpower to get them involved in the first
place. Is that still operative and are there any solutions that
are being considered to that?

DR. SUNDWALL: I’m not aware of the specific barrier
that you’re talking about for nursing education. But I am aware
that the MCH Block Grant has full funding. This next year about
$560 million. The lions share of that goes to states to be used
for a variety of activities under Title V, and they decide how
the money is spent, pretty much at their discretion. In fact,
we have very little regulation and limited reporting
requirements.

However, according to the law 15 percent of that is
kept aside for SPRANS grants. And if I’m not mistaken, Colleen,
$15 million is what’s gone -- I mean the $80 million, 15 percent
of the total, is what’s been utilized for educational activities.
We can do geriatric, we do genetic, we do hemophilia, we do
training for pediatrics, pediatric/nurse practitioners, but those
have to be applied to under a SPRANS program, that’s Special
Projects of Regional and National Significance. And that pot of
money is used for a wide variety of activities.

DR. CONWAY-WELCH: The chicken and egg problem, I
think, also relates to the SPRANS Grant, so that you also have
to have demonstrated track record that’s in some kind of a
Title V agency.

DR. SUNDWALL: If you can define for me the barrier,
I’1l1 certainly follow up on it and see what might --

DR. CONWAY-WELCH: Thank you. I’d appreciate it,
because I think that there is an opportunity for schools of
nursing to expand their training sites into areas that are
medically underserved, but again it’s a question of the
resources to do it to get that initial --

DR. SUNDWALL: You could also accomplish that by
participating with an AHEC, an Area Health and Education Center,

204

 

 
which is completely to get training out of the hospital or
nursing school.

DR. CONWAY-WELCH: Thank you. Perhaps I could follow
up with you on that. I/’d appreciate that.

DR. SUNDWALL: I’d be glad to.

DR. CONWAY-WELCH: The only other question I had is,
we have heard testimony from folks who feel that HRSA is doing a
very good job of getting the emergency drug funds to the state,
and once they get to the state there is a distribution problem of
those monies, and some states do it very well and some don’t do
it very well. Have you received any feedback or do you track
that in any way?

DR. SUNDWALL: Yes, we do. We have been aware of
delays in some states, California is one example, in getting
those monies distributed. However, the good news is that our
last survey found that all states have a distribution program
in place and have distributed part of their funds, if not all.

We are, right now this month, surveying the states, and
if they have any AZT monies unspent, then they are required to
return them to us so we can redistribute to states that have a
greater need. We are required to report to Congress on that this
year. By June we’il have a report on what was spent, and if
we’ve had an opportunity to redistribute unused funds.

DR. CONWAY~WELCH: And you can capture those monies and
redistribute them back into--

DR. SUNDWALL: Yes. In fact, we know that we will get
some monies back because already we’ve understood there are some
surpluses in areas that were alloted an amount based on the
number of AIDS patients they had according to the CDC figures in
1986.

DR. CONWAY-WELCH: Thank you very much.

CHAIRMAN WATKINS: Mr. DeVos?

MR. DeVOS: The more I understand this, the more I
salute your people who work with what I call a high level of
frustration around here.

DR. SUNDWALL: We appreciate that.

MR. DeVOS: Everybody wants more money, and of course,
nobody wants to pay more, and that’s nothing new for anybody in
this room. But I’m curious as to whether you find any offsets.
You know, I don’t live in New York. I live in Grand Rapids,

205

 

 
 

 

Michigan. We’re sitting there talking about what we’re going to
do with hospital beds that are empty. Some of our hospitals have
30 percent vacancies. The level of care has obviously gone up.
There is some efficiency. We’re doing day surgery. They’re in
and they’re out and they’re gone. If you have a baby, you go
home in two days, you know. It used to be a week.

There has got to be some tremendous offsets in this
country so we can afford some of this. Now, are those
identifiable at all? Are we going to make some progress or are
we just sitting here talking to the wind and we’re not going to
find the money to do some of these things?

DR. SUNDWALL: No, I wouldn’t be that discouraged. I
think that there have been things that we have parted with as
past responsibilities. For example in my agency, we used to
supervise the public health service hospitals. We stopped doing
that early in this administration, and I think appropriately so
because they clearly were duplicative of hospital services
available. So we got out of the hospital business and that was a
major federal program for 200 years in our country, and we
haven’t documented any underservice in any of those regions.
They’ve been adopted by private communities.

We’re no longer in the business of health planning at
the federal level. That was a major expenditure in HRSA that’s
no longer being done.

There are changes in the public health needs of the
country, and I think we do solve some problems and move on to
other ones. The budget doesn’t look like it because expenses
keep going up, but I’m not quite so cynical. I think society
does adapt to current needs, and if we’re wise we’ll learn from
the knowledge we’ve gleaned from this AIDS effort, and it might
help us reform our health care system, maybe better treat cancer
and infectious diseases, immunological diseases, and we’ll be
better for this whole awful epidemic.

MR. DevOS: But you see so many, seemingly, economics
of scale occurring with empty hospitals and so forth, and yet the
costs don’t seem to come down at all. At least in our town those
hospitals keep operating even if they’re half full or a third
full.

DR. SUNDWALL: Dr. Roper can answer that I’m sure.

MR. DeVOS: There’s going to come a day of reckoning
here, you know. Can we take some of those people in New York and
put them out in some of these other places? I think you’re going
to have to look at that. Now, that may not be exactly ideal in
somebody’s opinion, but when somebody else pays the bill then
you’re going to have to make some accommodations.

206

 

 
DR. SUNDWALL: Well, I think it’s interesting, and
again, Dr. Roper is the expert here, but our utilization of
hospitals was declining even before we enacted prospective
payment and the reimbursement system changed. I think in many
respects, we’re leaning that that’s not the ideal setting to take
care of a lot of illnesses that can be better be done less
expensively in a different place, so we do have over bedding
throughout the country in many areas.

MR. DevOS: Any prevention at all?
DR. SUNDWALL: Pardon?
MR. DeVOS: Do you guys do much in prevention?

DR. SUNDWALL: Yes, we do a lot in prevention. We’re
very aggressive in a whole range of prevention activities
through our community health centers. Whereas they used to do
pretty much typical doctoring, I think they’re much more
aggressive in health promotion and disease prevention in
everything we do with our migrants and community health centers.

MR. DevOS: You know, we have begun to focus our minds
on more physicals, health and exercise programs, and things we do
in training and education for the employed, we never thought of
before. And there has got to be a major trendline in this
country that shows that, while we may be living longer, that a
lot of people are healthier than they used to be. And that’s got
to help us somewhere to be an offset to taking care of some of
these new costs. I’m glad to see you’re bowing your head like
somehow maybe that’s occurring.

DR. SUNDWALL: I agree. We’re doing it, and
certainly in my agency, we have a very active program. It’s been
good for morale and I have not documented improvement, you know,
less time off work, yet, but we’re convinced that we’re going to
be able to get some savings there.

MR. DevOS: We have to document some of that somewhere
so that we can identify those monies. You know more and more
people in this country are getting older, and you’re going to
have less and less people available to work. You’re going to
have shifts that are really going to impact these things.

DR. SUNDWALL: Hopefully we’ll have more healthy older
people continuing to work. That would be grand.

MR. DevOS: Yes, but you know, we encourage them to

quit now. That’s what the Social Security problem is as far as
I’m concerned.

207
MR. ENOFF: We have some proposals that would remedy
that.

MR. DevOS: Well, I support that idea. We've
eliminated in our company any forced retirement age a long
time ago.

MR. ENOFF: The Commissioner has forwarded some
suggestions with regard to eliminating the earnings test
completely. Those are being considered right now.

MR. DeVOS: In all the conversations we hear, everyone
needs more money and more money, and someplace along the line
here we've got to find some ways to shift some of these things.
So you’re not going to just be able to dig in and get some more
money all the time. I’m glad to see you’re working on it.

DR. SUNDWALL: I agree.
CHAIRMAN WATKINS: Thank you very much, Dr. Sundwall.
DR. SUNDWALL: Certainly.

CHAIRMAN WATKINS: We appreciate you coming before the
Commission today, and we’ll continue to be in touch with you as
the final months of our Commission life go, because we’ve had
excellent support from you and relationship with you, and we very
much appreciate the help you’ve given to the Commission to date.

DR. SUNDWALL: You’re welcome. I’11 look forward to
your final report.

CHAIRMAN WATKINS: Dr. Roper, we’d like to have your
statement now, and then we’ll continue with the questioning.

DR. ROPER: Thank you, sir. I apologize to the
Commission for being late. They say in the military, don’t
explain, so I won’t. Anyhow I’m glad to be with you today. This
is HCFA’s third appearance before you. I was there at your first
meeting. Bill Winkenwerder, our AIDS coordinator spoke with you
a few months, and I am delighted to be with you again today to
talk about Medicare and Medicaid as part of the Nation’s effort
against AIDS.

My agency, the Health Care Financing Administration,
has responsibility for the Medicare program and the federal
portion of Medicaid. These two programs together are a principal
part of the Nation’s financing of AIDS health care services.

We estimate that the Medicare program is serving about
one percent of all persons with AIDS in the country, and it meets
a similar proportion of the total costs in AIDS treatment. That

208
 

 

is about one percent for fiscal 1988. For the current fiscal
year we estimate that expenditure to be $15 million in the
Medicare program.

The state/federal Medicaid program on the other hand
plays a much larger role because of the demographic and economic
characteristics of those with HIV infection, ARC and AIDS. We
estimate that 40 percent of all persons with AIDS nationally are
served by the Medicaid program. In some areas, especially those
with large numbers of IV drug abusers like New York City, the
percentage of Medicaid rises to be as high as 65 to 75 percent of
people with AIDS.

Medicaid meets about 25 percent of all direct medical
care expenditures for persons with AIDS nationally. And for the
curcent fiscal year, that’s about $750 million, three quarters
of a billion dollars. We estimate that that will rise by fiscal
year 1992, four years hence, to $3.2 billion. Those costs are
shared roughly 50 percent by the federal government, 50 percent
by the state governments, though the state share varies according
to the state’s ability to pay and population.

Most persons with AIDS may qualify for Medicare and
Medicaid as disabled persons. Others may receive Medicaid,
including children with AIDS and their caretaker relatives with
low incomes, pregnant women and infants, and those with incomes
to high to qualify for SSI and AFDC cash payments.

The estimated future expenditure is under Medicare and
Medicaid are considerable, but I think it’s important to keep
this in perspective. We believe there is no evidence that the
cost of AIDS will overwhelm our health care system or our economy
generally.

Using current best estimate projections, AIDS spending
will be 4 percent of the Medicaid budget by the fiscal year 1992.
The contribution of the Health Care Financing Administration
should be assessed within the broader context of how our society
deals with the AIDS epidemic as well as how it deals with health
care generally.

First, AIDS-related patient care services are only part
of a broad continuum of activities ranging from prevention and
education to the development of vaccines and other therapeutic
agents are under way.

Secondly, the challenge of responding to the human
financial and health care delivery problems of persons with AIDS
is a great task that needs to be dealt with both in the public
sector and in the private sector at all levels of our society.
Patients themselves and their private health insurers still pay
for about 60 percent of all health care costs in the nation.

209

 

 
 

 

The question is therefore not just one of what the
federal government will pay for in connection with AIDS, but
rather how overall responsibilities can be appropriately shared
in this pluralistic health care system we have.

I believe that there are four important principles,
at least that guide our thoughts in this area. The first is that
while we support some special initiatives, we should generally
seek to treat patient care and financing for persons with AIDS as
we would care for persons with any other disease.

Medicare and Medicaid broadly address health care needs
of large segments of the total population, and have shown their
ability to make fundamental contributions to financing care for
AIDS patients.

Medicaid in particular, as I have said, has
demonstrated that through its program design it can serve
those like IV drug abusers, and low income pregnant women and
children who are least likely to have other resources.

Similarly, we believe that private insurers and self
insured companies should treat persons with AIDS in the same
manner they do persons with other illnesses. Likewise self
insured employer plans and other group health plans should not
deny enrollment to employees who may be HIV positive.

In the public sector, the provision of health care
services must be acutely attuned to questions of equity across
the population. We therefore oppose and continue to oppose any
legislative change in the 24 month waiting period for Medicaid
disability, specifically targeted at persons with AIDS. Valid
proposals like this could be made for persons with terminal
cancer, or Alzheimer’s disease, or any other terminal illnesses
people face.

Furthermore, a substantial shift in costs would be
involved. We estimate that the Medicare program would bear an
additional $2 to $8 billion in costs over the next five years if
the waiting period, the 24 months waiting period, were eliminated
only for persons with AIDS, and between $35 and $42 billion in
additional costs if it were eliminated for all disabled persons.

The question of equity is an important one, and I urge
that you bear that in mind, though your charge surely is to deal
directly with the AIDS problem. This was brought home to me two
days ago when I was in Chicago appearing before the National
Commission to Prevent Infant Mortality, and they were very
anxious to know what we in the Medicaid program were going to do
to direct more resources to dealing with the problem of infant
mortality.

210

 

 
The second principle I point out is that AIDS care and
treatment costs should continue to be shared across our society,
and should not be just a federal government problem or even a
general government problem. We ought to bring AIDS care into the
main stream of the diverse health care mechanisms used in this
country.

I believe it’s vitally important, as you all have heard
from others, that we keep private financing of AIDS health care,
principally insurance financing, an active part of this system.
If we do not do that, we will most assuredly have an exclusively
government program, probably exclusively a federal government
program financing the care of AIDS patients.

One particular value that should be actively pursued is
the availability of insurance to all persons with high risk
health conditions. States are pursuing the idea of risk pools.
We encourage them to do that, understanding that states and
perhaps the federal government will need to subsidize these risk
pools to help people buy health insurance who could not
otherwise afford to pay for it.

The third principle that guides our thoughts in this
area is that flexible and innovative approaches are necessary by
all sectors of society to meet the demands of this epidemic.

For example, within the Medicaid program we’re anxious
to confer with states about their ability to tailor their
Medicaid programs with such things as case management waivers,
special Hospice benefits, home and community based services,
freedom of choice waivers, special incentive payment arrangements
to treat patients with AIDS, in other words a whole host of
things that states can do for Medicaid and private payers can do
for their programs to see that AIDS patients get the care that
they need.

The fourth principle is one that you’ve heard from
Surgeon General Koop, but we in Medicare as financiers of health
care also feel strongly about, and that is that health
professionals, health care providers, and state licensing
authorities have an obligation to provide ready access to care
to those with AIDS and HIV infection.

A variety of steps have been taken to assure this
access. Much more though needs to be done. Leaders in the
health professions, like Surgeon General Koop, the American
Medical Association, the American College of Physicians, and
others need to continue to speak out about the duty that health
care professionals have to care for people with AIDS. We need
educational efforts directed at emergency workers, nursing home
operators and workers, and many others about how safely to care

211

 
for people with AIDS. State infectious and contagious disease
guidelines and statutes need to be reexamined in the light of
this epidemic, so that the care can be given to those that need
it. With that,

Mr. Chairman, I conclude my remarks and I’11l be glad to respond
to your questions.

CHAIRMAN WATKINS: Thank you, Dr. Roper. I’d like to
open up with a couple of questions to you. You weren’t here for
my brilliant soliloquy on equity, but I’m worried about equity.

Dr. Sundwall made a statement earlier, and I happen
to think it’s a pretty good principle, not treat HIV-infected
individuals different than those afflicted with other life
threatening diseases. That’s equitable. So I’m all for that.
My problem is that we made 187 recommendations in only one
portion of a national strategy uncovered by 400 witnesses who
come aboard with compelling evidence, generally in consensus,
that the nation’s health care delivery system is in deep trouble
both now and even worse by the mid-1990s.

Here is an opportunity for the nation to look at itself
through the lens of the HIV and expose new avenues and bold
approaches that may well get us into a more cost effective health
delivery system with better health by the year 2000, we'll say,
much along the lines of your HHS 2000 report.

Your national health objectives, how well have they
been looked at with the HIV now a factor? I don’t think that
when they were divined eight years ago or whenever they began to
come on the drawing board, we knew much about the HIV epidemic.

So it seems to me there are a lot of things that we
need to do before we talk about equity on an old system that is
frankly almost bankrupt.

I’m very worried about that because I don’t know if
equity doesn’t imply accept the lowest common denominator that
the budget squeeze happens to push us into as though OMB perhaps
is perhaps really the Assistant Secretary of Health for the
nation.

So I’m just a little bit worried about that, and it
seems to me that now is the time to launch off on something a
little more imaginative with the experience of the HIV under our
belt.

And then were we to solve the problems raised by the
HIV epidemic, we would still need to get on with other related
issues and perhaps we’ll learn some lessons out of this that are
going to be very important for the future. Do you agree with
that statement?

212

 
 

 

DR. ROPER: I/’d be happy to respond. Surely there are
problems in our health care system. I don’t think it’s a
disaster. I don’t think it’s a system on the brink of failure.
I think it’s a system that serves the majority of our population,
the large majority of our population, very well. I think we
need to at the margins to make some significant improvements,
particularly for those who do not get good care at the present
time.

My fear is actually two-fold. One is, I think that it
is unwise public policy to pit one group of the population over
against another, and that is precisely, and this is my view, that
is precisely what is done when you create a special entitlement
for people with one illness.

That is surely what was done in 1972 when the Congress
conferred special entitlement on people who had in-stage renal
disease. A distressing national problem, to be clear, but now
people with ESRD have direct access to services well beyond what
other people who have other illnesses have. And I just am
arguing strenuously that that direction is one that I would urge
you not to take.

CHAIRMAN WATKINS: The Commission will agree with you
almost to a Commissioner. We all agree with that, but what we’re
saying is --

DR. ROPER: Is the baseline good enough? Let me
deal with that. I believe the system we have in America of a
pluralisticly managed and financed health care system with shared
responsibility in the public sector and the private sector is a
good way to proceed for the long haul. I would like to shore up
any problems in that system.

I don’t think you are, Admiral, but I know some people
are using the AIDS epidemic as an opportunity to push for a very
dramatic change in America’s health care financing systen,
seeking to bring entirely into the public sector the financing
and delivery of health care services. They do so by making the
case that this thing is woefully screwed up and the only answer
is to governmentalize the whole system. I am arguing strenuously
against that.

CHAIRMAN WATKINS: I think you will find that the
Commissioners will agree with you on that.

DR. ROPER: Okay. Then please don’t hear my argument
for equity as a maintenance of the status quo, but rather one
that says people with AIDS have desperate problems. Society has
a duty to help them with those problems. But we need to bear in
mind that there are others like the infant mortality problem that

213

 

 
 

 

I mentioned to you. I just think the large picture of how we
remedy the problems in our health care system in general is
worthy of our attention.

CHAIRMAN WATKINS: Okay, but I believe that the health
of the system even by the HHS’s own reports for young people is
of concern if we don’t get on with some other improvements in,
say, early adolescent health, prenatal care, and preschool
education and so forth. All of those things that the pros of
the nation are recommending, which we put great emphasis on.

And it seems to me --

DR. ROPER: Sure.

CHAIRMAN WATKINS: -- that that’s a preventative
concept and it’s very valuable. So status quo again, equity
for whom?

DR. ROPER: I am not advocating that. I am proudly
board certified in preventative medicine, and I’m anxious to
further the endeavors that Mrs. Gebbie and others in public
health are pursuing.

CHAIRMAN WATKINS: Don’t you think this is an
opportunity to get on a prevention regime which is the very
objective you set for HHS?

DR. ROPER: I’d salute that one in a minute. Let’s
prevent AIDS.

CHAIRMAN WATKINS: I just am a little worried that some
discussions lead to kind of a blase approach to something that
might be directly related to national security, directly related
to the economy of the nation in the future, directly related to
dealing with the problems we are going to have with Social
Security payments for the elderly, with teen pregnancy. We’re
told that $11 to $16 billion a year is spent on teen pregnancy.

These are the kinds of things that I think we have to
take a look at and find some kind of offset as Mr. DeVos was
saying, in other kinds of preventive efforts.

DR. ROPER: Sure.

CHAIRMAN WATKINS: I have attended meetings with the
IOM on finances. We have had the RAND people that you’re
supporting with HCFA funds, I believe, doing a study on AIDS
financing. We’ve received testimony from the Office of
Technology Assessment in the Congress, and I don’t see in any of
these groups trying to find those cost-effective regimes that you
can cost out and at least show that you, in fact, do save over
the long haul.from prevention versus remediation. That has not

214

 

 
been well done in the cost accounting business because we say
well, it’s too hard to cost out for health or education and
things like that.

I believe it’s time to get on this issue in a much more
aggressive way to convince ourselves that it is cost effective
for the nation to put funds up front and do some imaginative
things now in the health area that can affect the whole
capability of the nation to carry out national objectives. I
assume you agree with that?

DR. ROPER: I’ma little mystified. You said there
was no work being done on costing out more efficient ways of
delivering health care to AIDS patients. Surely we’re not to
the end of that process, but there’s abundant --

CHAIRMAN WATKINS: I’m talking about launching off on
some new initiatives, up front investment where we can show
amortization regimes that the Congress would buy and say, yes
we think that’s reasonable and everybody is on the same base of
analysis. We need some kind of approach for preventive health
care costing and offset that can demonstrate with hard facts
rather than use anecdotic information on what works.

DR. ROPER: I get your point.

CHAIRMAN WATKINS: You were there at the IOM session
with us, and I was not impressed by that session as being a very
aggressive financial management meeting. I was worried about it,
that we left there kind of nothing accomplished. I certainly
think Sam Thier felt that way.

DR. ROPER: Well, we paid for that meeting because
we're interested in drawing together all the parties of interest
and having a discussion. I think the meeting was productive in
that we further that process.

CHAIRMAN WATKINS: Should we be making some
recommendations on bringing the right people together, both
public and private, to work on this. Let’s get the facts to
convince the Nation that we’re really on top of programs that
make sense both from a cost point of view as well as from the
enhancement of the human side of the nation’s readiness. Is
that something that you --

DR. ROPER: It sure makes sense. I thought that was
part of your preliminary recommendation that I saw a couple of
months ago.

CHAIRMAN WATKINS: Can you help us draft up a proposal
that would get us into a much more rigorous analytical approach,
recognizing that we’re not trying to get away from the human

215
side, but where we can cost it out, and do it well so that all
elements are taken into account. Any cost analyst would look at
that, say OTA and Congress, and say yes that’s a fair analysis,
and that looks like an amortization regime and Congress and the
states ought to put the dough into that.

DR. ROPER: Yes, sir. We would be glad to be a part
of that. What I hear you saying is can we provide advice on how
better to develop information on cost effective aids treatment
mechanisms, share that information with the states so that they
can design their Medicaid programs around that information and
give it to the Congress for their policy discussions.

CHAIRMAN WATKINS: Perhaps we can discuss it further
and see what we might want to put in the report and recommend as
a more aggressive approach, something we can get in a reasonable
period of time. Let’s log it, record it and accept it. Where we
don’t, let’s develop it, and where we can’t, let’s say so.

DR. ROPER: Yes, sir.
CHAIRMAN WATKINS: Yes?

MR. DevVOS: You might want to look, and maybe not you
alone, maybe somebody else, but in the private sector a lot of
companies today are costing out their health care costs and
looking at offsets on some of that. I know other companies that
are doing it. We’re putting in a lot of programs that hopefully
have a pay back for them. It may give you some good data to
start with.

CHAIRMAN WATKINS: Yes, Frank?

DR. LILLY: Along those lines, I think this is
somewhat related to what we’ve been talking about here in the
last number of weeks I remember reading in the paper the report
of somebody having come to the conclusion that for many
governmental agencies, the most efficient operation from that
agency came when there was competition with the private sector.
I’m just wondering --

DR. ROPER: I think it was the front page of the New
York Times yesterday.

DR. LILLY: Oh, was that it, yesterday. Already and
it’s gone out of my mind.

MRS. GEBBIE: We’ve put in a week already in two days.

DR. LILLY: Okay. I’m just wondering in line with
that, and that may or may not be true, but I was wondering to
what extent your operations compete with the private sector?

216
 

 

DR. ROPER: We are a financing scheme, Dr. Lilly, and
what we do is pay money to private doctors and hospitals and
others to delivery health care services.

DR. LILLY: That’s what insurance companies do too.

DR. ROPER: Yes, it is. If you ask, are we in
competition with doctors and hospitals, no. We are the major
financiers of health care providers. We are anxious to get an
efficient delivery of health services by provoking competition
among them, the people we pay. I believe one of the chief ends
to that in Medicare and in Medicaid is by our paying organized
health plans, HMOs or other private health plans for them to see
to the needs of people with AIDS or whatever illness. I’m a firm
believer that managed health care services, which is the term of
art that’s currently used to describe these organized private
plans, delivers better care, better continuity of care at a more
efficient cost than other ways of doing business.

So we are anxious to further promote competition among
providers, especially health plans of that sort.

DR. LILLY: To promote competition but not compete?

DR. ROPER: We don’t, ourselves, compete with then,
no, sir. ;

DR. LILLY: Right, okay. That answers my question.
CHAIRMAN WATKINS: Mrs. Gebbie?

MRS. GEBBIE: I don’t want Mr. Enoff to feel bad, and
I’m going to come back to you in a minute, but I do have a couple
of questions for Dr. Roper, along the same line of what you’ve
been hearing. I think my perspective on the system is not
fundamentally different from yours, but rather I would disagree
on the size of the margin that we’re working on here because it’s
not little corrections. It’s maybe somewhat bigger. And also
the --

DR. ROPER: I don’t think I used the word "little."

MRS. GEBBIE: Yes, you were talking about making
corrections at the margin of the system, that the system is
fundamentally okay in answer to the discussion of whether we
should dramatically reform the whole system.

DR. ROPER: I didn’t say --

MRS. GEBBIE: Well you didn’t describe the size. I
just suspect that the edge part that needs fixing is larger than

217

 

 
 

 

some others. As we are tackling that system and looking at how
Medicaid and Medicare fit into that partnership we’re trying to
put together, I at least, and I think some of the other
Commissioners, have come to the conclusion that you have
provided to us in your paper, that Medicare isn’t the answer for
people with AIDS for several reasons. Now that’s contrary to
much of the testimony we’ve had earlier on where lots of people
saw that as a good fix.

But if we back off of that and say, okay, Medicaid for
those people who are not insured, for those people who won’t be
insured even if we fix up a risk pool for medically uninsurable,
Medicaid is the systen.

As we’ve listened to several witnesses, the three areas
of fix to Medicaid, making sure the range of benefits covered is
adequate, for example, managed care, home care options, all of
those are covered --

DR. ROPER: I agree with that.
MRS. GEBBIE: Pardon?
DR. ROPER: I agree with that.

MRS. GEBBIE: Okay. Getting a higher income level
covered. That is encouraging states to pick up the medically
needy portion or go up to a higher percentage of poverty.

DR. ROPER: That’s a state option that we encourage
them to take advantage of.

MRS. GEBBIE: Right. And then a better rate of payment
so that you don’t have people discriminating against the
Medicaid-funded client.

DR. ROPER: We encourage the states to do that.

MRS. GEBBIE: If we do all of those things, it will
cost the states more money, but it will also cost you more money
to put all of that together.

From listening to my colleagues who run the state
Medicaid agencies, they sometimes think that you want some or all
of those things done, but that you are also trying to hold the
total dollar expenditure to roughly where it is today. What is
the level of commitment to that federal share rising if those
things are committed to at the state level?

DR. ROPER: Well, as you well know, but maybe others
don’t, our share depends entirely on what the states put in, and
matching is automatic. It is not even up for debate -- if the

218

 

 
 

 

states do the things you suggest -- whether the additional
federal dollars will flow. Of course they will.

Our commitment is to provide the federal share. We
believe that there are problems in the Medicaid program. I’m
from Alabama. The southern states in particular have severe
problems with the Medicaid program, and we are anxious to help
them. In Alabama’s case it’s $3.00 federal matching for every
dollar they expend, and we’re encouraging them to do that.

MRS. GEBBIE: Okay.

DR. ROPER: Let me just make sure and emphasize that
one more time. We are not trying to arbitrarily to hold the
aggregate budget below some target. We are not.

MRS. GEBBIE: Okay, that’s helpful to have that very
clearly on the record. One of the areas related to that is the
fact that right now to expand the range of that benefits, states
have to go through a waiver process, and we’ve heard something
about those waivers, and even certain ones recommended to us
which sound very appealing. But that does put a burden of the
state getting its gear up and looking at it and going through a
number of hoops and we’ve heard that it takes many months
sometimes to get a waiver.

How would you respond to a recommendation that would
get that wider range of benefits out of being a waiver and simply
being squarely, clearly stated, this is the way we want the
program run with all of those pieces in it?

DR. ROPER: I think it’s worthy of debate. We’ve been
talking about that internally in the department ourselves over
the last year. The waiver process, in particular some of the
ones we’re dealing with here, is cumbersome, frustrating.

MRS. GEBBIE: And it lapses every now and again and
you’ve got to start over again, as I understand it.

DR. ROPER: It’s hard for me to meet with a group of
Medicaid directors or governors or whatever else without this
being the number one item of concern, but I understand that. We
would like to try and find a way to make it go more smoothly.

MRS. GEBBIE: As I recall it --

DR. ROPER: I would like to make an additonal point.
Not taking away from the firm point I gave you a minute ago, we
need to all understand that the sort of mandating in the statute,
or at least allowing in the statute without requirement for a
waiver of the sort that you described is most assuredly going to
expand the cost to the states and to the federal government.

219

 

 
MRS. GEBBIE: Yes, and I’m very much aware of that.

DR. ROPER: And it will do that because however worthy
these services are in reducing the cost to an individual
patient, more people are going to get served.

MRS. GEBBIE: And I would not want any of us to go into
that somehow thinking we were going to come out with either the
same bottom line or a smaller line. I’m well aware that it’s
going to cost more.

Could you provide for us how you would describe the
package of benefits that ought to be the basis requirement of the
states, if we were starting all over, if Medicaid hadn’t been
invented so far, and with what we know today? These are the
things that we simply ought to expect of the states. Could you
sketch how that would be different from what’s currently in that
basic piece?

DR. ROPER: Let us have a little bit to think about
it, but yes we will do that.

MRS. GEBBIE: I think that would be very helpful to us.

DR. ROPER: I hope you understand that an important
principle to me personally, and to the agency, though is the
question of state flexibility. I thought I heard you in your
question what we would compel states to do. We would truly like
to be able to give them options that are more easily utilized
than currently.

MRS. GEBBIE: Okay, well --

DR. ROPER: But I’m hesitant to commit to the idea of
change the Medicaid law to compel states to do things. I
believe, as a former state official, and you as one now, know
that state officials ought to do right by their citizens.

MRS. GEBBIE: Yes. But right now, for example, we
compel them to pay for in-patient hospitalization. We don’t
compel them to pay for home care.

DR. ROPER: I hear your question ~-

MRS. GEBBIE: Switch the compellings to things that in
today’s world seem more central, and then put the range of
options to give states some room to maneuver based on their
demographics or whatever they have there. If we’re going to push
the partnership, we may have to push states as well as the
federal government into some different postures here.

220

 
A related piece of that, and I don’t know how far we
can go with discussing it this morning, is long term. We seem to
lack a connection between our preventive program and our
treatment program. It seems to take a great deal of energy for a
state childhood immunization program, or a state teen pregnancy
prevention program to get squarely hooked up with its state
Medicaid program to see that the former is, in fact, a long term
amortization of costs in the latter.

Are you in a position to discuss any ideas, or have you
got some inspirations about how, for example, HCFA and CDC could
be better linked to model that long term investment in prevention
at the federal level that could then shift to the states as well?
It’s a difficult struggle for all of us.

DR. ROPER: How we in HCFA and CDC could be better --

MRS. GEBBIE: Or whatever other federal agencies. I
don’t think that’s the biggest --

DR. ROPER: I don’t think the answer frankly is
redrawing the boxes. We are continually discussing with them
these sorts of things we are about to launch in the Medicare
program, a series of demonstrations of preventative services in
the Medicaid population.

The sorts of preventative services you mentioned,
immunization, well child care, whatever, there is more consensus
there on what works than there is in the elderly, but we need to
pursue those ideas. And I believe financing schemes like ours
ought to pay for preventive services where they’re demonstrated
to be effective, and rigorously demonstrated to be effective.

There are a lot of things that our colleagues in public
health hold dear that really haven’t passed that muster.

MRS. GEBBIE: Yes. Well, this is just backing into
time to AIDS. Many of the people with whom our prevention
programs are working might otherwise be Medicaid eligible, for
example, and some of the prevention resources being put into
counselling testing and other kinds of programs might, in fact,
be long term payoffs on the Medicaid side. We just don’t have
any clue, I don’t think, on how to link that in and make them
billable services that would stretch the prevention dollars while
at the same time having a long term savings for your eventual
treatment dollars.

If you think about that and you have some lightening
bolt strike, share your thoughts with us please.

DR. ROPER: Yes. But to go back to your connecting
the boxes in a different way point. To make a general point to

221
the Commission, I would urge you all not to spend a lot of your
time talking about how to reorganize the world in fighting the
AIDS epidemic.

I think I’11 just tell you one anecdote. As I said on
Monday out in Chicago appearing before the National Commission on
Prevention of Infant Mortality, one of the questions I got was,
how could we better provide information to the schools in order
to deal with infant mortality and related matters. The
questioner, one of the Commissioners, pressed hard on this issue
of, do you and the HHS and the education department ever talk to
each other, what are the cross links of the sort that you just
asked?

And I said in a serious answer, we probably talked more
when we were a part of the same department, but in 1980 education
programs for what I guess people thought were good reasons at the
time, were split off into a separate department. Government
reorganization is not an answer to society’s problems.

MRS. GEBBIE: Now, Mr. Enoff, I do have some questions
for you. I didn’t want you to feel left out. This is really a
search for clarity on my part. I was probably one of the more
vigorous questioners of people from your agency when they were
here before, and I really thought I understood. I saw a head nod
back there.

I thought I understood the whole sequence of things in
process by which one got enrolled in your system and how it
worked. And then yesterday we heard some testimony from people
out in the community trying to get enrolled with SSI and SSDI, if
I got the initials straight, that got me mixed up again. So I’m
going to try one more time.

MR. ENOFF: I didn’t hear that testimony, but I’1l
be glad --

MRS. GEBBIE: Well, it deals with this whole issue of
presumptive eligibility and how hard it is to be presumed
eligible. It’s my understanding, and your written testimony
seems to say this, that if I have been ill and I can’t work, I’m
too ill to go to work, and I’ve been to my doctor and my doctor
says you have AIDS, Mrs. Gebbie.

I then decide that I need some help, and my local
community organization says you can get SSI, go down to the
office and start filling out forms. And I fill out forms, and
I tell you I have AIDS and my doctor sends you a note that I
have AIDS on your appropriate format. That ought to qualify
me for enrollment right?

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MR. ENOFF: As long as you meet the income and
resources test and you have the statement from your doctor,
you certainly should be qualified for presumptive disability.

MRS. GEBBIE: What we were told yesterday is that
unless my doctor had hospitalized me to make the diagnosis, I
would be turned away.

MR. ENOFF: That’s not true. If that’s happened
somewhere, I’d sure like to know where and I’d be glad to check
into it, but that’s not our procedure.

MRS. GEBBIE: We had two witnesses from the greater
Washington, D.C. area who testified that that was the repeated
experience of people they know. These persons with AIDS had to
provide 28 pieces of paper, among which was evidence of the
hospitalization.

MR. ENOFF: I mean we do ask for evidence from the
physician, but hospitalization is certainly not one of those
requirements. And if you would give me the names of those
persons I’d be glad to have someone talk with them and find
out where it was to see what the problem may have been.

MRS. GEBBIE: Okay.
MR. ENOFF: That is not our procedure.

MRS. GEBBIE: I appreciate that clarification, and we
will make certain that we get the details together to track that
one down.

The other area that I would like to get clear has to do
with trying to run these systems in such a way that we don’t make
it worse for people than it otherwise needs to be, and it has to
do with this issue of assets and what assets you can have to
qualify for different programs.

Again, if I followed correctly, to get the Social
Security disability, you’re only looking at whether I can or
can’t work, and whether I am or am not disabled.

MR. ENOFF: That’s correct.

MRS. GEBBIE: So if I own a house and I still have a
car I can get around in, and some savings from the bank, you’re
not looking at that?

MR. ENOFF: We’re not looking at that, but just so
we’re clear here, in the SSI program, a house does not make you
ineligible for SSI, nor does a car if it’s used for treatments or
anything like that. So there are means tests, but they are by no

223

 

 
 

 

means tests that say you can’t have a home or a car as long as
they’re of reasonable value.

MRS. GEBBIE: Well, I guess that’s the piece I’m
looking at. It sounded in your testimony as though for that SSI
period you would have to be more impoverished or have fewer
resources than you might have after the five month wait when you
got on your SSDI --

MR. ENOFF: The SSI program is a welfare program.
There’s a means test. There’s a question of income and
resources. The disability program under Social Security has no
means test. There’s no means test. There’s a work test. If
you’re working obviously you’re not disabled. But there’s no
test of assets or anything like that. It’s an insurance program
basically. You pay your taxes and you qualify based on covered
employment and you receive a benefit if you cannot work. It has
nothing to do -- you know, you can be a millionaire and receive
disability benefits. That’s the intent of the law.

MRS. GEBBIE: Is that means test for the SSI a national
standard mean or is that set by the state?

MR. ENOFF: It’s a national standard. There are State
variations for the supplementary payments, but the basic Federal
benefit has a national test and it’s pretty much legislative. We
have regulations to clarify it, but it’s generally legislative.

MRS. GEBBIE: One of the other areas that we’ve heard
about from a variety of people has to do with the vagarities of
different state Medicaid programs, the level of income at which
you qualify for Medicaid goes up and down depending on where you
live in the country.

And as you move off SSI, which I think automatically
entitled you to Medicaid onto SSDI, you might go to a level of
benefit at which you no longer qualify for that state’s Medicaid
program, but you still haven’t been at it long enough to get onto
Medicare which may not be the thing to get onto anyway.

Have you looked at all, have you had any exploration
with Dr. Roper’s people or with any states about any amendments
to laws or regulations that would allow that sick person who has
gotten onto SSDI to have access to Medicaid without the sort of
bouncing up and down piece, or the on and off piece?

MR. ENOFF: We have had continual discussions with
people in Dr. Roper’s organization, even prior to AIDS, in terms
of this situation. The intent of the statute that there be a
two-year waiting period for Medicare was because that was a
person who doesn’t meet a means test. Generally there was
thought, if I go back, I guess, to legislative intent, that there

224

 

 
might be some insurance from the work place that would cover a
person for a temporary period of time.

So we have looked at that. It’s a very costly effect
if you just simply make that eligibility automatic. But in
addition to SSI making you eligible for Medicaid, as Dr. Roper
has indicated, there are waivers and other kinds of ways of
qualifying for Medicaid so that you do not have to necessarily be
SSI eligible. That’s a State determination generally.

MRS. GEBBIE: Well, I’m not sure that fully covers the
case of the person who has gotten onto SSDI for being disabled,
has some resources apparently, but is quivering just above that
state’s chosen cutoff for eligibility. This would apply not just
to AIDS patients probably, but to several other groups of people
who get SSDI.

Has there been any exploration, or is it worth pushing
you two to talk some more about trying to broaden the cut of
people who need that Medicaid assistance during the two years
while they’re waiting to qualify for SSDI or for Medicare?

MR. ENOFF: You don’t have to push us to talk. We talk
about these programs all the time.

MRS. GEBBIE: Well I mean to talk productively that
comes out with an answer to helps people here.

MR. ENOFF: Well, the disability benefit does not
automatically disqualify you for SSI, as I think I indicated in
my testimony. Oftentimes a person receives both. I think it was
40 some percent on both programs. But there are some people who,
with the disability income which averages over $500.00 a month,
would not qualify for SSI. And of those who do not qualify for
SSI, some then might not qualify for Medicaid. It depends on the
State situation.

MRS. GEBBIE: And because those people probably are
uninsurable for medical or other reasons, they probably fall in
that 37 million of uninsured Americans that we’re struggling
with. And what we’re trying to do, I think, is in part try and
get people back out of that 37 million into some kind of covered
program. And here’s --

MR. ENOFF: I understand that, and I’1l defer if Dr.
Roper wants to talk further about it, but I think it’s a question
of uninsurability rather than a question specifically dealing
with AIDS. There are some folks who fall in that gap, and there
are insurance pools and other mechanisms that are being tried.
So I say it’s not new, it’s not a new issue in terms of AIDS, and
I think we would not want to treat it in, you know, that kind of
an instance --

225
MRS. GEBBIE: No, I’m not wanting --
MR. ENOFF: -- but we do talk about --

MRS. GEBBIE: -- differently for AIDS, but these are
people -- these aren’t people who are just uninsured because they
happen to work for a small store that doesn’t provide insurance.
These are people who are otherwise enrolled in a government
program. They’re known to us and clearly have some health
problems, and that’s why I’m suggesting this, not just for AIDS,
but for that cut of people who are wavering just above Medicaid
eligibility.

Could we be looking at something different just to make
sure they get a health insurance coverage of some kind?

MR. ENOFF: We have looked at various methods and have
covered some of these fringes, I guess you would call it, in that
area, but we continue to talk about the issue and if you have
some suggestions, we could look again.

DR. ROPER: A particular concern I gather is persons
who are SSI eligible, Medicaid eligible apply for disability
income and become qualified for that program and began receiving
disability income payment, and that bumps them over the threshold
and they’re no longer SSI eligible during the 24 month waiting
period. How are they going to pay for health care?

MRS. GEBBIE: Right. Because they don’t get rich
enough to just walk in and pay out of pocket for huge medical
expenses. Would either of you, or could the two of you together
give us some kind of sketch about what might be possible to
arrange for those people during that period other than
automatically putting them on Medicare, which I don’t see
as a--

MR. ENOFF: The question concerned whether HCFA or SSA
could provide some thoughts on the possibilities, other than
waiving the Medicare waiting period, for providing health care
for people who lose SSI, and consequently Medicaid, benefits when
they become eligible for Social Security disability benefits; do
not have private medical insurance; and must wait out the
Medicare waiting period.

Because this question deals specifically with health
care, I defer to Dr. Roper on this issue.

MRS. GEBBIE: Okay. I haven’t seen an answer to that
come in here anyway. Thank you very much.

CHAIRMAN WATKINS: Dr. Lilly?

226
 

 

DR. LILLY: Pass.
CHAIRMAN WATKINS: Dr. Lee?

DR. LEE: Let me run, not a new idea, through you two
gentlemen, and see what you say. Dr. Roper doesn’t want the
problem, but with AIDS you really have it and the problem is, and
I know you don’t like this, but the problem is you’ve got to look

DR. ROPER: We have the problem to a greater extent
than anybody else in society. We are the largest financier of
AIDS health care now.

DR. LEE: What I’m saying is you’re going to get it
more and --

DR. ROPER: Sure we are.

DR. LEE: -- the reason is because the patient
population is an uninsurable population.

DR. ROPER: And we project that we will be spending
more on AIDS.

DR. LEE: So I can’t help but come to the conclusion
that it’s your area that’s going to help solve this type of
problem. Now, let me ask --

DR. ROPER: We sure believe in helping.

DR. LEE: Would the Administration and the Congress
ever consider eliminating entitlement to the people that can pay?
In other words, just having all entitlements be means tested and
how much money would that create for handling these additional
problems of yours? I know what the Social Security man is going
to say, right?

MR. ENOFF: Remember I’m not the nice guy that left I
guess, but I would have to say that that’s a basic change from
the philosophy of the program, the Congressional intent of the
program. So whether the Administration --

DR. LEE: I know it’s basic change.

MR. ENOFF: -- would even think about doing it. I
mean it just goes against the purposes of the programs if you’/re
talking about means testing.

DR. LEE: What program are you exactly referring to?

MR. ENOFF: All of Social Security, yes.

227

 

 
 

 

DR. LEE: We have to pay for these things. The money
has got to come from someplace, and it’s always seemed to me to
be a little bit ridiculous to pay somebody whose outside income
is $450,000.00 tax-free dollars a year, $352.00 a month from
Social Security.

DR. ROPER: Can I try?
MR. ENOFF:. Go ahead.

DR. ROPER: You asked how much it would save to means
test, at least in my case, Medicare?

DR. LEE: Yes.

DR. ROPER: I/’11 give you a glib answer, it depends.
It depends on how you do it and where you set the thresholds and
whatever. Could it be done? Yes it could be done. It will be
administratively difficult and complex. It will be a political
bombshell, but we’re inching that direction.

In the catastrophic health insurance feature that’s
going to be added to Medicare shortly, there are some steps in
that direction where people who have more assets, more income
will be asked to pay more of the costs of the catastrophic
benefit. I don’t think there is anything wrong with doing that.
We are headed in that direction.

If you ask me if ten years from now, we’ll be further
down the road of asking for well to do Medicare beneficiaries to
finance more of the care, sure, yes, that’s the direction. But
understand as Lou was saying that this is a matter of, I’m trying
to say political sensitivity, it’s a matter for important debate.
I think we are and ought to be headed further in that direction.

I have to tell you my father who is 71 does not share
that view. He says that he and my mother saved and set aside
and why should he be compelled to pay more just because he was
prudent, and I give you that counter argument for what it’s
worth.

DR. LEE: I’m a fiscal conservative though. I think
most of the people on this Commission are fiscal conservatives,
and it seems to me to be fiscally conservative to --

DR. ROPER: The point is well made.

MR. ENOFF: Maybe one other way of looking at that and
some of the initiatives that we’ve thought about, and that is
that trying to solve a Medicaid issue, and I’m getting back more
along to where Mrs. Gebbie was coming from, that sometimes we try

228

 

 
to solve a Medicaid entitlement by changing the SSI program, and
that’s probably not a good way of going.

You were into Social Security, but I think you may be
talking more in terms of the SSI population unless you’re talking
about, you know, income levels that are substantially higher than
the SSI income level. So I think --

DR. LEE: The SSI, I don’t know -- that’s -- these are
poor people. Well, I guess the question is if you’re trying --

MR. ENOFF: -- Medicaid what do you look at to solve
it.

DR. LEE: Do you go along with the proposal that was
given to us, the block grants from the federal government to
support Medicaid when it goes over the limit? When the states
go over a certain limit, do you buy that? I don’t think it’s
politically feasible myself.

MR. ENOFF: I don’t recall the specific proposal that
you’re suggesting. I guess it is -- if we’re going to spend
incremental further Federal dollars, should it be in the form of
a block grant to help the States add to their Medicaid program?

DR. LEE: Right.

MRS. GEBBIE: It was a stop loss. Once you hit a
certain percentage of your expenditures for AIDS or a certain
percentage of AIDS care in the budget, then there would be a
block grant stop loss that would fill in behind your regular
progran.

DR. ROPER: If you’re going to spend additional money,
that sort of targeting spending makes more sense than trying to
spread the dollars, I guess, would be my answer.

DR. LEE: Okay, thanks.

CHAIRMAN WATKINS: Dr. Roper, in your written
statement, you talk about four states that had waivers approved
to serve persons with AIDS or ARC or Medicaid eligible, and two
other states had combined waivers serving persons with AIDS, and
other states are believed to be serving persons with AIDS within
waivers designed for broader groups of disabled persons.

In your opinion, are the states sufficiently pursuing
the care waiver options for Medicaid that are available?

DR. ROPER: I’d like to see more of them pursuing it.

229
CHAIRMAN WATKINS: How could we as a Commission drive
incentives to move it in that direction if you think it’s the
right thing to do?

DR. ROPER: Well --

CHAIRMAN WATKINS: Or to help move it in that
direction, to make it attractive to move it in that direction?
We understand New York, for example, has not elected to use the
waiver procedure because they figure they have, internally, a
more cost effective machine that they’d rather put their money
in. If that’s the case, why is that the case?

DR. ROPER: It’s because the State of New York has a
very broad Medicaid program, and they would not agree with this
statement, but compared with other states, a richly endowed
Medicaid program.

CHAIRMAN WATKINS: It’s what?

DR. ROPER: A richly endowed Medicaid program when
compared to other states. So the additional things that another
state like Alabama might get from such a waiver, they’ve already
got in their base program. You asked what can we do?

CHAIRMAN WATKINS: If there is anything you think the
Commission should recommend along those lines?

DR. ROPER: I think it’s especially your urging the
states to do the things they can do including these within the
current structure, largely hortatory in language on your part.

CHAIRMAN WATKINS: Mr. Enoff, we had a presentation by
Dr. Pascall of RAND under a contract with HCFA that was showing
estimates from their point of view that were a little bit
different from the CDC estimates of the number of AIDS cases
we'll have by the early 1990s. Their expectations of low and
high were something like 200,000 low, 750,000 high, but their
center point was 400,000 as opposed to 270,000.

What kind of an impact would that have, or do you see
it having a major impact on the disability trust fund if some
of these higher estimates actually come true? Would there be
significant problems that need to be wrestled with now to be
ready for that situation?

MR. ENOFF: Yes, I would certainly think it would have
an impact as we indicated. While the AIDS/ARC beneficiary
percentage is low: less than one percent of the total disability
population. It’s growing to four to five times the current
number, so it would have an impact, and the disability program
funding over the short range certainly isn’t excessive.

230
But we have only used the estimates through 1991 in our
report that were available, and we’ll be looking this summer at
those estimates and making a better projection that would be more
nrecise. I can’t give you a number off the top of my head, but
obviously if the number is twice as high, you would think it
would have more of an impact. The same kind, twice as much of an
impact on our program.

CHAIRMAN WATKINS: If you decide this summer that
RAND’s number is valid, then what’s the process that you go
through to ready the system by ’92 to deal with that new number
which is 50 percent higher than the current estimate?

DR. ROPER: There are a number of ways that you deal
with that. One is a increase in the tax rate, if we’re talking
about the disability program that’s financed by the employer-
employee taxes. And we would look at those recommendations and
if it appeared to be accurate you could suggest either a
reallocation among the OASI and DI programs or an increase in the
rate to take care of that. But I don’t think we’re there yet.

CHAIRMAN WATKINS: In other words, you can manage that,
you’re telling us that’s not an issue, that once you get the data
you can manage that program?

MR. ENOFF: Unless there is some unforeseen immediate
impact that we haven’t seen, I would not expect that to occur. I
think there’s time to put that word out to the Congress. We will
be looking closely, as I say, at CDC and HCFA and other estimates
throughout the next summer into the next trustees report.

DR. ROPER: If I could respond. As you know there is
about to be an effort within a couple of months to sit down and
re-estimate all these things, our actuaries and SSA’s actuaries
will be an active part of that process.

CHAIRMAN WATKINS: But there’s nothing right now that
is demanding more than, say, doing it this summer in concert with
the other analytic work that you have going on already?

MR. ENOFF: You know, we’re constantly looking. I just
don’t think we have enough solid data to go any further at this
point. But as we do, we will make the projection and then give
the indications. As I say, the trustees have asked us to take a
look at that.

CHAIRMAN WATKINS: So I take it you’re a proponent then

of getting into more accurate -- prevalence estimate of what’s
going on out there in the nation?

231
MR. ENOFF: We try to get the data that we can working
with HCFA and CDC. I mean we’re not the data gatherers.

CHAIRMAN WATKINS: I understand that. The data base
isn’t all that good as indicated by just the RAND spread alone.
Dr. Roper, we’ve heard that a proportion of the children with
AIDS are not covered by Medicaid for health care. Is that true,
and if it’s true, what categories are we talking about of
children, or is it just a lack of knowledge about how the system
works to take advantage of the system? Could you just give me a
little feel on that? Would that come under the Aid to Families
with Dependent Children, what data do we have on that?

DR. ROPER: I’m informed that we estimated 90 percent
of children with AIDS are Medicaid eligible now. The estimate
for the 10 percent not being eligible, I presume is that their
families are employed and have insurance and that’s paying the
cost of their illness.

CHAIRMAN WATKINS: So there is no other reason that you
can think of that would put children in another category. That
is the ones that have families with income is the only criteria
that --

MR. ENOFF: Well, children could qualify for SSI and
therefore Medicaid is --

CHAIRMAN WATKINS: Pardon me?

MR. ENOFF: I said, children can qualify for the SSI
program as well --

DR. ROPER: Themselves directly?

MR. ENOFF: That’s right, the individual child can
qualify if they’re disabled with AIDS.

CHAIRMAN WATKINS: Well is there any proscription as
far as you know by any policy that would preclude a child with
AIDS to get that kind of support other than the family financial
situation?

MR. ENOFF: There are no SSI policies which, by
themselves, would prevent someone from obtainng Medicaid
coverage, since Medicaid is a State administered program. In
36 States, the District of Columbia and the Northern Mariana
Islands, persons who are eligible for SSI are also eligible
for Medicaid. The remaining States have different or additional
requirements beyond SSI eligibility. However, as I pointed
out earlier, SSI eligibility is not the only path to Medicaid.
The various State programs may have waivers or other ways by
which a person, such as a child with AIDS, can obtain coverage.

232
CHAIRMAN WATKINS: Mrs. Gebbie, do you have additional
questions?

MRS. GEBBIE: One other question, and it’s really a
followup of some of this same area, and the question that I asked
of Dr. Sundwall earlier. We have been struck from time to time
at the variety of people involved with data gathering and data
analysis about this epidemic, and occasionally we find an agency
that seems very odd to even be involved at all, going off and
modeling and doing something like that. AID was the one that we
had last week that left us all wondering or leaves me wondering
why they were involved.

Are you two satisfied that there is a mechanism
available to make certain you can get at any and all data that
somebody in the federal system is collecting, and that people who
are collecting data from various places are finding a way to talk
so that if you need data collected in certain categories, the
people who are doing it are shaping it in the right way. Ought
we make some recommendations that would strengthen that process
or improve it?

DR. ROPER: I’m satisfied the process is working well.
Please recommend other things if you will, but we’ve got so much
coordination going on, it’s hard to do our jobs as we’re
coordinating so much.

MRS. GEBBIE: Well, maybe we should recommend less
then. I mean I’m open to either side of the equation.

DR. ROPER: Seriously, in our department, I go every
Monday afternoon with a meeting with all the other assistant
secretaries focusing just on AIDS. Every other Monday morning,
there is an all morning long meeting with people one layer down,
about 30 of them that talk about AIDS and what the whole
department is doing. There’s a larger group that monitors things
beyond our department, the Domestic Policy Council at the Cabinet
level has periodic meetings on the subject. We’ve just got all
sort of coordination going on.

MRS. GEBBIE: Well, are those coordinating mechanisms
sufficiently strong that if it turned out that you really needed
data by some different demographic category than CDC has, you
have a way to get that data?

DR. ROPER: I’m satisfied, but I might say in addition
to our own, you know, internal efforts, some of my actuaries are
participating with the actuaries in the insurance companies on
this area. One thing you might want to look at and you might
want to talk to the National Center for Health Statistics, and
that is with regard to whether the Privacy Act poses any problems

233
in what they share. I can’t speak to that, but they would be the
ones to know that. They have, probably, more data like you
describe than anyone else, but we have not.

MRS. GEBBIE: I think they, as yet, have little AIDS-
related data, although it’s growing. And there is one more
followup on that piece, and again I hate building in bureaucratic
control systems that look like they’re going to limit people, but
what control is there if, to pick what I think is a very far-
fetched example, if you, Dr. Roper, decided that you didn’t like
cbc stuff and you wanted to go out and let contracts to four
cities to do surveys to get your own estimate? Is there a
control on stopping that or at least having it happen in an
organized manner?

DR. ROPER: The ultimate control is I hope we have
sensible people in government.

MRS. GEBBIE: Not everyone would agree, I’m afraid.

DR. ROPER: The second answer is that we have all
these coordination mechanisms and we talk to each other and
we know what each other is doing.

MRS. GEBBIE: And, as you said, you are relatively
satisfied with that.

CHAIRMAN WATKINS: Dr. Lee?

DR. LEE: How much would it cost Medicare if you
included out-patient coverage? Now, you’d encourage people to
receive care as an out patient and it would be cheaper, but have
you ever figured out how much that would cost you if you
included better out-patient coverage with Medicare?

DR. ROPER: Are you talking out-patient coverage of
persons with AIDS?

DR. LEE: No. Suppose your Medicare program for
everyone encouraged out-patient treatment and care?

DR. ROPER: Well, let me pursue with your question for
a moment. We do pay for doctor services, home health services,
ambulatory surgery, a number of out-patient activities. I need
some more specifics about what you mean by encourage out-
patient care?

DR. LEE: Well, we were told repeatedly by an

assortment of witness yesterday that out-patient coverage on
Medicare is very poor.

234
DR. ROPER: I/’11 just have to get my staff to look at
yesterday’s testimony because I don’t know what they mean.

MRS. GEBBIE: I think they were talking about Part B
kinds of services that would otherwise -- that wouldn’t be
automatically covered if you just got on to Medicare, Part A.
That’s the distinction I was making.

DR. ROPER: The point that’s made about out-patient
services under Medicare is we do not pay for out-patient drugs,
self-administered drugs, and that may have been the point someone
made yesterday.

DR. LEE: And you’re satisfied with your home care
provisions?

DR. ROPER: Well, I would make some changes in then,
Dr. Lee, but it’s one of the most rapidly growing parts of the
Medicare progran.

DR. LEE: Okay. What is your --

MRS. GEBBIE: Can I follow up on that? Your present
regulations support home care and some long term care only where
the person is moving toward rehabilitation or some adjective such
as that, and for many AIDS patients, that adjective is not
applicable. So the question was, would they ever be covered for
those benefits?

DR. ROPER: We do have a Hospice benefit under
Medicare that I assume AIDS patients, almost all, would qualify
for after they’re Medicare eligible. There are limits on the
home care benefit. The principal one that I would point out is
we require that the person get only intermittent services, that
is not continuous around-the-clock services, and that the
patient be home bound. That is that they have to be in the home
as opposed to being able to be up and about themselves.

DR. LEE: Well, let me drop that one of the solutions
that keeps coming up, even in the first meeting that all of you
attended last September, is the delay for getting Medicare.
Some of the political candidates have said they’d go for it.
Some haven’t. Are you fighting it strongly in your
organization?

DR. ROPER: I’m very much opposed to an AIDS specific
elimination of the waiting period. If we want to change the
waiting period, I’m open to discussing that, but it needs to be
done with the knowledge of what the budget cost for that is.

DR. LEE: Is it very expensive?

235
DR. ROPER: Yes, sir.

DR. LEE: Very. Your team here is nodding their heads
vigorously.

DR. ROPER: Elimination of the waiting period for all
people who are disabled would cost $35 to $42 billion over five
years is our estimate.

MR. ENOFF: Plus another $10 billion for the Social
Security benefits.

CHAIRMAN WATKINS: Well, we thank you both for coming,
Dr. Roper and Mr. Enoff, and we also appreciate your willingness
to keep an open door to us as we finish up our Commission’s work.

DR. ROPER: Absolutely.

CHAIRMAN WATKINS: We would like to continue chatting
along the lines we discussed earlier and we may have some other
additional questions that we’ll want to submit. We’1ll try to pin
down this area of support for children with AIDS. We have some
specific data, but we just don’t have it in hand here today, but
we'll see if we can bring it out. Thanks very much for coming.

We’ll recess now until 1:00 o’clock.

(Whereupon, at 12:09 p.m. the meeting was adjourned to
reconvene at 1:08 p.m. this same day.)

236
A-F-T-E-R-N-0-O-N S~E-S~S~-I-O-N
1:08 p.m.
STATE APPROACHES TO FINANCING CARE PROGRAMS

CHAIRMAN WATKINS: This afternoon’s topic for our
first panel is state approach to financing care programs. We
have with us Dr. Kenneth W. Kizer, Director, California
Department of Health Services, Mr. Gary J. Clarke, Deputy
Assistant Secretary for Medicaid, Department of Health and
Rehabilitative Services, Florida, and Dr. Matthew P. Scanlon,
Deputy Director, New York State Medical Care Facilities Agency on
behalf of the National Council of Health Facilities Financing
Authority. I’d like to start with you, Dr. Scanlon if you would
begin with your prepared statement.

DR. SCANLON: All right, Mr. Chairman and
Commissioners, I thank you very much for giving me this
opportunity to talk to you this afternoon. The topic that I
will speak about will be capital financing for AIDS facilities,
and there are three issues that I would like to discuss with you.
The first is the type of facilities in which PWAs be cared for;
secondly, what types of organizations will operate and manage
these facilities; and thirdly, where will they get the capital
funds in order to construct these facilities.

I’1l give three short answers to those and then give
you some specific recommendations. The types of facilities in
which PWAs will be cared for, at least as we can see in New York
State will be at the sub-acute care level. By that I mean
skilled nursing home facilities, community residences which have
some type of medical supervision, or other types of residences.

The "who" of who will provide this care will be in
some cases public health care systems like the hospital system
in New York City, but for the most part it will be the
traditional non-profit providers of health care in this country.

Three quarters of all hospital beds in the United
States are provided by non-profit hospitals. We expected this
same pattern will continue into the operation and maintaining
of facilities for PWAs.

These facilities, these non-profit providers, raise
capital primarily through the tax exempt bond market, and they
do this for four reasons The first is that by using debt
financing for these facilities, the organizations are able to
leverage any equity funds or governmental appropriations that
they have available.

237

 
Secondly, the tax exempt bond market provides a much
lower cost of funds than the taxable debt market. For example,
taxable debt for AIDS treatment facilities, if we could issue
it at all, would require an interest rate on the order of 12
percent. Using the tax exempt bond market, it’s closer to 8
percent.

Thirdly, the reimbursement stream, which I’m sure
you'll hear about later, for capital purposes is based on 25 to
30 year debt. That debt is long-term debt. Long-term debt is
only available in the tax exempt market. Taxable financings
generally only have maturities of 10 to 12 years.

And finally the tax exempt market understands non-
profit health care providers. Non-profit health care providers
do not raise debt in the taxable markets.

What I want to concentrate on today is what do we
need to do to make the tax-exempt markets more accessible to
organizations that will be providing AIDS treatment facilities.
There are two answers to this question. The first obstacle is
that there were a number of changes in the Tax Reform Act of 1986
that hampered the ability of agencies like mine to go into the
tax-exempt markets and raise capital.

Primarily what happened in the tax act was that
Congress considered large acute-care hospitals, but additional
costs were added on to facilities that were small as we expect
these AIDS facilities to be.

The second obstacle is that in order to access these
tax-exempt markets, because these facilities are new and untried,
we'll need some type of government guarantee.

The federal government has an excellent program which
could provide access to the tax-exempt capital markets for these
AIDS treatment facilities. This program is administered by HUD
under the FHA Commissioner. It’s called the 232 Program, and
it provides mortgage insurance of up to 30 to 40 years. With
that mortgage insurance we’re able to go into tax-exempt markets
and issue the type of debt that will be necessary to finance
these facilities.

In each of these areas we have suggestions that I/11l
summarize, but which are specifically described in our testimony.
On the tax-exempt bond side, the first suggestion would be to
remove restrictions on the use of tax-exempt bonds by non-
hospital facilities. We expect that most of the treatment of
AIDS patients, after the initial diagnosis, will be in sub-acute
care levels facilities similar to nursing homes.

238
Secondly, we should eliminate the restrictions on our
being able to pool a number of facilities into one financing.

Thirdly, we should change provisions that have
increased the costs of issuance for smaller facilities,
including AIDS treatment facilities.

On the FHA 232 Program, we also have three
suggestions. First is to accelerate the processing for mortgage
insurance through HUD by using private firms, in concert with
HRSA, so that these facilities can receive commitments on a
expedited basis.

Secondly, we should reduce the cash requirement
because not many of these facilities are going to be able to
meet requirements for equity that are currently in the FHA
regulations. We also should eliminate other technical
restrictions.

That, I think, takes my allotted five minutes. We’ve
looked at the cost of these proposals. On the tax-exempt bond
Side, the costs will be minimal. They are just technical changes
that hamper our ability to access the market. On the FHA 232
side, as long as the facilities that are obtaining FHA insurance
are financially viable, what will happen is the federal
government will actually receive more money because in order to
obtain this insurance, the government requires a mortgage
insurance premium payment.

That’s a very brief summary of our long testimony.
I’1ll stop now and answer any questions you may have.

CHAIRMAN WATKINS: Thank you, Dr. Scanlon. We’1l
proceed with Dr. Kizer.

DR. KIZER: Good afternoon, Admiral Watkins and members
of the Commission. I’m Dr. Kenneth W. Kizer, Director of the
California Department of Health Services. Thank you for the
opportunity to be here today to comment to the Commission about
health care financing issues related to the HIV epidemic in
California.

Since AIDS was first reported in 1981, about one fourth
of all of the known cases in the U.S. have occurred in
California. As of this date, we have had about 13,000 cases
reported to the Department, and of these, 56 percent of them have
died.

The Department projects that another 35,000 cases of
AIDS will occur in California by the end of 1991. We also
estimate that about 300,000 Californians are now infected with
the AIDS virus.

239

 
Based on our current understanding of the natural
history of HIV infection, and in the absence of an imminent cure
or disease-arresting immune-therapy, we believe that we have to
assume, for planning purposes, that all persons infected with HIV
will ultimately go on to develop illness and that about half of
these persons will develop fulminant AIDS.

At present, it is believed that at least one quarter
of Californians with AIDS will become dependent on Medi-Cal
California’s Medicaid program, or some other publicly financed
health care program.

Clearly, given the resources currently being utilized
in providing care for persons with HIV infection, combined with
the stresses currently confronting publicly financed health care
in general, we are very concerned about future financing and
access to health care for HIV infected persons.

In California we have been concerned about these issues
for some time, and have undertaken various actions to address
them. These actions have included initiating a number of home
health and attendant pilot projects, including hospice care as a
Medi-Cal benefit, applying to HCFA for a Medicaid home and
community care waiver, conducting studies on the cost of AIDS
care, and presently pursuing legislation.to authorize a new
category of licensed health care facility which we call an AIDS
congregate living facility.

I previously provided to the Commission staff copies
of two reports of our on-going investigation about the impact of
AIDS on the Medi-Cal program. A third report covering Medi-Cal
expenditures through the end of 1987 should be finalized this
summer.

Although not as costly in the aggregate as heart
disease, cancer and some of the other top ten causes of death in
the United States, AIDS is an expensive disease to treat. In
California, the average lifetime cost of care for an AIDS patient
is $70,000 for private insurance and about $44,000 for Medi-Cal,
with nearly 90 percent of those costs being due to
hospitalization.

For the AIDS and ARC cases reported to date, in
California, we believe that the combined public and private
expenditures for personal health care will exceed $1 billion.
Likewise, using current AIDS caseload projections and lifetime
treatment costs, we estimate that an additional $2.2 billion will
be spent for personal health care for persons diagnosed with
AIDS from now through 1991.

240

 
Further, based on current data and assumptions, we
expect an additional $15 billion to be spent in California for
treatment of persons who have already been infected with HIV.

I should point out, though, as I suspect you already
understand, that these projected HIV-related health care costs
may significantly change depending on further substitution of
out-patient and home care for in-patient care, development of
new treatment regimes for persons with AIDS and ARC, as well
as for asymptomatic HIV seropositive individuals, revision of
caseload projections, changes in the proportion of seropositive
persons progressing to AIDS and ARC, and other factors.

Even though AIDS will certainly continue to be an
expensive disease, our experience in California has shown that
we can reduce the cost of providing health care for persons with
HIV infection.

We believe that the greatest impact can be made in this
regard, while at the same time providing both competent and
compassionate treatment, by increasing our ability to provide
health care in settings other than the traditional general acute
care hospital.

Insofar as current federal reimbursement rules and
regulations make it difficult to reimburse for services that may
be viable alternatives to expensive in-patient care, they promote
unnecessarily long lengths of stay in hospitals and, therefore,
higher treatment costs.

Likewise to the extent that reimbursement is
restricted only to traditional health care facility licensure
or categories that do not fit the alternative and innovative
modes of treatment being tried in California, this also is an
obstacle to financing AIDS care.

To counter these obstacles, we recommend that the
Medicaid waiver review process be streamlined and that Medicaid
rules and regulations provide additional flexibility to provide
for the testing of innovative treatment alternatives, realizing
that if we are truly going to innovate then a degree of risk
has to be accepted. That is, by the very nature of being
innovative, not every new mode of service delivery can guarantee
in advance that it will provide cost savings.

Lastly, I would like to express our belief that the
models of care that are being developed for AIDS are likely to be
applicable to many other disease states, and that we should not
overlook or underestimate the potential of the activities being
directed towards the HIV epidemic to assist in the overall effort
to maximize the services received for the limited public dollars
available for health care.

241
PRESIDENTIAL COMMISSION ON THE
HUMAN IMMUNODEFICIENCY VIRUS EPIDEMIC
FINANCING THE COSTS OF THE HIV EPIDEMIC
The Hearing was held at the
Interstate Commerce Commission Building
Hearing Room B
12th and Constitution Avenue, N.W.
Washington, D.c.

Wednesday, April 27, 1988

COMMISSION MEMBERS PRESENT:
ADMIRAL JAMES D. WATKINS (Ret.), CHAIRMAN
COLLEEN CONWAY-WELCH, PH.D.
KRISTINE M. GEBBIE, R.N., M.N.
FRANK LILLY, PH.D.
CORY SERVAAS, M.D.
POLLY L. GAULT, EXECUTIVE DIRECTOR
COMMISSION MEMBERS NOT ATTENDING:
JOHN J. CREEDON
THERESA L. CRENSHAW
RICHARD M. DEVOS
JOHN CARDINAL O'CONNOR
BENY J. PRIMM
PENNY PULLEN

WILLIAM B. WALSH, M.D.
I-N-D-E-X
PAGE

PANEL FIVE
OPTIONS FOR CARE AND SOURCES OF FINANCING 143
Arthur W. Feinberg, M.D.,F.A.C.P., Professor of
Clinical Medicine, Cornell Medical College,
Associate Director, Department of Medicine,
North Shore University Hospital and Fellow,
American College of Physicians (ACP) on behalf of ACP

Harvey J. Makadon, M.D., Medical Director 146
Ambulatory Services, Beth Israel Hospital,

and Executive DIrector, The Boston AIDS Consortium,

The Harvard School of Public Health

Carl J. Schramm, President 149
Health Insurance Association of America

Mary Bell Lehnhard, Vice President, 152
Office of Government Relations,
Blue Cross & Blue Shield Association

Gail R. Wilensky, Ph.D., Vice President 154
Division of Health Affairs and Director, Center
for Health Affairs Project HOPE

Ben Schatz, Director 158
AIDS Civil RIghts PRoject
National Gay Rights Advocates

PANEL SIX
FEDERAL APPROACH TO FINANCING CARE
David N. Sundwall, M.D., Administrator 187
Health Resources and Services Administration (HRSA)

 

Louis D. Enoff, Deputy Commissioner for Programs 192
Social Security Administration (SSA)

William L. Roper, M.D., Administrator 208
Health Care Financing Administration (HCFA)

PANEL SEVEN
STATE APPROACHES TO FINANCING CARE PROGRAMS
Matthew P. Scanlon, Ph.D., Deputy Director 237
New York State Medical Care Facilities Agency
on behalf of the National Council of Health Facilities
Finance Authorities

Kenneth W. Kizer, M.D., M.P.H., Director 239
California Department of Health Services
I-N-D-E-X (continued)

PANEL SEVEN (continued)
Gary J. Clarke, Deputy Assistant Secretary for

Medicaid, Department of Health and Rehabilitative
Services .

PANEL EIGHT
PRIVATE SECTOR FUNDING INITIATIVES
Leighton E. Cluff, M.D., President
Robert Wood Johnson Foundation

Sibyl Jacobson, Ph.D., President
Metropolitan Life Foundation

Stanley Karson, Director
Center for Corporate Public Involvement

PANEL NINE
FINANCING THE STATE AND COUNTY PREVENTION AND
EDUCATION EFFORT

Robert Bernstein, M.D., F.A.C.P.
Commissioner of Health, Texas

James T. Dimas, M.P.A., Executive Director
Public Health Foundation

William A. Bogan, Executive Vice President
COSSMHO

Joel L. Nitzkin, M.D., President
Association of County Health Officials

PANEL TEN
FEDERAL FUNDING FOR PREVENTION AND EDUCATION
Gary R. Noble, M.D.,M.P.H., Deputy Director of
(AIDS) for the Center for Disease Control (CDC)

Roy Pickens, Ph.D., Assistant Director for AIDS
National Institute on Drug Abuse (NIDA)

APPENDIX ~ SUBMITTED TESTIMONY

PAGE

242

268

271

273

295

297

300

303

323

327
With those comments, I will stop. I will be happy to
try to address any of your questions. Thank you.

CHAIRMAN WATKINS: Thank you, Dr. Kizer. Mr. Clarke?

MR. CLARKE: Thank you, Admiral Watkins, members of
the Commission. In Florida we are justifiably proud, I think,
of our track record in funding AIDS. We have grown from zero
funding in 1985 to $6 million in 1986, $12 million in 1987 and
projected $24 million in state only expenditures for AIDS in
1988. Most of that money has been devoted solely to efforts in
the area of patient care, and I know members of the Commission
visited Florida and saw some of the programs there.

Frankly, despite these expenditures, we are no where
near meeting the need. Our clinics are over crowded. There are
long waiting lines for admission and examination. There are
reports of rude treatment simply from staff and facilities being
overworked. |

We’ve taken a look at some of our expenditures in
Florida, particularly in Jackson Memorial Hospital, to get a
picture of how we’re financing care for AIDS patients.
Interestingly, about 23 percent of all hospital days are paid
through private insurance, about 16 percent are paid through
Medicaid, and all the rest is paid through local: property taxes,
through state general revenue, or more importantly bad debt .
writeoffs and indigent care by our large teaching hospital,
Jackson Memorial Hospital.

DR. LEE: Did you say 60 or 16?
MR. CLARKE: 16. 16 percent is paid for by Medicaid.
DR. LEE: 16?

MR. CLARKE: 16, that’s right. 60 pertent is state
and local property taxes unmatched by federal money. Of the $26
million we estimated we spent on AIDS patient care last year, $8
million came from state and state general revenue. About 3 to 5
million came from the Medicaid program only.

As our case counts double, and we project in Florida
that they will double each year until 1992, we believe that there
is no way that state or federal grant programs by themselves will
keep up with this workload. Particularly because of the
problems that we have in Florida with the financing structure of
hospital care, we think what AIDS will do is exacerbate an
already existing problem of providing health care to the poor and
to those with catastrophic events.

242
In contrast to Dr. Scanlon’s testimony, most of the
care provided to AIDS patients in Florida is in public hospitals
or just recently turned public hospitals that are now non-profit.
About ten of our hospitals probably do 80 or 90 percent of all
the care to AIDS patients in Florida, and this is primarily done
in our six statutory teaching hospitals.

These six hospitals provide over 55 percent of all the
indigent care in the state and they do more Medicaid care than
all 85 of our for-profit hospitals combined. So what we have
seen, at least in our state, is a high concentration, not just
of AIDS cases in urban areas, but of AIDS cases in our teaching
hospitals which are already experiencing severe distress because
of the financing mechanisms and patient care arrangements in our
state, and the high degree of competition.

We believe that unless we can expand the insurance
base of coverage for AIDS patients and provide care in home and
community-based settings, the problems of our urban teaching
hospitals are only likely to get worse. And frankly this won’t
be the straw that breaks the camel’s back. It will be a brick
load that will break the camel’s back. Our hospitals are in
severe, severe straits right now.

Given the current categorical and financial and medical
determinations necessary to become eligible for Medicaid -- which
I frankly believe is our most efficient and most useful way of
federal state cost sharing for providing patient care for the
poor -- I’m not sanguine that the federal partnership for
financing AIDS patient care will actually keep pace with the
increasing costs experienced at the state and local levels.

For instance, while 70 percent of all the children
in Florida with AIDS are probably eligible for the Medicaid
program, only about 35 percent of our total AIDS population is
actually eligible for the Medicaid program. As a result the
other 65 percent generally has, with the exception of those with
private health insurance, no way of paying for their care. And
as I know the Commission members know, it’s terribly expensive.

In addition, as you also know, there is a high cost
associated with treating ARC patients, virtually none of whom are
eligible under any of our categorical programs.

One of the things that I will propose to you, and I’11l
get to my recommendations in just a second, is a little bit of a
philosophical twist that may be at some difference with my state
counterparts. One of the things I believe is that when we know
something works in the state and federal program, we ought to
mandate it, and where we don’t know what works, we ought to let
it be the option of the states.

243
 

 

I believe that we know that there are some things that
we can do to help AIDS patients, and I believe we can do it
through a state and federal partnership, which is the Medicaid
program. This program is, as you know, a federal and state
matched program -- generally about 55 percent federal funds on
the average, and 45 to 50 percent state funding.

Some of the ways to do this, in terms of my
recommendations, would be to:

1. Expand SSI coverage (Supplemental Security Income
coverage) to persons with AIDS or ARC up to 100 percent of the
poverty level.

2. To change the definition of presumptive
eligibility -- and there have already been some changes put
forward this year about how one becomes eligible for the SSI
program, which is the way most patients, with the exception of
children, become eligible for the Medicaid program. Currently
we’re using the CDC definition of AIDS which, as you know, is
used as an epidemiological tool and really does not necessarily
encompass all of the illnesses and associated costs that come
into play when you’re financing care for persons with HIV
infection.

3. I believe that all the states should be required
to provide effective treatment for AIDS. This includes provision
of the drug AZT in my own particular state. We currently do not
cover AZT under the Medicaid program.

4. To require, expedite, and set standards for home
and community-based waivers for AIDS programs, I did not have the
opportunity to hear Dr. Roper this morning, but as you may or
may not know, states generally have had long and difficult times
in getting waivers out of the federal government.

Particularly for this patient population, we really do
know what to do. The models that have been put forward in San
Francisco and Miami and elsewhere really do work, and we need to
have some minimum standards and some expedition on those requests
for waivers. We’ve had waiver requests last for up to two years
before they’re finally approved or denied.

5. The federal government, I believe, needs to assist
in establishing centers of excellence for the treatment of AIDS
patients, not just from a medical point of view, but in terms of
establishing these home and community based services. There’s a
lot of expertise around the country that really needs to be
provided instead of reinventing the wheel.

6. One of the things that we have seen is a desperate
need for housing for AIDS patients. When they’ve lost their

244

 

 
 

 

jobs, when they’re in serious medical straits -- when sometimes
they’re better and sometimes they’re worse -- it’s very difficult
for us to find housing that will meet their needs and allow us

to follow them through the various progressions of their illness
and severity of disability. There needs to be created state and
federal and, frankly, private initiatives in order to put those
housing initiatives in to place.

Finally, I’d just like to put a little bit of
perspective on this issue in terms of the treatment of the
disease AIDS in comparison to the cost of the total Medicaid
program. We believe next year there will be 2,400 living AIDS
patients in the state of Florida. This does not include ARC.
That 2,400 contrasts with over 600,000 people currently eligible
for the Medicaid progran.

We estimate the annual Medicaid cost of taking care
of an AIDS patient, with all the hospitalization, AZT and other,
things that are required would be approximately $17,000.00 a !
year. In contrast, the care that we currently provide through
our nursing home program costs us about $20,000.00 a year. So
we are already doing a lot of long-term care for a lot of
severely ill patients through the Medicaid program.

Frankly, if our cost projections are right and our
numbers are right, and we can get all of these people eligible
for Medicaid -- which under current standard, at best, we can
get about 35 percent eligible -- assuming we could get them all
eligible, it would cost us next year in the state of Florida
about $40 million. That contrasts with the Medicaid budget for
our state which next year will be $2 billion, or really only
about 2 percent of our total expenditure.

I think this is something we can do and I think with
your help and some changes, we can help not only AIDS patients,
but a number of the hospitals and providers that are really doing
the work.

CHAIRMAN WATKINS: Thank you, Mr. Clarke. Now, let me
just pick up on a question to you and Dr. Kizer. Then I’1l pass
to my left and I think we’1ll start with Mr. DeVos.

Dr. Kizer says in his written testimony, "To counter
tnese obstacles, we recommend that the Medicaid waiver review
process be streamlined and the Medicaid rules and recommendations
provide additional flexibility to provide for the testing of
innovative treatment alternatives and so forth."

Mr. Clarke mentioned again the expeditious handling

of waiver cases. On the other hand, we listen to Dr. Roper who
is encouraging us to put in our report an encouragement to the

245

 

 
 

 

states to start taking advantage of the waiver alternatives.
He says the states are not using the waivers.

So, we’re in a dilemma on the Commission. What is
the problem? Is it the federal government? Is it the state
government? Is it neither one of them? Is it the system? Is
it the definition? It’s really confusing as to -~- we’re chasing
our tails right now from just the testimony. So, can you
enlighten us on that? Let’s talk about waivers and alternative
health care settings and responsiveness and let’s try to pin the
tail on the right donkey.

DR. KIZER: I understand your comment. I think we
touched on that briefly at the Institute of Medicine in February
when we were there. California has submitted a waiver request.
I don’t know about Florida, but we do have one at HCFA, and it’s
been there for about three months or so.

CHAIRMAN WATKINS: Can you talk a little bit about
that? What is it specifically?

DR. KIZER: I’m not sure that at this point I would
have a specific criticism about how they are handling our present
waiver. The generic issue, and I think I can speak to this as a
sentiment that I’ve heard from my other state counterparts, is
that the ostensible criteria by which a waiver will be judged is
whether it can guarantee cost savings. That’s what I tried to
address in my comments.

Insofar as we are going to try to be truly innovative
and develop some new models, it is very hard to guarantee in
advance that there are going to be cost savings. Certainly in
non-AIDS related areas of care -- and we have submitted numerous
waiver requests for other sorts of care under Medicaid -- that
process is an arduous one that typically takes a year or longer
to work through with a variable success rate, depending on your
ability to guarantee that there will be savings. If you cannot
guarantee it, then the likelihood of the waiver being approved
is not particularly good.

I can understand that sentiment, but if the idea is
to encourage really innovative programs, there is a built-in
contradiction in the process. I think the experience of other
states has been similar in that it is an arduous process, and
the ability to guarantee cost savings up front when you are
trying to do something new makes one start the process feeling
somewhat discouraged, at least in other areas.

I think, perhaps that is the problem that you see

with some states being reluctant to pursue the waiver process,
not only for AIDS care but in other areas as well.

246

 

 
 

 

CHAIRMAN WATKINS: Mr. Clarke?

MR. CLARKE: I really mostly have to second that. In
addition, another problem, particularly for a state like Florida
that does not have a generous Medicaid program in terms of the
services covered is that you have to prove cost effectiveness
compared to what you have. If, for instance, you’re not covering
home health care adequately or you’re limiting your stay on
hospital days, as in Florida to 45 days and other states are
limited to as low as 12 and 14 days, if you’re trying to prove
cost effectiveness compared to what you have, it’s a very
difficult task and that’s the task all the states are put to.

In addition, there has been some feeling we’ve gotten
the bureaucratic runaround in the past. Frankly, it is very good
news to me to hear that Dr. Roper intends to expedite that. We
intend to put forward a waiver request probably in July or
August this year.

CHAIRMAN WATKINS: Mrs. Gebbie?

MRS. GEBBIE: A different attack at the same issue.
When Dr. Roper was here this morning, we asked him to come back
to us with a revised package. Knowing what we know today about
health care services, what would he write in as the mandated
parts of Medicaid and what would he leave out? That is, are
there things that we now all have to go for waivers for that if
we were writing the law today we would make fundamental, things
that perhaps we now would include at the core of the progran.

Could the two of you from the perspective of your
states respond? If you could, what would you put in the law as
the things every state absolutely has to do under Medicaid, and
then what things would you leave out as optional for states or
as waiver items?

To give an example, based on what we’ve heard, is that
we might write in something about case management services being
a requirement. Feel free to comment on that, but could you also
consider writing up some ideas there?

DR. KIZER: Sure, Kristine, I would be happy to do that
in concert with our Medi-Cal managers and staff. I think the
point that you make about case management is a good one and
certainly applies to areas other than AIDS, with prenatal care
being an excellent example where we think that there is a lot of
benefit from case management. Of course, the California
Medicaid program is generous in the sense of covering a lot of
services or being broad based in its coverage. We offer all of
the optional benefits under Medicaid except for one. So, there
is not much currently under the program that is not available.

247

 

 
 

 

Just to amplify on something Mr. Clarke said, although
the program is broad based, the reimbursement rates are not
particularly generous and that is a problem when you are trying
to address the issue of cost savings. From the outset of the
Medicaid program in 1966, when it was roughly a $760 million
program, to now being in excess of $6 billion a year, cost
containment has been an essential feature of the progran.

Rates of reimbursement have been ratcheted down to
the point where I am not sure there is a whole lot more room to
go. So, when we are trying to show cost effectiveness against a
system that is already ratcheted down that low, there again is
an inherent problen.

MRS. GEBBIE: Don’t look at it from the cost
effectiveness viewpoint. At least in my view, and I think
Dr. Roper agreed this morning, if we fix the range of services,
if we make adjustments in the poverty level at which we kick it
in and if we adjust the reimbursement rate which are the three
biggest problems we all encounter, there’s no way out. It’s
going to cost both the states and federal government more money.

I, at least, am willing to entertain that as a part of
our report, but we’ve got to see what that package of services
would be composed of in its ideal sense and not just for a state
that’s currently generous but as the core of the package across
the country.

MR. CLARKE: That’s one of the things I tried to
recommend in my comments, that we set standards for what we’/re
expecting here. But keep in mind, in addition to all the things
you’ve mentioned, the most difficult thing about this is
eligibility. That’s the thing that we have also got to address.
We've addressed it by way of precedent in the last couple of
years through the Omnibus Budget Reconciliation Act of 1986 and
1987 in which we’ve untied welfare categorical requirements as
a condition for Medicaid eligibility for pregnant women and
children.

What I was trying to suggest today is I believe
because of this epidemic, because of the huge costs and because
it’s impacting different hospitals differently, we need to take
advantage of that precedent and apply it to persons with HIV
infection under something different than the surveillance
definition.

MRS. GEBBIE: Would you do that separately for HIV
infected persons or would you do it more broadly through a
higher eligibility level than medically needy that would treat
HIV infected persons like anybody else who can’t get coverage
today?

248

 

 
 

 

MR. CLARKE: Well, technically again, and we’re into
the Medicaid program, the medically needy program by federal law
at the present time is tied to the AFDC level. The AFDC level in
our state is 33 percent of the federal poverty level. By federal
law, we can only go a third above that. So, our medically needy
program only extends up to 44 percent of the poverty level and
you have to be categorically eligible, which single adult males
are not unless they’re disabled under the SSI definition.

MRS. GEBBIE: Well, I guess what I was trying to sort
out, which we’ve tackled several different times, is the
relative merits or the ethics of creating a new special class
of service for those with HIV. Shouldn’t we similarly fix
persons with other illness costs or other conditions that are
also caught in these is same problems, but just didn’t happen
to have a Commission created for then.

MR. CLARKE: I understand and we’ve been on that
dilemma. My only point is that we’ve already started down that
path with pregnant women and children.

MRS. GEBBIE: So, in your mind it’s consistent with
what we’ve been doing and would fit in.

MR. CLARKE: That’s right. It’s something new,
special and different.

DR. KIZER: Let me offer a comment. The last point
in my prepared comments that I made was in between the two poles
that you were presenting. The HIV epidemic may well provide an
opportunity to look at some demonstration projects that would be
very relevant to other disease categories. I’m very sensitive
to the equity issue. I think it always has to be in our minds.

But insofar as providing care, this disease may well
show us models or ways that we can deal with problems of
Alzheimer’s disease and stroke patients and lots of other people
who may need a similar spectrum and intensity of services. We
should look at these as opportunities to do demonstration
projects that are really pioneering new ways of providing
services for everybody.

CHAIRMAN WATKINS: Well, that really catches my
attention. That’s exactly what I personally feel. We tried
to drive that concept through this morning, and this constant
principle of equity with which we can all agree, there’s a way
to approach equity and yet help AIDS patients which helps all
sick people.

I like your idea of taking a look at the rules and
regulations on Medicaid and see if we can’t experiment, with
sunset clauses. Let’s measure your cost effectiveness and

249

 

 
 

 

recognize at the end of that time we have to come to grips
with the applicability of the experimental programs to other
infectious diseases if we show a cost effectiveness. Why not?

So, what’s wrong with that? Is that inequitable to
other people that do not have the HIV? I don’t think so. It
seems to me that we can use your recommendations perhaps to make
adjustments to the programs that can still have equity as a basic
principle in the longer haul.

DR. KIZER: That’s the point I was trying to make, sir.

CHAIRMAN WATKINS: Can the two of you give us the
specifics? Let’s focus on this epidemic and let’s have a set
of special waiver procedures and programs, with appropriate end
points. Give us a two year period of testing and come up with
measurement and evaluation regimes to come back to the federal
government.

Can we have something like that, a specific
recommendation of how the rules and regulations as you view
it, can be modified?

MR. CLARKE: Absolutely, without a doubt. We’11l
provide it to you.

CHAIRMAN WATKINS: Who of you would like to take the
lead and the other be the cosigner? I think the two of you, if
you could get together, it would be very useful to us so that we
could say, "We have this recommendation coming in from two of our
witnesses that represent two state authorities."

DR. KIZER: It makes no difference to me. We would be
happy to do it. We could individually provide them or if you
wanted a joint statement --

CHAIRMAN WATKINS: Well, we need it in a short time-
frame. We’d like to have it in hand within the next three to
four weeks because otherwise we’re out of business.

MRS. GEBBIE: Joint would be better than individually
just because it will show some better analysis, I think.

CHAIRMAN WATKINS: Yes, joint would be better. I think
it would be a stronger position.

MR. CLARKE: We also have an association of state
Medicaid directors and state health officials and they want to
get involved in this as well.

CHAIRMAN WATKINS: Can you do that for us? The time
constraints are real and your contact point is Kristine Gebbie.

250

 

 
 

 

MRS. GEBBIE: Who keeps picking up assignments here.

CHAIRMAN WATKINS: She loves these assignments, she
really does. She’s just delighted. Our staff, of course, will
be helping her out. But we’d like to get that input from you.

DR. KIZER: We would be happy to provide that. If you
like, or if Mr. Clarke has no problem, I’d be happy to try to
do that. We are, in California, somewhat unique as far as how
health departments are organized in that both the public health
and Medicaid, as well as a number of other areas, fall under
my direction. So, we do not have a separate department that
administers Medicaid or public health. So, it is perhaps, easier
for me to coordinate and get responses from both those entities,
since they both report to me.

CHAIRMAN WATKINS: Mr. DeVos?

MR. DevOS: Well, we keep talking about equity. You
represent three of the states where you have an inequitable
amount of this problem. I think that gives you further reason
to follow up on what the Admiral is talking about.

My concern is always when we -- all of us in the
Commission get branded in certain subjects. We always feel like
we’re talking to ourselves because we’re always asking the same
questions. But you’re trying to involve the federal government.
I come from a state where we have excess hospital beds in some
of our areas. I presume you’re probably all pretty tight because
you’re all growth states.

DR. SCANLON: Right. Yes. In New York City on any
given day, there’s 1500 beds that are taken up by AIDS patients
and we’re just bursting at the seams.

MR. DeVOS: Well, I understand, and so you have this
problem or you’re overloaded.

MR. CLARKE: We have both excess beds and overload on
AIDS patients in particular hospitals.

MR. DevOS: Are you able to balance that?

MR. CLARKE: Actually, not really. Because these
patients become public patients, they end up only in the public
hospitals. What’s happened is the problem -- which is really a
financial problem for these hospitals and these providers -- is
concentrated in a very small place and the load is not spread
over the rest of the hospital industry.

251

 

 
MR. DeVOS: Well, I know, but Dr. Scanlon started
talking about financing and building new facilities. So down the
road a few miles you’ve got something that’s possibly usable, but
it doesn’t happen to be the quite right spot so you’re confronted
with a whole new facility. I’m just wondering what you recommend
as a resolution to that. We have excess capacity some places and
under utilization at others.

DR. KIZER: By way of information, I should tell you
that we are confronted with that same situation in California.
In 1986, the last year for which we have complete statistics,
hospital occupancy in California was only at 54 percent. We
have thousands of excess hospital beds in the state. It isa
distribution problem. In some communities there is a shortage
of beds, and we are seeing considerable new capital construction
in areas to meet that. In other areas, we are “over bedded" as
far as hospital beds.

Your comment about the disproportionate impact on
states with the three states represented here being part of the
disproportionate impact is also applicable within a state like
California, in that about 70 percent of all of our cases, to
date, have come from either San Francisco or Los Angeles. Within
those large geographic areas, there is also disproportionate
impact within specific communities.

In contrast to Florida, the majority of AIDS care in
California is provided by private facilities and is financed by
private mechanisms, at this time, although we are seeing a
growing dependence on both public hospitals and publicly financed
systems of care.

MR. DevOS: My position is not a very popular one
because I am concerned that people who aren’t involved directly
with AIDS aren’t really too interested in paying for it. Yet at
the same time, the people who are the recipients of the services
are unable to pay. So, someplace along the line, you have to
find an accommodation, either to convince those taxpayers or
consumers that they ought to be willing to pay or you’ve got
to find those who are the recipients in some way moving towards
areas where the services are more readily available or at a lower
cost.

It’s not a very popular position. I live in this
town, I want to be serviced in this town. I appreciate that.
It’s just that those two collide someplace and you end up with
inadequate services or poor service or none at all. It’s bad
enough that you see it within the state, but try and jump a state
line and it gets more complicated. But you can’t even seem to
get around it inside your own state where you can balance that
load.

252
DR. KIZER: That is right, and the problem is not
unique to AIDS. We certainly see this same issue arise in
long-term care for any condition and the desire to have that
care provided within one’s own community, but within that
community there may very well be constrained or limited access
to the services that are desired. This is particularly true
for publicly financed patients where that care may need to be
provided miles or counties away. So, the issue is certainly one
that we are familiar with in California, and I suspect in other
states as well.

MR. DevOS: You may have a person who will be ina
hospital short-term and back out that you cope with, but when
you go down to where people need hospice care or ongoing care in
a government controlled or some other nursing home type facility,
then the issue is important. These people don’t have any means
of support. And whether that person should move to a lower cost
area or where there’s adequate care I think is something you’re
going to have to address. It’s not a popular idea.

MR. CLARKE: And you’re going to have to find the
financing mechanism for it because it takes staff, it takes
space, it takes food, takes medical supplies. We’ve moved people
out in Miami as far as we could, but we just can’t keep up with
it. Unless we attach some financing mechanism to the patient
himself, I really believe this kind of grant funding we’ve been
doing just will not keep up with it.

MR. DevoS: I know, but you’re asking other people to
pay for that and they’re not very interested in that. There is a
load on, let’s say, Miami to have nursing care and special
training for people there. These same health care providers may
be sitting back up the road in Orlando, but that patient doesn’t
want to go up there. Orlando has facilities, they have
personnel, they have capacity.

MR. CLARKE: They don’t have the willingness.

MR. DeVOS: You’ve got to find a resolution to that.
I’m not minimizing that task. I’m just saying when somebody else
pays the bills, they’re going to ask the questions.

DR. SCANLON: One of the other things you’ll have to do
to carry out that idea is to be able to provide capital financing
to renovate some facilities. Not all facilities that you might
want to move people into would readily be usable for AIDS
patients.

One of the recommendations in my testimony is that FHA
be directed to change their underwriting criteria so that they
don’t have to take a mortgage on an entire facility. If, as
you’re suggesting, there’s a wing or a unit in a hospital that

253
 

 

could be used for AIDS patients, FHA should have the authority
to provide a guarantee to that facility so they’d then be able
to raise capital debt to make the necessary structural changes
to care for AIDS patients.

MR. DevOS: That makes a lot more sense to me than
building new. When we’re sitting here in a nation with limited
resources and we’ve got hospitals with health care professionals
just standing around and empty beds, you’re just not going to get
the money to build everywhere.

DR. SCANLON: The reason that I mentioned New York
regarding the need for new facilities is that over the past ten
years, we have removed 10,000 hospital beds from our health care
system. And now, quite frankly, we’ve been caught short. That’s
why we’re having to go back and figure out ways to provide
capital financing for additional facilities of that sort.

MR. DeVOS: What did you do with those beds that you
took out?

DR. SCANLON: The hospitals were closed. They’ve
been sometimes turned into schools, sometimes into apartments,
condominiums. Other uses have been found for then.

MR. DevoS: I think the alternatives for these
facilities are going to be something a lot of cities are starting
to look at. You guys probably have some good ideas as to how you
could reconvert those or use them for something else, nursing
homes or whatever.

DR. SCANLON: Right. In fact, that’s what we’re doing
with some of the hospitals that were decommissioned. We’re now
going back to a hospital closed 20 years ago, looking at it,
bringing architects in and saying, "What do we have to do to this
facility in order to make it usable by AIDS patients?"

That’s why the capital financing issue is so crucial
for us. Because we’ve got to find new capacity. Some of it will
be recycled hospital capacity that we closed down already, but it
still needs modernization and renovation.

MR. DevoS: Thank you.
CHAIRMAN WATKINS: Mrs. Gebbie?

MRS. GEBBIE: One question for you, Dr. Scanlon. I
tnink it’s just because you’re in an area that I haven’t paid
much attention to before. I could not tell from your testimony
on the various things you asked for, some of which seem sensible
to me, which would require statutory changes, which might be
regulatory changes and which deal simply with the attitudes or

254

 

 
 

 

policies of the administering agencies that could be changed if
somebody would just look the way.

DR. SCANLON: They’re virtually all regulatory or
statutory. They’re not really attitudes, although some of them
are just simply approval processing matters.

In our written testimony, especially on FHA changes,
there is a designation for each proposal as to whether this is
something that can just be accomplished by changing personnel
and procedures, whether or not it actually causes a regulatory
change, or whether you have to go to a statute. There are very
few statutory changes that we are recommending in our testimony.

MRS. GEBBIE: And the backup materials makes that
clear?

DR. SCANLON: The backup materials go recommendation
by recommendation and indicates, "Is this statutory, regulatory
or just a policy change?"

MRS. GEBBIE: Thank you. I appreciate that.

Dr. Kizer, there was one thing in your testimony on
which I want some clarification. You identified that for the
privately insured patient or commercially insured patient with
AIDS, the average cost has been $70,000, and for the Medi-Cal
patient it’s been $44,000.

I assume the difference is accounted for either because
Medi-Cal manages patients so much better they get more efficient
care or because you’re giving them fewer services or because
you’re reimbursing them so much less or some combination of the
above.

DR. KIZER: Well, it’s actually very simple. We don’t
pay that much. The Medi-Cal rates, as I said before, are quite
low compared to private insurance rates. If you want a number as
far as a conversion factor, for the composite of care for AIDS
patients, private insurance, or commercial insurance, pays on the
average about 1.6 times more than what Medi-Cal reimburses.

MRS. GEBBIE: Okay.

DR. KIZER: It is just because of the difference in
rate structures.

MRS. GEBBIE: But the range of services provided the
patients in the two is roughly the same?

DR. KIZER: Right.

255

 

 
MRS. GEBBIE: So, we shouldn’t encourage those private
insurers to look at your rates as a way of saving money in the
system at large?

DR. KIZER: No, we think that might be a good idea.

MRS. GEBBIE: Well, I guess it really is a question
as to whether you’re so far below that it would be awful if
everything dropped that far or whether there is slack in the
system that --

DR. KIZER: I think your point is well taken. I was
being facetious. You are right. There is no doubt about it that
Medi-Cal rates are very low, ranging somewhere -- depending on
the service category from about 30 percent of what is billed to
upwards of 50 or 55 percent of what is billed. That is because
throughout the history of the Medi-Cal program, cost containment
has been a feature of the program. The rates are ratcheted down
to the point where there is not much further you can go with
then.

There are many providers in the state of California
who would quickly point out that they are not only as low as they
can go, but they are below where they should be, and that the
low rates are contributing to current problems in access and the
uncompensated care burden. I throw that out so that my comments
are at least balanced. There are many people who feel they are
too low already.

MRS. GEBBIE: I want to have the help of both you and
Mr. Clarke in exploring a couple of the ideas we’ve heard from
other people that have some appeal. One of them was that in
addition to whatever corrections might be made within the
Medicaid program that would make it more appropriate for covering
persons with HIV infection, that for states disproportionately
affected, there would be a federal block grant available that is
essentially a stop loss on what you pay out for AIDS. That is,
once you hit a certain percentage of your Medicaid enrollees or
a certain dollar amount for Medicaid related AIDS benefits, then
a block grant would kick in to pick up the difference so it
didn’t eat your Medicaid program alive.

Have you heard that idea before? Is that something
that sounds worth exploring or does it not make sense from your
understanding of your own Medicaid programs?

DR. KIZER: From my own view, from the broad public
policy point of view, I think it is an idea that has some merit,
but frankly I would like a little more data before I were to say
that that should be national policy. It gets back to, I think,
the discussion that we had before, i.e., that is an idea that may
well merit demonstration and to look and see actually what the

256
costs are, how effective is it, does it address the needs, does
it result in inequities in the system that shouldn’t be
tolerated, et cetera, et cetera?

It’s the type of idea that, frankly, I think warrants
exploring. But I think, from the national policy perspective,
should have a little more data before it’s set in concrete.

MR. CLARKE: States obviously would not turn down
block grants. But again --

MRS. GEBBIE: I never heard of one doing it.

MR. CLARKE: I really do believe it’s preferable if
possible that we try to extend insurance coverage to AIDS
patients or HIV infected people rather than block grants. We
shouldn’t have a tradeoff of one for the other. Extending
coverage to the patient themselves really makes it much more
flexible and much more acceptable both to the patient and to
both public and private providers in terms of devising treatment
arrangements.

When you have block grants, while they’re "blocked"
to the state, they then have to be reapportioned in the state
and you go through the whole grant process cycle and application.
While it has some flexibilities and benefits, I think in the
long run really gives us staggered programs, is not universal
coverage, the money ends up being targeted where the cases are
worse and not elsewhere. You just don’t have the money to spread
around.

MRS. GEBBIE: It is in the testimony of Dr. Wilensky
from earlier this morning. You might want to pick up a copy
and look at it. My impression was the funds would flow straight
into the Medicaid program and pick up both state and federal
halves to keep that from eating the progran.

Anyway, the other --

DR. SCANLON: Before you get off that point, from the
point of view of providing capital financing, it would be much
better to enrich the revenue stream because then the facility
that has to borrow in order to renovate a wing or whatever can
show a predictable revenue stream to whoever is going to either
guarantee their debt or is going to loan them money. Whereas if
it’s a block grant and it’s up for grabs, it’s difficult to tell
whether the facility that’s providing the care is going to be
financially viable until after the block grant is awarded.

MRS. GEBBIE: Thank you. I don’t mean to be cutting
you out of the discussion. Thank you for adding that.

257
 

 

DR. SCANLON: That’s okay. I/’11 pop in if it seems
appropriate.

DR. KIZER: I would also like to raise a point. I
would like to see how that would fit in with whatever else is
done in the way of providing catastrophic care for everybody
and where that goes this year or in subsequent years.

MRS. GEBBIE: Okay. One of the other areas that has
interested some of us is the problem of the person who gets on
SSI or gets on SSDI, that is the permanent disability piece,
but because their state has a particularly low Medicaid
qualification level, they don’t stay eligible for Medicaid.

They still aren’t getting enough from their disability income

to buy private insurance or be covered. So they’re stuck without
anything until they wait out the period until they go on
Medicare.

We’ve heard about this situation anecdotally and I
don’t really have a feel for whether it’s a large group of
patients.

MR. CLARKE: When the federal government enacted the
SSI program, it gave states the ability of selecting one of two
options, either automatically entitling all SSI recipients to
become Medicaid eligible or doing their own eligibility
determination. I believe those are the so-called 209 B states.
There is a known number of them. I believe there’s eight to 12
states, none of them sitting at this table. That is a problem
in those particular states.

MRS. GEBBIE: So, find some way to level out coverage
for those people so they don’t end up on the street while they’re
moving around in those categories.

MR. CLARKE: Again, that would require federal
statutory change and take away that option from those particular
states.

MRS. GEBBIE: Okay.

DR. SCANLON: Something that you might want to consider
along with SSI in coming back to the housing component that was
mentioned before is that there was a federal program that was
ended in the early ’80s called the Section 8 program that you
might consider recommending be revitalized just for AIDS
patients.

What that did is it looked at an individual’s income
and provided him a voucher that would pay the difference between
30 percent of his income and whatever the rent was for the
facilities that he was living in. Based on that, the program

258

 

 
 

 

could provide a revenue stream to create a housing program for
AIDS patients.

So, if you put both of those together, the SSI and
the Section 8 monies, you wind up with a situation where an
individual would have enough income to be able to pay the rent
and still support himself.

MRS. GEBBIE: Okay. The last question I have is a
request for comment. My guess is that we’re headed toward a way
of dealing with these illness treatment costs that’s within the
general Medicaid system, which is a state/federal partnership.

Some states have not been excited about putting more
money into their half of Medicaid. That’s why some states have
such low eligibility levels or such low reimbursement levels.
Assuming we can figure out a way that sells it for the federal
portion of the contribution, are there things we could say or
policies we could recommend that would make it easier for states
to make their portion of this improved approach to paying the
illness treatment costs for HIV infected persons?

MR. CLARKE: Well, certainly the block grant program
you talked about or some kind of way to step-wise approach would
ease the burden in those states who have to put in an additional
required share. It would certainly make the pill be easier to
swallow. .

But I should point out that for all states that are
currently in the Medicaid program, it’s virtually a deal that the
states can’t refuse and we do have certain mandatory requirements
on us at the present time. What we’re really talking about is
putting additional mandatory requirements. The problem from the
state level and from the governors would be, "Where am I going to
find the extra revenue to match these additional requirements?"

MRS. GEBBIE: But you think that would generally be
found one way or the other or would not be so vigorously opposed?

MR. CLARKE: As a state employee, I hesitate to speak
for my governor.

MRS. GEBBIE: Well, we’ve asked everybody to step
outside of those roles and deal with the best they can
individually guess.

MR. CLARKE: The point is that the cost of care for
these patients is being absorbed by society right now and it’s
being absorbed in a very haphazard, injudicious and unfair way.
I think what we’ve got to do is devise a better way to do that.

259

 

 
DR. KIZER: If I understood your question correctly,
and I am not sure I did, one thing that may be of interest in
this regard is something that we are pursuing in California,
which is a health insurance premium payment plan under the
Medi-Cal program. This allows Medi-Cal to pay for the insurance
premiums of individuals who become disabled so that they continue
on a commercial insurance plan, with Medi-Cal paying the premiun.
They continue to get services via the commercial plan.

It is a lesser expenditure of public funds than would
otherwise be the case if they became a total public charge.
Insofar as that type of approach might be useful or a model for
other states, it might be worth looking at.

DR. SCANLON: What also might help in enticing states
into AIDS facilities programs, is that if there is, on the
Federal Government side, a commitment to providing a vehicle
for capital financing that’s easy for them to use, that would
then allow them to leverage whatever funds they do get through
this enriched reimbursement stream. So, if you put both programs
together, you might find states buying into it more whole-
heartedly.

MRS. GEBBIE: If you have follow-up thoughts or more
precise ideas about these, it would be very helpful to us to
get those in writing. Thank you very much.

MR. DevOS: May I just jump in?
CHAIRMAN WATKINS: Yes.

MR. DevoS: I’m fascinated with that insurance part.
That’s good for awhile, isn’t it, until the insurance company has
to raise all their rates to recover from it. That gets back to
his comment that we’re paying for it now, but not necessarily in
the best way we could. I think it’s an interesting comment.

DR. KIZER: I am not sure I understand the gist of
your comment, but insofar as the load is spread out across the
insurance industry and across multiple insurers, the impact
on any individual company is going to be relatively small.
Currently, Blue Cross in California is expending about one
percent of their benefits for AIDS. Under the Kaiser Permanente
plan, about one and a half percent is spend for AIDS; this is
projected to increase to three percent in the next few years.
So, insofar as that can be spread out over multiple insurance or
prepaid plans, the individual impact is not going to be that
great. It is hard to envision that they would then have to raise
their rates all that much.

MR. DeVOS: I guess if they were here, they might have
a word to say about that.

260
DR. KIZER: I’m sure they would.
CHAIRMAN WATKINS: Dr. Lee?

DR. LEE: I’m glad to hear you people. When we were
talking to the federal arm there, I was unsure I had the facts
here. You have restated the facts as I understand them, that
first of all these public hospitals and academic centers are
bearing the brunt of the HIV epidemic and they’re going to
continue to bear the brunt of it.

There is no use, to my way of thinking, to looking to
private insurance plans for the kind of people we’re talking
about. If you go to take care of these people, you understand
that very rapidly.

Now, let me get a couple of facts. Mr. Scanlon, you’re
only talking about tax exempt money for New York State
facilities, right?

DR. SCANLON: No, I’m talking nationwide. I represent
also 25 other state agencies like mine which issues tax exempt
bonds.

DR. LEE: But you’re talking about state owned
facilities?

DR. SCANLON: No, no. These are non-profit owned
facilities.

DR. LEE: I was unaware you can use tax exempt money
to build a private, non-profit hospital?

DR. SCANLON: That’s right. Virtually all of the
capital financing for private, non-profit health care facilities
is done through tax exempt bonds. For example, last year, my
agency alone issued close to $2 billion worth of tax exempt debt
for that.

DR. LEE: Okay. That’s interesting.

Now, the next is sort of a bigger subject. You guys
are on the heat with Medicaid. You have the bulk of the
problems. If we leave it all to Medicaid, aren’t states going
to continue to take an unfair -- your particular states continue
to shoulder an unfair percentage of the cost? In other words,
what I’m wondering is whether we really shouldn’t be advising
spreading it to Medicare. For instance, Mr. Kizer talks about
the inadequacies of Medicare. We heard there were no
inadequacies to Medicare or very few from Dr. Roper. You spelled
out more --

261
 

 

DR. KIZER: I did not mention Medicare, so I’m not
sure.

DR. LEE: This is not Medicare you’re talking about?
You’re talking about Medicaid all throughout this?

DR. KIZER: That’s correct.

MR. CLARKE: Medicaid is a state and federal progran.
Medicare is 100 percent federally funded

DR. LEE: Yes, I understand that.

MR. CLARKE: We have one precedent in Medicare for
funding patients who are not elderly and that’s the kidney
dialysis program. Certainly that precedent also couldn’t be
extended to patients with HIV infection.

DR. LEE: That way you distribute the cost. Then
what Mr. DeVos said, you know, is valid.

DR. SCANLON: It’s concentrated in five, six, seven
states, and so we’re taking all of the brunt for paying for what
is really a societal problen.

Going to Medicare would spread the cost of that
throughout the entire country, instead of just concentrating
it on the budgets of five or ten states.

DR. LEE: Well, isn’t that a good idea?

DR. SCANLON: Yes, absolutely.

DR. LEE: Terrific.

MR. CLARKE: Terrific.

DR. KIZER: I don’t know in the case of California if
it is or not. I don’t know whether it is or isn’t.

DR. LEE: What?

DR. KIZER: In response to Mr. DeVos, I’m not sure
whether it is or isn’t.

DR. LEE: You’re not sure if it does spread the risk?

DR. KIZER: Well, no, I am not sure whether it is a
good idea to make it Medicare. I am not sure that whether it is
Medicare or Medicaid, or some other program, is really the issue.
What pot of money the funds come out of, is not as important as

262

 

 
 

 

how the money is allocated and disbursed and the availability of
funds.

DR. LEE: Well, I agree, but currently these hospitals
are going broke because they don’t have the money.

DR. KIZER: Well, I think it goes back to your opening
comment there, that the epidemic in New York is different than
the epidemic in California, even though it is the same pathogen.

In New York, the majority of new cases are related
to intravenous drug use, if my figures are correct, whereas,
in California less than 3 percent of our cases are related to
intravenous drug use.

And, as I have already said, the majority of our folks
do have private health insurance, because they are employed,
working, productive members of society. The majority of care
is being provided in private hospitals and, while, clearly,
there is a disproportionate impact on some facilities, with the
public hospitals being hit the hardest, I’m not sure that I would
say that AIDS is the root cause of the problems in our public
hospital system. There are lots of other things that are
contributing to the problems of public hospitals, and I say that
not to minimize the stress or the problems that the public
hospitals have. Indeed, I think I can say as a matter of fact,
that in California I do not think that AIDS is the cause of the
stress that public hospitals are having.

DR. LEE: In Florida, though, they are facing the
New York problem. We saw their cases.

MR. CLARKE: Right. Maybe, though, I ought to clarify.
I’d agree with Dr. Kizer. AIDS is not the root cause of the
problem, but AIDS is greatly exacerbating an already existing
problem.

DR. LEE: Sure.
DR. KIZER: Right. That’s the point that I’m making.

DR. LEE: Well, would you rather fix Medicaid to fix
your problem, or would you rather have Medicare get into the act,
or would you rather have both? What would be your way of doing
it in Florida?

MR. CLARKE: Well, neither program is perfect.
Medicare, obviously, has a lot of advantages from the patient and
service provision point of view. It has some great problems with
regard to long-term care and nursing home care. In essence,
Medicaid is the backstop for Medicare in this country.

263

 

 
Again, the point I tried to stress at the beginning is,
this is a societal problem that goes well beyond AIDS. It’s a
problem of how we pay for people who are sick in this country.

In most other industrialized countries in the world,
the question is: "Are you a citizen?" Not, "Are you poor?",
"Do you meet a certain category?" "What are your assets?" and
all the other hoops that we have to jump through at the present
time to prove that somebody is worthy of health insurance
financing if they don’t have it themselves.

And, that’s really the root cause of this problem, be
it AIDS, or cancer, or any other disease.

DR. KIZER: I think in response to your specific
question, from our perspective, in so far as Medicaid is a
program under some state control, we would like to maintain
that control. And, insofar as Medicare is a totally federally
driven and administered program, as a state we would prefer to
have some say in how we manage and control the progran.

And so, we see Medicaid as, perhaps, more preferable
from the point of view of the state’s rights and the state’s
ability to control how the funds are spent and allocated within
our borders.

DR. LEE: I wish we could get a clear answer, but I
guess you people don’t have one either, do you?

MR. CLARKE: I don’t think we agree.

DR. LEE: Who doesn’t agree, you and me, or Kizer and
you? What is your --

MR. CLARKE: I think I agree with you, Doctor.

DR. LEE: You agree with me?

MR. CLARKE: Yes, I do.

DR. LEE: I think I agree with you, too.

CHAIRMAN WATKINS: This is the first time we’ve had
anybody agree with Dr. Lee, so we applaud that. For the record,
we very much appreciate it. It gives him a little bonus.

DR. LEE: Can you see any reason, though, that
hospitals should be closed in a country where the population is
aging rapidly and growing? Maybe there will be periods of time

when they won’t be full, but I never understood why Dr. Axelrod
closed some of those hospitals in New York City.

264
DR. KIZER: That assumes, though, that hospitals are
the sest place to take care of seniors, and I think that that
8 & very questionable premise.

DR. LEE: Well, they are very sick, very often.

DR. KIZER: Well, there is a role, obviously, for
nosu“tals in the care of seniors, as well as non-seniors. But,
the fact that we are "over~bedded" in California, and I think
orobebly as a nation, means that we need to be looking at other
ways o£ providing care for seniors, as well as other folks, in
out-of-hospital settings, which can be much cheaper and still
provide the services needed ~-= and, perhaps, in a more caring
and compassionate manner than hospitals. I certainly think there
‘s €& good rationale for closing hospital beds where they are not
neeaad.

MR. CLARKE: We have 20 percent of our population
statewide is over age 65. In some counties, we are up to 35
percent of our population is over age 65.

Nonetheless, we have hospitals in those very counties
that are running 38 percent occupancy today, huge hospitals,
400 secs.

DR. LEE: That’s not what they told us in Miami they
have et entirely --

MR. CLARKE: What they were talking to you about in
Miami, though, was those patients were AIDS patients who were
beirg treated, not the ones down the street that were unwilling
to corve them.

MR. DevoS: I think a lot of people would agree,
Dr. Xiger. There is a lot of over-bedding in California.

DR. KIZER: Am I to interpret more in that than just
what you said?

CHAIRMAN WATKINS: Yes, Mrs. Gebbie?

MRS. GEBBIE: I don’t think we addressed this
specifically here. You talked on a little bit, Mr. Clarke, and
you <eferred to it too, Dr. Kizer -- where does Medicare might
fit into the system, and the gaps in coverage in that systen.

The fact is that you wouldn’t get your drugs paid for on an
outpatient basis if you got on Medicare, and yet, lots of HIV-
infected people are outpatients and need medications. Do you see
any ole at all for increasing access to Medicare for HIV-
infected people, or would you still leave it where it is, at the
end of the two-year road for those on disability?

265

 

 
DR. KIZER: I guess if I were to try to answer that
question, I would try to devise a means of answering it, by
putting it out to the states to see if there were any takers. {i
would look at it as a demonstration project to see whether there
is some role for Medicare, and see how that might be extrapolated
from whatever an individual community or state might be able to
demonstrate.

MRS. GEBBIE: You mentioned concern about the inability
of the state to participate in management of the system, were
that to kick in as the financing mechanisn.

DR. KIZER: Well, I would like to see, as a state
Manager, the state having some say in how a program is managed,
and insofar as that might be accomplished under Medicare, or
under a demonstration project, then that may have some potential.

Insofar as HCFA may want to pursue some of their own
demonstration projects, then, perhaps, there is some merit there.

MRS. GEBBIE: Thank you.

MR. CLARKE: I think, frankly, some of the concepts
we talked about today -- about extending Medicaid -- within the
current political context are quite radical. Extending Medicare
to HIV-infected persons, all of them, is certainly absolutely
radical in this current context.

CHAIRMAN WATKINS: Let me close out the panel with one
question. We’ve had recommendations today that we should support
subsidized risk pools for the medically uninsurable. If you
agree with that, or if you don’t agree with it, and like to
comment, but what does that mean to us as the Commissioners?

What are the federal policies that we would have to put into
effect to make that concept viable, attractive, and workable?

DR. KIZER: The role of the risk pool is something that
we are currently exploring in California. There are, I think
now, 15 states that have risk pools. We have legislation under
consideration with regard to that. I think there are some issues
that we are not totally comfortable with as far as what that
means for premiums, and who is going to pay for them, and other
issues.

I think, though, with regard to your specific question
from the federal level, the issue of the risk of preemption is
paramount to addressing this in the long term, and that is, as
you probably know, quite a controversial subject as to whether
self-insured plans are going to be exempted or included under
any sort of provisions like that.

266

 
MR. CLARKE: We have such a pool in Florida, and, quite
frankly, regardless of AIDS, it is really very small. It does,
actually, not work very well, and does not result in a whole lot
of people having additional coverage.

The question really comes down to one of cost.
Somebody has got to pay for this particular thing. I think it is
really kind of naive of us, if we really think that in the long
run private health insurance, in the current context, is going to
pay for a huge number of these patients, because eventually they
become disabled, eventually they have no means of paying their
current premium. And, either we’re going to have to pay the
premium through a direct subsidy or crank it all into this pool
and continue paying for then.

But, really, what we’ve seen, and I think is the
epidemic changes, and we have a lot of poor people in Florida
infected with AIDS, is that such a concept really won’t help
address our problem at all. It will hit a small number of
people, and for that reason it may be worthwhile, but it’s not
really going to help all that much.

CHAIRMAN WATKINS: It seems to be in the bag of
recommendation though, that have come up from a large number
of witnesses.

We haven’t had a very clear definition of how they
would make a risk pool attractive, viable and workable, but we
certainly hear the words coming up. And, I just thought from
your vantage point, a little different vantage point than some
of the other witnesses we’ve had, maybe you had some views on it.
That’s something that we ought to be getting into it.

DR. KIZER: I think your question is really the same
question that we are wrestling with in California, because we
hear this a lot. We hear it from all kinds of folks, but really
when you look at what are the specifics and how do you make it
work, and what are the specific benefits, it becomes a little
less clear. And, as we look at places like Florida and some
other states that have had some track record and experience in
this regard, some of these things get a little fuzzy.

And so, I think the uncertainty that you have is shared
by us in California, although it would appear that such an
approach address a small slice of the problem. But, from the
point of view of this being an answer, or a major solution to the
problem, I think that is probably overstating the benefit or the
likely benefit to be achieved. It may be part of the menu that
ultimately needs to come forward, but I think the benefits are
likely to address only a small slice of the patient population
that we are dealing with.

267
CHAIRMAN WATKINS: Mr. Clarke, you already have an
analysis done in the State of Florida on your uninsurable risk
pool. To date, do you have something that’s --

MR. CLARKE: We can provide you with numbers in terms
of the numbers of people covered, and how much it costs, and how
it operates.

CHAIRMAN WATKINS: And, your assessment of it, and your
state’s assessment of the viability of that concept.

MR. CLARKE: I actually believe, if I’m not mistaken,
there is probably a national summary of all those programs lying
around in somebody’s library today that we could probably provide
you as well.

CHAIRMAN WATKINS: Thank you very much. We appreciate
your coming before the Commission today. It’s been very helpful
to us. We’l1l proceed now with the next panel.

MR. CLARKE: Thank you.
DR. KIZER: Thank you.
PRIVATE SECTOR FUNDING INITIATIVES

CHAIRMAN WATKINS: The next panel today is on Private
Sector Funding Initiatives. We have Dr. Leighton E. Cluff,
President, Robert Wood Johnson Foundation, Dr. Sibyl Jacobson,
President, Metropolitan Life Foundation, and Stanley Karson,
Director, Center for Corporate Public Involvement. We’d like
to commence the panel’s work with the statement from Dr. Cluff.

DR. CLUFF: Thank you, Mr. Chairman. I am, as you
pointed out, the President of the Robert Wood Johnson Foundation,
and I have submitted for the Committee’s consideration a prepared
statement, and if I may, I’1l make a few remarks.

Since November, 1986, the Robert Wood Johnson
Foundation has awarded $22.1 million in grants related to AIDS.
That total includes $17.2 million in grants for our AIDS Health
Services Program, which is a four-year national effort to provide
comprehensive and coordinated care to people with AIDS in 11 of
the major cities in the United States.

With the remaining $4.9 million, the Foundation has
funded policy research, technical assistance to community
efforts, and organized private sector and professional responses
to the epidemic.

Additionally, we are currently giving serious
consideration to several AIDS-related proposals that total more

268
than $4 million additional dollars. We have also recently
announced an unprecedented grants initiative that will fund AIDS
prevention and service projects at the community level
nationwide. That program currently comes without a price tag,
because the Foundation has set no predetermined limit on the
total number of grants, the length or size of individual grants,
or the total funds we ultimately will commit under this new
effort.

Because we have observed a significant unmet need for
prevention and services at the community level, we anticipate an
enormous response to this initiative that I’ve described, and if
that response occurs the Foundation is prepared to make a multi-
million dollar commitment in order to fund the most promising
proposals that we expect to receive.

The AIDS prevention and service projects were
authorized by the Foundation’s Board of Trustees, with a charge
to the staff of the Foundation to be bold, courageous and fast.
So, we decided to simplify the application process, and to help
novice applicants develop their proposals, via a special
telephone hotline which the Foundation operates.

Our brief and direct call for proposals was issued
in both English and Spanish and sent directly to thousands of
community agencies who could benefit from such funding.

To my knowledge, Mr. Chairman, this is the first time
that a private foundation in the United States has ever submitted
a proposal for funding, or a brochure requesting submission of
proposals in Spanish.

We knew that many of the organizations most in need of
funding were not likely to approach a large national foundation
for that money, due to their untraditional work, their smaller
size, their lack of a track record or for any number of other
reasons.

It is one of the tragedies we feel of the epidemic,
that a hard-working community group hesitates to ask a $2 billion
foundation for a $2,000.00 grant that might otherwise make an
imaginative response to AIDS possible, and we hope to bridge that
gap between foundations and the front lines of AIDS with this new
effort.

Even with last Sunday’s announcement that the Ford
Foundation, together with the Kaiser Family Foundation, the
Rockefeller, the Gannett, Xerox, Aetna Life and Casualty
Foundations have entered into the fight against AIDS with some
$8 million in funds soon to be available, we nevertheless remain
somewhat frustrated at the Robert Wood Johnson Foundation
because that gap is still a wide one for many reasons.

269
 

 

At the Robert Wood Johnson Foundation, people with
AIDS are among the many that have been beneficiaries of our
grants, along with the elderly, the homeless, infants, children,
adolescents, the uninsured and the chronically mentally ill,
amongst many.

But, taken as a whole, private foundations in the
United States committed only 3 percent of their available funds
for AIDS last year, and the majority feel that AIDS is too risky
a problem to address.

We see a reluctance to move beyond the discussion stage
at many philanthropies, and that disturbs us because we know that
no single foundation can meet the needs created by AIDS. That is
painfully clear in several cities around the nation, where we
have invested in AIDS projects. In New Orleans and Dallas, for
example, where economic recessions limit or rule out state and
city funds for AIDS, philanthropies have not filled the funding
gap. In those cities, AIDS care and services hang on a
shoestring budget, largely provided by the Robert Wood Johnson
Foundation. And, despite the generous size of those grants,
they are not adequate to provide the services that the growing
case load, which I should mention has doubled in one year,
requires.

What makes the Robert Wood Johnson Foundation unusual
in AIDS funding is our willingness to act, despite those risks
that we’ve identified. We urge other foundations to confront
them squarely, and to move beyond them with speed and confidence.
Those risks include some of the following. AIDS education
requires explicit messages about sexual transmission and drug use
in order to change behavior. Funding such controversial efforts
may result in high visibility for foundations, particularly those
involved in projects related to prevention, education and AIDS
testing. Applicants may lack the secure track record that
foundations prefer, or often have preferred, since so many AIDS
agencies are fledgling organizations in communities.

Underlying all those risks is this one. Foundations
cannot expect the success rates with AIDS grants that they
expect often times in other areas. We cannot hope to solve
every problem AIDS poses, nor to fund every need that AIDS
creates. However, we at the Robert Wood Johnson Foundation know
from our experience that foundations can accomplish a great deal
despite those limitations. Foundations can act as leaders and
catalysts within communities, helping to shape a rational and
sensitive response to AIDS. They can help start-up community
organizations to better manage their efforts to fight this
epidemic with technical assistance, organizational help and
staffing. They can ensure that those dying of AIDS have access
to adequate health care, adequate support services, adequate

270

 

 
 

 

legal and financial advice. And, because foundation funds can
be granted with more flexibility often times than can public
funds, foundations can complement the government’s funding
efforts by filling funding gaps and supporting experimental
approaches to prevention and services.

Ultimately, all those recommendations can be summed up
in the charge our Trustees gave us as a staff. The Foundation
should be bold, it should be courageous, and it should move fast
in funding AIDS efforts.

It is our belief that the epidemic requires nothing
less from us. Thank you, sir.

CHAIRMAN WATKINS: Before we proceed with Dr. Jacobson,
Dr. Cluff, as we have said to your predecessors, we are impressed
by your Foundation. I can’t tell you how many witnesses have
come before us, singing your praises. As I’ve said publicly
before, without the Robert Wood Johnson Foundation the nation
would have long gone under on the AIDS epidemic, in my opinion.
We keep hearing that. We ask, "who is funding it?" and the
answer is the Robert Wood Johnson Foundation.

So, your Foundation has gained great respect and
credibility in our eyes as we’ve listened to the hundreds and
hundreds of witnesses coming before us. You are a role model,
in my opinion, for foundation efforts in this regard. And,
hopefully we can be helpful in inspiring others. I know other
additional large foundations are beginning to come aboard now.
If there is something that we can do specifically to enhance
that, by encouraging a strategy, a foundation strategy that
could be integrated across the nation, you would be a perfect
foundation to lead such an effort.

So, I think you are in the lead, and we know that, and
we appreciate very much what you and your Foundation have done to
date in dealing with the epidemic. Now, we get to hear two other
leaders in this area, the Metropolitan Life Foundation and the
American Council on Life Insurance’s Center for Corporate Public
Involvement.

DR. CLUFF: Thank you very much, Mr. Chairman.
CHAIRMAN WATKINS: Dr. Jacobson?

DR. JACOBSON: Thank you for this opportunity to talk
about AIDS from my perspective as a grant maker.

We, at Metropolitan Life, have made a substantial
commitment to the battle against AIDS, and have undertaken a
number of programs, both from our company and also from our
Foundation. Our programs have essentially focused on public

271

 

 
education to reduce risk-taking behavior, and have been designed
to operate on two levels.

The first level is to provide information to the
general public or particular target groups, including those
people most at risk.

The second level consists of trying to reach other
organizations in the private sector, which may not as yet have
developed AIDS-related programs on their own.

In terms of television efforts alone, Met Life has
spent over $5 million on AIDS programming. Last year, we
sponsored the two-hour special, "The National AIDS Awareness
Test, What Do People Know About Acquired Immunodeficiency
Syndrome?" The question-and-answer format used medical
authorities, celebrities from the fields of sports and the
arts, and government officials.

In addition, we commissioned Louis Harris and
Associates to conduct a pre-broadcast and a post-broadcast
survey, to assess what the general level of knowledge was about
AIDS, and also to establish a baseline in order to measure
whether there had been a change in knowledge as a result of
seeing the program.

The results were good. They showed that the program
substantially increased the viewer’s knowledge about the kinds
of behavior which pose the greatest threat or risk of contracting
AIDS.

As a follow-up to the television special, we sent
15,000 copies of the tape, as well as over a half a million
brochures, to non-profit organizations across the country.

This year, we’ve launched with Group W Television,
a project which is modeled on the experiences in San Francisco
called "AIDS Lifeline," and this will be a series of five
programs, a national syndication for commercial television.
The first program has already been aired. An interesting
feature of the series is that participating stations will donate
the equivalent of their licensing fee to local organizations
that are involved in care giving for people with AIDS, or to
the National AIDS Network.

Another of our AIDS programs -- one which perhaps best
illustrates how an organization operating in the private sector
can act as a catalyst to encourage others to enter this field --
is our Foundation’s "Project Reach." It is a series of grants
directed at AIDS education for hard-to-reach and also high-risk
groups.

272

 
We invited various organizations, who were known to
serve these groups, to submit proposals. Those invited to submit
proposals were told that special consideration would be given to
bilingual materials and cooperation with existing organizations,
as well as their ability to reach large numbers of people.

As a result of that approach in Project Reach, a
number of organizations (whether they be youth organizations, or
minority group organizations, organizations working with women,
or IV drug users), said that they internally raised the question
of whether they should undertake AIDS education, and make it a
part of their regular programming.

Our invitation to submit proposals served as a catalyst
to raise the issue with some of these non-profit organizations.
Some organizations that submitted proposals, but failed to
receive grants from us, found financial support for their ideas
elsewhere.

The discipline of preparing the proposals had helped
them form their ideas and concerns into concrete plans of action,
and that, in itself, was a step toward implementation.

I’ve outlined in my written submission a number of
ways that the private sector can help in the battle against AIDS.
However, I think many organizations are reluctant to become
involved, because they are unable to conceive of a way to make a
significant contribution. They don’t know how to become
involved, they don’t want to waste money, and they don’t quite
know what to do.

I think they have to be told that there are things that
can be done that will make a difference. They need direction in
planning, and they need assurance.

I believe that there is a crucial role for government
to play in encouraging the private sector. It begins by
recognizing that the very magnitude of the epidemic and its
consequences begs for direction at the threshold of involvement.

The agencies of government, whether they be federal,
state or local, must assure the private sector of their
willingness to commit massive resources, and of their
determination to continue to provide guidance and support to
those who do become involved in the battle against AIDS.

CHAIRMAN WATKINS: Thank you, Dr. Jacobson.
Mr. Karson?

MR. KARSON: Yes, Mr. Chairman, and members of the
Commission, I’m very pleased to be here today, and 1/11 briefly
summarize my prepared statement.

273
While my full-time position as Director of the Center
for Corporate Public Involvement involves the life and health
insurance industry, I’m not speaking here on behalf of the
business, but from an even broader corporate perspective. As one
of the organizers of the National Leadership Coalition on AIDS,
and Chairman of its Program Committee, I have knowledge of other
businesses that are participants in the fight against AIDS and
will direct most of my statement to these kinds of initiatives.

Clearly, the insurance industry is thus far the largest
contributor to AIDS projects and organizations in corporate
America. Since 1986, the life and health insurance business has
provided more than $10 million in cash contributions and in-kind
services and support for AIDS-related projects, including
research, education, prevention and direct services.

one point eight million dollars ($1.8 million) of this
total has come from the two trade associations, the American
Council of Life Insurance and the Health Insurance Association

of America jointly, and this money was expended in 1986. The
bulk of this went to the American Red Cross for the first major
national public education program dealing with AIDS. Some
research funds also went to the Sloan-Kettering Institute and

the University of Alabama for a joint study on the central
nervous system effects of the virus. A fairly substantial sum
went to help develop the National AIDS Network, with which you
are all familiar. Similar amounts went in those relatively early
days in terms of the understanding of the extent of the minority
incidence of AIDS to the National Black Nurses Association and
the National Coalition of Hispanic Health and Human Services
Organization, for work with their constituents. And, there were
several other grants that I won’t mention in detail.

I administer a small matching grants program of the
industry, which goes to community AIDS projects, education
prevention, direct support, which are matched by member life and
health insurance companies in communities across the country.
It’s been in existence barely more than a year, but we’ve made
30 separate grants in all regions of the country and in Canada,
and these grants totaled $215,000.00 of industry funds which are
aggregated and matched by $303,000.00 of company dollars.

Turning from the insurance industry to other
corporations and their grants, precise and complete reporting in
this area is not possible, as formal information is unavailable.
But I would estimate, and I’ve done kind of a quick and dirty
telephone survey of a number of corporations in the past several
weeks, that up to 100 corporations have made financial grants
that might total between $4 and $5 million for AIDS purposes,
outside the insurance industry. In-kind grants, in the form
of loaned staff, facilities, equipment, fund raising and

274

 
advertising, also are abundant, but, here again, formal surveys
or reports are unavailable.

I mentioned the National Leadership Coalition on AIDS,
and that is an organization that we are very proud of having
taken a leadership position in forming, because we think this
is a tremendous resource in mobilizing the private sector,
particularly business and labor, in the fight against AIDS.

One more point I would like to emphasize is reinforced
by many years of work with insurance companies and others in the
field of corporate public involvement. With few exceptions,
those corporations that are distinguishing themselves today in
AIDS outreach programs are those that have already built a
reputation for corporate responsibility in this nation.

It is easier to refocus a corporate grant program to
deal with AIDS when you have in place already a well-managed
and directed program to start with. It is understandable that
corporations that have over the years accepted the role as
community leaders would now add AIDS as a critical new issue,
rather than those businesses that have yet to deal with other
older critical community needs.

I would like now to state my recommendations and
conclude.

1. Partnership efforts between the public and private
sector should not only be encouraged at the highest levels,
including government, but should be the subject of highly visible
meetings called by the President for this purpose.

2. National organizations, such as the National
Leadership Coalition on AIDS, should be utilized by all those
working with this disease to mobilize the commitment and
resources of the private sector, particularly, business and
labor.

3. Since many, if not most, businesses are still
uninvolved with support for AIDS programs and organizations,
incentive approaches such as challenge or matching grants should
be emphasized and employed both by the government and private
sector groups to encourage wider participation.

4. Businesses located outside the major urban areas
of the East and West Coasts, those that are hardest hit by AIDS,
should be particularly alerted to the impact of the disease
regardless of region, and should be alerted to the importance
of funding education and prevention programs in their communities
before they are directly affected.

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And finally, for the most part, the business most
involved with AIDS programs today is the large corporation.
Since the number of medium and small businesses in our country
far exceed the large ones, and employ far more people, it is
crucial that smaller businesses be motivated to become more
actively involved. To achieve this objective, national and
regional trade and professional associations can be instrumental
in informing their membership of the need and the urgency.

I thank the Committee for this opportunity to appear.

CHAIRMAN WATKINS: Thank you, Mr. Karson. We/’1ll start
our questioning from Dr. Lee.

DR. LEE: One of the PWAs who came before us was
pushing philanthropy as one of the major sources of funding in
this area. And, I’ve been thinking about it a good deal, and it
seems to me that some of the very most effective organizations
are the philanthropic ones. The Gay Men’s Health Crisis does a
fantastic job in New York. The AIDS Foundation of San
Francisco, the Shanti project.

In the cancer world, you Know, Danny Thomas alone has
cnanged the whole atmosphere of childhood leukemia. There are so
Many organizations and foundations, has there been thought given
to a March of Dimes type organization creating a big super
philanthropic agency of some kind for AIDS?

DR. CLUFF: Well, I’11 try to respond to that.

I know that the various organizations that have been
established dealing with AIDS, the national organizations, have
attempted fund-raising activities of a variety of kinds. The
organization called "Comic Relief," supported by many of the
Nation’s prominent comedians has conducted telethons to raise
funds for services to patients with AIDS. The Robert Wood
Foundation has cooperated with this effort.

That would not ordinarily be a responsibility or a
function of a Private Foundation. We, generally, are not fund-
raising -- we do not go out and solicit or try to raise funds.
We can support organizations that undertake that kind of an
activity, but private foundations themselves ordinarily are not
fund-raising organizations.

DR. LEE: That’s all I have.

CHAIRMAN WATKINS: Dr. Lilly?

DR. LILLY: Two questions I want to ask. It’s my
impression that foundation funding is available mainly for

innovative projects.

276

 

 
 

 

Is that true, that somehow if I want to do something
that is perfectly good, but let’s say it is not innovative, then
I have to think of a way to sell it as an innovative approach.
And, I ask that simply because it seems to me that there are an
awful lot of well-known standard things that need to be done that
are not being done, in fact, and which are, not in any sense,
innovative.

So, my question is, is innovativeness a major
criterion for foundation support?

DR. CLUFF: Well, I’1l speak only as regards the Robert
Wood Johnson Foundation is concerned, Dr. Lilly.

Generally, private foundations, and the Robert Wood
Johnson Foundation is no exception, do not provide what is called
"ongoing" support or "ongoing" costs of an established operation.

In part, that is because foundations, at least the
Robert Wood Johnson Foundation, consider themselves as attempting
to try to identify ways in which health problems in the United
States can be better dealt with, if you will, in creating
demonstration models which could conceivably be replicated by
others. There is no way that the Robert Wood Johnson Foundation
could undertake the responsibility for the long-term continuous
support of an already established operation.

So, generally, foundations do involve themselves more
in dealing with innovative approaches to the development of
nodels or new demonstration efforts to deal with the health care
problems of the American people.

It’s, in part, because you could very quickly tie
up virtually all the resources of private philanthropy in
underwriting ongoing activities.

Here again, though, you are dealing with a semantic
problem, and it depends a lot upon what one calls innovative and
what one doesn’t call innovative.

The Robert Wood Johnson Foundation, in the support of
its health services program, capitalized upon already established
or developing health service programs in the 11 cities we
support. Now, if one wanted to call those innovative, I guess
one could, but to a very large extent they were facilitating the
growth and the development of already existing activities.

So, in essence, another role foundations play is not
just supporting something that’s brand new, but facilitating
the movement, if you will, of an effort. For example, in health
services for patients with AIDS, the Robert Wood Johnson

277

 

 
Foundation looked upon itself not only as creating new models,
or new innovative ways of dealing with the problem, but,
accelerating a process to assist people who already were very
much concerned about providing service to people with AIDS, and
accelerating their efforts by assisting them financially until
they could get fully moving.

Now, if one wants to call that innovative, I guess
one could, but we look upon it often times as facilitating or
accelerating an already established movement.

MR. KARSON: If I could respond to Dr. Lilly also, I
think I understand the thrust of your question, that the needs
out there do not all involve innovative approaches. Some are
very mundane needs of AIDS groups.

DR. LILLY: And, they are not getting done.
MR. KARSON: Pardon?
DR. LILLY: And, they are not getting done.

MR. KARSON: Yes. And, we have tried to respond to
those. The difficulty is in getting, in the corporate area at
least, businesses to want to join the fray. One of the great
hallmarks of corporations is that they are conservative
institutions. So, they are not exactly in the forefront of
joining a new controversial issue, as important as AIDS is.

What they need is to see peers starting to do this,
and they feel a little more comfortable about getting into it.
This is what we try to do through an incentive program, like a
matching grant program, where we say to an insurance company,
you support a community project in your community, we’1ll provide
a match for it. And, this started very slowly, very slowly, but
then as companies saw that their peers were making these grants
already, they thought, well, maybe we can do it too.

So, we have grants going, for example, for operating
purposes of such organizations as the AIDS Action Committee of
Massachusetts, the Gay Men’s Health Crisis, AIDS Project Los
Angeles; through a foundation in Chicago to provide AIDS
education for ex-offenders; in New Jersey to a transitional
residential care facility for pediatric cases with AIDS; a
volunteer group in Cincinnati to provide support services for
those with AIDS and general education. Those kinds of things
are being funded, and they are being funded first.

The innovations haven’t come to us as much as those

that really need the basic support to start with, so they can
go on to be innovative in the last analysis.

278
DR. CLUFF: Mr. Chairman, could I just add one other
comment? I’m sure you are fully aware of the fact that in the
field of AIDS, the disease appeared only in recent years and
almost anything that is done in that field at the present time
is innovative.

DR. LILLY: Right.

The other thing I wanted to touch on is your point
about corporations being conservative. The government is also
very conservative and has not been very happy about educational
efforts that have had to use explicit language, such terms as
anal intercourse, or the use of condoms, or clean needles and
syringes. These terms do not readily cross the lips of
government people, and I suspect that’s true of corporation
leaders as well.

So, are the private corporations and the foundations
willing to tackle this problem because this is where the action
is in the education field.

DR. JACOBSON: I can only speak for our Foundation, and
for the company, and I would say, yes, we are willing, but then
we didn’t have the cultural barrier to entering into the fray, to
use Mr. Karson’s terms, because we were doing education in 1920
about syphilis. So, it fit with our tradition of public health
education, and that was a foundation upon which one could easily
build a new need and a new direction in terms of AIDS.

But, other companies would not necessarily have that
tradition, so then it becomes, perhaps, more difficult to pick
a piece of the action which they feel comfortable enough to deal
with and to move quickly into.

DR. CLUFF: If I could add, the multi-million dollar
Health Services Program that the Robert Wood Johnson Foundation
supports, part of that program is in the area of education.

And, indeed, we have often times wondered if we weren’t
going to be picketed at the Foundation by some groups, because
some of the educational materials distributed by sites we have
funded might be found not entirely appropriate because one is
dealing with rather sensitive matters.

But, we have established as a part of that program an
educational activity. We also have recently announced a major
program dealing with the whole issue of prevention, in which
education is a critical part, and we will undoubtedly be funding
additional activities in that regard.

Just one other thing, which is not specifically a
program dealing with AIDS itself, although, it is very much

279
 

 

related to it. As you know, I’m sure, from the testimony you’ve
heard, that there is an increasing concern and problem with the
development of AIDS in sexually promiscuous young people. And,
the Robert Wood Johnson Foundation is currently supporting 19
sites around the country in what we call our "School-Based
Adolescent Health Care Program." A part of that program is very
significantly related to the issue of education, and, many of
those programs are themselves developing educational activities
related to the problem of AIDS as a part of the school-based
programs.

I have to admit, though, that it is an area where one
has to be brave when one gets into it, because one can face a
fair amount of criticism.

Mr. Gore, who is the Director of our Communications
Office, is with me today, and we keep newspaper clippings from
all over the country regarding the Foundation’s activity in this
area, and they’re not always complimentary. However, we happen
to feel that they are sufficiently important, that they are
worthy of private foundation support.

DR. LILLY: Thank you.
CHAIRMAN WATKINS: Mrs. Gebbie?

MRS. GEBBIE: The real temptation after a panel like
this is to think that all we need to say in our report is,
wonderful, great, keep doing it, because you’ve all done a very
good job.

I’m trying to sift through what I’ve heard, and it’s
not yet clear to me what the two or three things are that we
could say that would make a difference.

I know, Mr. Karson, you gave us a list of some things
that ought to happen, but they aren’t things that we can order.
So, could each of you quickly give us the most critical
sentences you think we could say that are complimentary of what
you have done, but, more critically, would mobilize additional
private sector activity into this epidemic?

MR. KARSON: Well, speaking of the corporate area here
in the panel, probably in order of importance would be the
President or someone at certainly a very high level of government
to call together, the leaders of national business, national
corporations, Business Roundtable, NAM, U.S. Chamber, other
institutions, and lay it on the line.

If there is a critical problem, a health problem in
this country, as we know there is on AIDS, then it has to come
from that level and in rather measured words, and I think it

280

 

 
 

 

would have an impact. There have been some things said in the
past year that have demonstrated that kind of commitment. I
really can’t see that much change in the amount of corporate
support that’s come about since then.

So, we need something more, something greater. That
would be one thing.

Maybe there ought to be some kind of a national program
to provide recognition for those kinds of programs, corporate or
foundation, that are doing something in this field, like we do
with other health areas and other social areas.

All those things help, but it’s a matter of getting
together those at a peer level. I think that works, peer
pressure works so effectively in so many things. If you can do
that in the corporate sector, I think you can get some results.

MRS. GEBBIE: Thank you.

DR. JACOBSON: I would agree. I think that the message
to become involved, and suggestions on ways to get involved must
be taken from people with clout in the government to the
leadership in companies, whether it be on a regional level, or
within a city.

In New York, (and this is not the level of clout I’m
talking about) when Dr. Joseph, New York Commissioner of Health,
spoke to grant makers that the New York Community Trust
convened, he was eloquent in bringing a first-hand description
of the problem and in explaining what government was doing, what
wasn’t being done, and in giving a menu of things that were
needed and could be done.

_ I think that such as first-hand call menu of needs,
and sense of urgency should be brought at a very, very high
level, and reach above middle management. It shouldn’t just be
in the bowels of a company, or the bowels of a foundation. It
needs to, as Mr. Karson said, I think, get to the leadership of
organizations, bringing peers together.

I think that would be the single most important thing
that I would suggest.

DR. CIUFF: Anticipating your question, I have four
very brief suggestions.

MRS. GEBBIE: Oh, good.

DR. CLUFF: One is, I think you could serve a very
significant purpose in generating further activity in the private
sector, if you could encourage Dr. Wyngaarden, Dr. Fauci or

281

 

 
Dr. Mason to call a meeting of health foundations in the United
States, and, engage their cooperation in working with the federal
government in formulating programs that are effective in dealing
with AIDS.

I give you that suggestion because some years ago, when
Dr. Butler was the Director of the National Institute on Aging,
he called just such a conference and generated a significant
amount of private/public involvement in dealing with some of the
problems of the elderly in this country.

Number two, I don’t know whether it’s been emphasized
to this group or not, but I’m sure you are very well aware of
the fact that there has been an increasing problem of AIDS in
children, and these are innocent victims of the disease.

It is true that now they are, to a very large extent,
concentrated in New York City and Newark, but they are occurring
all over the country. They are often times the offspring of drug
abusers, but not exclusively so.

There is an enormous problem in the care of those
children, and they represent local problems, and I would hope
that somehow or other your Commission would find it possible to
emphasize the importance of that issue as being very much of a
local issue.

The third thing I would mention is that there is a
critical need to awaken the American public to the evidence
that the epidemic of AIDS now extends beyond New York, Newark,
Los Angeles, San Francisco and Miami.

As was noted in THE WALL STREET JOURNAL today, these
cities now account for less than half of the cases of AIDS, and
now an increasing proportion of AIDS cases are occurring in Texas
and Illinois.

I would like also to mention the need to increase
awareness of the impact of AIDS in communities upon their
hospitals. I am sure you are well aware that within not too many
years, if the epidemic continues at its current rate, virtually
every medical bed in New York City hospitals will be occupied by
an AIDS patient. That presents an enormous local problem, and,
indeed, it’s important that the Commission have an opportunity to
bring that to the attention of local authorities.

Finally, and my fourth suggestion is, I hope that your
Commission recognize the critical importance of voluntary efforts
in grappling with this problem. I don’t believe the AIDS
epidemic can be handled exclusively either by government or by
private foundations. It is going to involve an enormous
contribution of our voluntary sector, and I would specifically

282
mention not only private philanthropy, I would mention our
churches, and other local organizations working with local
government.

I would hope that your Commission would take these as
at least four areas that could make an enormous contribution to
grappling with this problen.

MRS. GEBBIE: Thank you.
CHAIRMAN WATKINS: Mr. DeVos?

MR. DevOS: Unfortunately, Cardinal O’Connor isn’t here
to take credit for some of the good work the Catholic Church does
in New York --

DR. CLUFF: You bet.

MR. DeVOS: -- and I know he gets a lot of criticism --

DR. CLUFF: You bet.

MR. DeVOS: -- and he also does a lot of good things.

Do you happen to know, probably you, Dr. Cluff, what
available funds are given for health care, specifically? You
mentioned health care givers, generally. Do you know the total
number of dollars given last year?

DR. CLUFF: In the care of patients with AIDS?

MR. DevOS: Well, no, you said if you called together
a group of health care foundations.

DR. CLUFF: How many foundations would there be?

MR. DeVOS: How many are there, and what do they give
right now? Do you know?

DR. CLUFF: Well, I think you would find that at the
present time you could probably gather together about 60 major
foundations in this country.

MR. DeVOS: And, do you know what their level of giving
is?

DR. CLUFF: Well, I’m talking about foundations that
would generally be giving in excess of $1 million a year in
funds.

MR. DeVOS: Do you happen to know the level of giving
in this country. for various causes, religious and other?

283
DR. CLUFF: Well, in terms of private giving in this
country, the largest private giving is to churches.

The voluntary sector, like the American Red Cross,
the American Heart Association, the American Cancer Society,
that solicit funds, of course, represent another significant
proportion.

Private foundations in terms of total giving, probably
don’t represent much more than 3 to 10 percent total -- 3 percent
giving in the health care field, but in the area of health care
services they represent a very small proportion, less than 1
percent.

MR. DevoS: The last number in my head about giving,
foundations, personal and so forth, something about $60 billion.

DR. CLUFF: That’s right, about $40 to $60 billion.
MR. DevOS: It may go more than that right now.
DR. CLUFF: Correct.

MR. DevOS: And, if you get over, therefore, into
what’s available, specific interest to health, you are saying
that’s 2 to 3 percent of that.

DR. CLUFF: Correct. Let me emphasize, though, that
you may need to think of foundations other than just health
foundations. There are enormous problems in regard to the
financial issues related to patients with AIDS, and I’m not
talking just about their health care, but also about their
personal financial situation.

There are legal issues that are impacting as well
upon patients with AIDS. There may be foundations interested
in the social and the economic and legal issues that may be very
important to AIDS, which might very well be called upon to make a
contribution as well.

It is discouraging to us at the Robert Wood Johnson
Foundation, that we’ve been active in this field as long as we
have and there has been such little effort from the private
foundation sector beyond what has been presented to you today.

But, I do think that it can be mobilized. I may be
presumptuous in suggesting this, but I happen to believe that
without the Robert Wood Johnson Foundation’s involvement in this
area, you wouldn’t have seen an announcement in THE NEW YORK
TIMES on Sunday of a coalition of foundations having contributed
$8 million to AIDS. I think that’s a stimulus.

284
As a matter of fact, one of my staff was at the meeting
of the Council of Foundations, which is meeting in California at
this moment, and on a panel made a major presentation regarding
the problem of AIDS, and specifically, as it relates to the
activities of the Robert Wood Johnson Foundation’s programs and
the total spectrum of the problen.

We’re doing everything we can to encourage activity in
this area.

MR. DeVOS: I think your suggestions are very well
done. I was Chairman for many years of the National
Organization on Disability, when I went into that thing I
thought that would be duck soup. We had to raise a lot of money.

DR. CLUFF: Yes.

MR. DeVOS: You know, there are 30 some million
handicapped people in this country. I thought that would be
easy. I’1l1 tell you, that was the hardest fund-raising I ever
did e

DR. CLUFF: Yes.

MR. DevOS: And, I still don’t know why, because it
seemed to have all the elements. But, it still struggles along,
maybe $300,000.00, $400,000.00, $500,000.00 a year.

And, in my experience in fund-raising, and I’ve done a
reasonable amount of it, it doesn’t matter how it costs corporate
America until it gets to some employee in that company, to where
it becomes very real and very close to them.

DR. CLUFF: Yes.

MR. DeVOS: Fear drives often times more new
involvement than just a desire to be a good guy. You almost
have to be afraid, and that causes action. And, I say, that’s
unfortunate.

You’ve got to remember, everybody else is committed
pretty heavily to existing medical and other causes. I watch our
giving profiles, and to break in, to be a new source for somebody
is really tough. You’ve got your whole list that you’ve been
doing, and, boy, you just go through those, and then here’s four
new proposals, or 20 new proposals, and see if there is any money
left. It’s tough going.

So, I salute those of you who have been innovative
and creative. I salute the insurance industry, but the insurance
industry has a personal stake, and a fear in there that causes

285

 
that action, that triggers it. I think your ideas are well
taken, and I think our recommendation to Dr. Fauci and

Dr. Wyngaarden might be well received, and I think that’s a
marvelous idea.

I think you could maybe be more effective with them
than you can a political person. A political person has got too
many other causes that he’s afraid to get involved with more, and
that may keep him from getting in up front. But, the NIH leaders
might be the right ones to step forth.

MR. KARSON: I’d like to just make a quick response,
Mr. DeVos, that the figures that you were, asking us for, I think
I’m fairly close to it, within a billion or so.

Ms. Jacobson and Dr. Cluff may bear me out that
foundation giving is near $5 billion, is that correct?

DR. CLUFF: In the health field, yes.
DR. JACOBSON: And, it’s 5 percent of the total given.

MR. KARSON: Well, total giving is around $70 or $80
billion.

DR. CLUFF: Yes.

MR. KARSON: Which is around $4 or $5 billion, I guess.
Corporate giving, the most recent figures I guess are for 1986 or
1987, is in the area of $4 billion, roughly, $3.5 or $4 billion,
maybe a little bit more than that. We see that’s a relatively
small amount of the total. Corporations have their standard
giving priorities, many of them, and foundations do, too. What
we need is what we talk about at government a lot, is that the
reordering of priorities.

If the message can be delivered strongly enough to
those that control corporate giving, corporate foundations as
well as foundations, and those people are the CEOs for the most
part, that reordering can come about, but it’s not going to come
about if there isn’t the crisis feeling in a situation.

And, one more thing, we emphasize, as we should,
money, because that’s without which you can’t do much. But,
it’s not just cash grants and money that is important to these
organizations working in AIDS. It is providing in-kind services,
providing office space, meeting space for organizations, or
educational forums dealing with AIDS for the community or for
particular groups.

It is very important to realize, as I’ve found out from
speaking to some of the AIDS organizations, that they are all

286

 
new, struggling organizations that have all the problems of new
non-profits. They don’t know all they need to know about how to
manage and how to run things. So, a corporate budget officer, an
accountant, someone who knows how to deal with administration,
with hiring and firing people, those are the kind of people,
executives or otherwise, that corporations can provide that can
be of enormous help to AIDS organizations and programs. So,

it’s not just cash.

MR. DeVOS: I think those are very valid
considerations.

DR. JACOBSON: I think that sometimes grant makers
need help with seeing where the opportunities fit within their
existing priorities, rather than feeling that they have to
shift priorities. Some are concerned with civic affairs, some
in generating more voluntary efforts, some with youth, some
organize around populations, others by topics and so forth.

So, there are pots of money and opportunity other than
just in what we would categorize as health. Sometimes it may be
a lack of vision, not a lack of will and it may take somebody to
help you see where actually you could make a fit within your
existing program or priorities.

DR. CLUFF: I think it’s important, Commissioner DeVos,
to note that there are a lot of other health problems the
American people face besides AIDS, and the Robert Wood Johnson
Foundation, of course, is not putting all of its resources into
AIDS. We are very much concerned about the homeless. We’ve put
a lot of money into that. We are very much concerned about the
chronically mentally ill, not only adults but children, and we
are very much concerned about the adolescent youth of our
country.

There are a lot of other areas where foundations can be
important sources of funds for the health problems of Americans.

I happen to agree with you, though. Until the American
people get really frightened about AIDS, it’s going to be hard to
generate much of a public response.

It was for that reason that, it’s my intention shortly
to take to our Board of Trustees a proposal to support a study to
make a ten-year model to make projections on what is likely to be
the outcome of AIDS in this country, based on various scenarios,
assuming that no vaccine becomes available, that no treatment
becomes available, or if one becomes available and so on. And,
based on the available evidence, to try to make some projections
as to what the impact of AIDS will be upon the country, not
tomorrow, and not next year, as is now reported in the MMWR, but
over the next decade.

287
My suspicion is, if there are truly, as has been
suggested, 1.5 million infected people out there, and we
recognize at the moment that probably at least half of those
people will come down with AIDS and die, then we are faced with
a problem that exceeds in importance any other major problem in
the country.

But, I don’t think that we’ve created the information
yet to truly scare, if you will, or frighten the American people
enough to make them hungry to do something.

MR. DevOS: We’re holding a hearing in about two weeks
on AIDS in the work place, and it may be that we first of all
have to get corporations involved in educating their own work
forces --

DR. CLUFF: That’s right.

MR. DevoS: -- that will then, perhaps, trigger a
follow-on as far as contributions is concerned.

DR. CLUFF: That’s always the first step.
MR. DevVOS: Yes.
CHAIRMAN WATKINS: Dr. Conway-Welch?

DR. CONWAY-WELCH: Dr. Cluff, the Robert Wood Johnson
Foundation, by virtue of its teaching nursing home project,
changed the corporate culture of nursing education in a number
of schools of nursing around this country, and they will never
be the same as a result of that project and the success of it.

My biases show, I guess, in that what we are doing in
nursing education today is not working. It’s going to take some
dramatic surgery or medication to fix it. We are not only
dealing with a cyclical nursing shortage now, but we’re also
dealing with a supply that is emptying rapidly.

AIDS is nursing intensive. The majority of care that
AIDS patients need is nursing care. John Thompson came in front
of us yesterday from Yale and identified the fact that virtually
everything with the exception of possible areas of radiologic
treatment, et cetera, is nursing care and it can be done at home
just as easily as in a hospital.

Could you look into your crystal ball, and I would
invite Dr. Jacobson and Mr. Karson as well, to look at some ways
or mechanisms or priorities whereby the private foundation world
might impact changes in nursing education that are going to make
the field more desirable and attractive for people to carve out

288
a career and to provide the horsepower to deal with the HIV
epidemic in the next ten to 15 years. Do you see any ways that
the foundation world would be able to make an impact similar to
RWJ’s impact with teaching nursing homes?

DR. CLUFF: Your question is broader than AIDS, but let
me address it in two ways. You’ve put your finger on a major
health problem in this country, and I won’t describe it because
you’ve done it quite well.

If our Board of Trustees approves my recommendation,
within the next two months you will hear of a major initiative of
the Robert Wood Johnson Foundation, dealing precisely with that
problem. We are as concerned as you are, obviously, about what
is happening to nursing and what the impact of that will be upon
health care in this country in the future.

So, yes, we are very much involved in that area. Asa
matter of fact, we hope to be able to launch a joint program with
the Pew Charitable Trust dealing with that area.

Regarding AIDS, this is an enormous problem. The
Foundation, as you know, as one of its ways of functioning, has
grantees in multi-site programs, such as the AIDS programs. They
such as the AIDS program, meet on an annual basis to share their
views. The camaraderie, the networking is critical, as was the
case with the teaching nursing home program.

The grantees in our AIDS program recently met in New
Orleans, and I can share with you an observation regarding the
problem that nursing is having in that program. In order for a
nurse to provide the services that are required she is having to
carry a case load of 75 patients, which is literally impossible.

It’s for that reason that I emphasize that as an
immediate way to deal with this problem, is to somehow or other
enlist the cooperation of volunteers. Where the nurse,
basically, has volunteers who she can train, work with and
supervise or who can contribute to providing the services that
are required.

There is an innovative program, as a matter of fact,
arising in New York, which I hope we will fund, dealing with drug
abusers who have AIDS, and the question is, how can one possibly
use those who are Methadone controlled drug abusers, and use them
as volunteers to work with multiple drug abusers who have AIDS?
We have to find some way to provide nurses with the resources
they need to carry on their responsibilities without necessarily
having to do everything by themselves. Yes, that’s a problem of
great importance to us, and I’m quite confident that you are
going to find that we will to be doing some very major things in
that area in the next 12 months.

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DR. JACOBSON: I think the nursing shortage, generally,
is of concern to any grant maker in the area of health, and that
there are amazing parallels with what has happened in education.

One finds there, you know, concerns about
compensation, prestige, working conditions, use, utility and
deployment, and, of course, attraction, retention and
preparation. It’s a basic problem larger than AIDS care. The
shortage will, of course, affect the quality of care for AIDS
patients as well as for others.

DR. CONWAY-WELCH: Is there a group, and I’m sure
there is, I’m not aware of the name of it, that pulls various
foundations together so that they can brainstorm, and identify
the priorities, that a number of foundations might address ina
collective manner?

DR. JACOBSON: I think the Commonwealth Fund just
pulled together two weeks ago groups of funders who might be
interested in addressing the nursing shortage. It’s often done
in terms of affinity groups, or informally ad hoc groups talking
to people.

DR. CLUFF: There is one organization, though, which
the Robert Wood Johnson Foundation again helped launch, called
"Grantmakers In Health," which has its offices in New York
City, and is supported by many private foundations, as well
as corporate foundations. That is an organization which does
precisely as you are indicating, Dr. Conway-Welch, and that
is to provide on a regular basis opportunities for foundation
officers to address a multiplicity or different types of
problems.

I happened to be Chairman of their Program Committee
for three years, so I have some familiarity with what they do,
and they have recently been addressing some of the questions
regarding AIDS as well.

DR. CONWAY-WELCH: Thank you.

CHAIRMAN WATKINS: I was taken, Mr. Karson, because you
were very concise in providing us ahead of time with a paper in
which you listed obstacles to progress in getting on with more
corporate involvement. And, you listed three things, absence of
national leadership, business traditionally unwilling to take on
new controversial issues, corporate and personal concerns with
the two- current high-risk groups for AIDS, which has been a
deterrent to the corporation to step into the breach.

We’ve heard other words making the same statements,
well, foundations don’t traditionally want to get into very

290

 

 
 

 

specific health issues, like the AIDS issue, as the Robert Wood
Johnson Foundation has leapt into the breach and done.

There are so many other issues that are related to
the HIV epidemic, in which foundations are traditionally
involved. We’ve had testimony before the Commission recently,
from the Urban Institute with some very compelling data that
linked a high proportion of males of 16 not working in an area,
female heads of household in an area, households on welfare in an
area and high school dropouts in an area, with a high incidence
of AIDS.

My only point is that there are many other aspects
of this epidemic, including prevention, in which foundations
classically are interested. Ford Foundation, Carnegie and so
forth, are up to their eyes in work dealing with youth problems,
and societal problems of all kinds, trying demonstration programs
to improve the environment in the inner-city to make it healthy
for young people to grow up and avoid drug abuse and the like.
So, it just seems to me that if we restrict ourselves to AIDS
specific, and that’s a deterrent for foundations to get in, for
God’s sake, let’s get them in on related issues which they’ve
been into before.

It seems to me that this is something the National
Leadership Coalition on AIDS should do, through your corporate
relationship, coupled with the foundation linkage that you all
have. Generally, you know who the leadership is in the corporate
world, very active, very aggressive. You listed some that have
made major contributions for AIDS in the workplace, very
imaginative schemes of running their companies, and that sort
of thing.

So, I’d like to rethink a little bit and not be so
narrow maybe in the recommendation, that we look a little broader
at what we might recommend. I would ask the three of you to
caucus and give us a broader look at this, at how we might
encourage the foundations and corporate America to come together
on issues that aren’t so controversial, because it is in their
own self-interest to improve those conditions to enhance their
own work force.

We’ve really got an opportunity here to take advantage
of something and really move it, from anybody’s point of view,
whether it is self-interest, or whether it’s humanitarian, it
works both ways. Some corporations just need to increase what
they are doing already, and they are doing a considerable amount,
people like David Kerns at Xerox, and Johnson & Johnson, Jim
Burke, and many others who really are up to speed on the
significant national issues we had before AIDS, and now, maybe
they’d be willing to jump into the breach, and help lead the
corporate and foundation worlds into something more aggressive.

291

 

 
 

 

I think your discussion has been useful, because you
gave me a thought that we have a lot more to do along the
Allstate forum line, where we had a large number of people, CEOs
and their representatives coming in to really get serious about
corporate involvement. And, I think that had high payoff.

Would you comment on my statement, and do you feel that
maybe we can go a notch higher and convince people, like the
President and others, to step in and provide the leadership that
you need.

DR. CLUFF: Well, Mr. Chairman, I just wish I had had
you at the last two retreats I held with my staff, because I
wish I had a recording of what you’ve just said.

We, too, at the Foundation, have come to recognize
that, a narrowly focused activity of the Foundation on a
specifically narrowly targeted problem, that includes a
multiplicity of problems within a community, is, perhaps, not
necessarily the only way that a foundation should proceed.

We are now in the process of laying out some
strategies which would represent a community-wide approach,
not just narrowly targeted on a single problem, but with a
multiplicity of problems that are so interactive in creating a
multiplicity of issues within a community, and in which the
corporate sector, the public sector, the private sector, and a
variety of other organizations and agencies within the community
would cooperate collectively together in dealing with community
problems, rather than necessarily just a narrowly targeted single
problen.

CHAIRMAN WATKINS: But, if you, Dr. Jacobson and
Mr. Karson could put your heads together and give us that
strategy that we could recommend in our report to the President,
and, say, we think this needs to be done and inspired by you,
Mr. President, that could be very powerful and I think very
helpful.

Metropolitan Life, with John Creedon on the Commission
here, has got no choice but to do some of the public relations
work for us. I think that with the tremendous contribution that
his organization has made to date, I think he would be the kind
of person that could be involved with you three in putting
together a very effective strategy that would have great appeal
nationally, and could well be one of the main catalytic forces to
get this thing rolling in the right direction.

MR. KARSON: Admiral Watkins, it was music to my ears
to hear you articulate the challenge just now, just as Dr. Cluff
said it was to his ears.

292

 

 
 

 

This is exactly the message that we have been putting
out for 15 years now, to life and health insurance companies and
others who would listen, to help them become more involved in
their community: self-interest as you put it yourself. This is
tne exact phrase that we put out and they’ve accepted it by and
large.

There are six, seven priorities now in the life and
health insurance industry in the area of what we call corporate
public involvement, or corporate responsibility. These were
enunciated three years ago, before AIDS became the major
challenge: education, the elderly, the hard-to-employ, health
and wellness, housing and hunger and the homeless. So, these are
areas that our companies, for the most part, are already involved
in, and it was not by accident that I said in my prepared
statement and my oral statement that those corporations involved
with AIDS today are, by and large, those that have a record of
being involved with community needs and those issues.

For example, in Chicago, one of the matching grants
that I stated before went to an ex-offender education program
because the company that made the match, Washington National of
Evanston, has worked with the Safer Foundation for years in their
ex-offenders program. So, it was easy for them then to extend
their work with the Foundation to help them with AIDS education.

There is a major company, Lincoln National in Fort
Wayne, Indiana, which is not a hot bed of AIDS cases, and yet,
over a year ago they were one of the first companies to come to
us for a match to help fund a Northeastern Indiana AIDS Project.
It’s because that company has been a leader, and the subject to
many articles, including in Fortune Magazine, in terms of the
basic issues affecting the people of that community, including
AIDS.

So, I agree with you 100 percent on that, and I
certainly can’t speak for my colleagues here, but I would think
that we would accept your challenge and get together, and come
back to you with some specific recommendations.

CHAIRMAN WATKINS: Can we ask you, Dr. Cluff, to pick
up the lead to --

DR. CLUFF: Surely.

CHAIRMAN WATKINS: -- coordinate, and it would be very
helpful for us to be able to see a paper from the three of you.
You’ve been a super panel here today, and we know you now, and I
think it would be helpful for us to have that strategy. That is,
what you would like to see us recommend to the President along
these lines, because I just think it would have a tremendous

293

 

 
 

 

impact on corporate America, as well as the foundations. I’ve
been trying for some time to add some additional excitement into
the corporate world, in the whole area of American youth, along
an integrated approach of health education, health promotion and
motivational regimes, to get young people out of the potential
for behavioral foolishness.

The corporate world, leadership is very, very
concerned about the future of the work force, and economic
competition, and world competition, and so forth. Through the
eyes of the need for a more ready work force, I think we have a
nice self-interest item that we can lean on here. What the HIV
epidemic has done is expose the ills that were already there that
you’ve been fighting for some time.

And so, now is the time to get the other believers in
and take the good news to the people.

DR. CLUFF: I will do so.

CHAIRMAN WATKINS: All right. Well, we’ll expect that.
We’d like to have it within at least a couple of weeks. I don’t
think we want to dot every "i" and so forth. What we are talking
about is a conceptual paper that people will look at and say,
that makes a lot of sense, and this is something we can get
going, we can spark, and we can, through our organizational
linkages, find enough enthusiasm out there to make it a very
worthwhile event, maybe in the fall or something like that.

DR. CLUFF: Well, we’re very good friends. I’m sure
we’ll be glad to do so.

CHAIRMAN WATKINS: Thank you very much for coming
before the panel.

FINANCING THE STATE AND COUNTY PREVENTION
AND EDUCATION EFFORT

CHAIRMAN WATKINS: I/’d like to start now with the
members of the next panel who have arrived.

We have with us at this time, Mr. James T. Dimas,
Executive Director of Public Health Foundation. We also have
Dr. Robert Bernstein, Commissioner of Health from the State of
Texas. And, it is my understanding that Dr. Nitzkin and
Mr. Bogan are on their way, if they haven’t already walked in
the room, and they can join us up at the table just as soon as
they arrive.

The subject of our next panel, on which fortunately
we’re able to start a little early, is financing the state and
county prevention and education effort.

294

 

 
 

 

So in the absence of two of our panelists at this
particular time, I’d like to proceed with you, Dr. Bernstein,
Commissioner Health, Texas.

DR. BERNSTEIN: Mr. Chairman, members of the
Commission. I appreciate this opportunity. I/’11 try not to
emphasize testimony that I think you’ve heard from so many
others. We have all of the problems of AIDS, but we also have
some a little more unique to our state.

And although there’s great concern about the HIV
infection in the major cities of Texas, the trend from 1983
through 1986 shows a clear spill-over from our metropolitan areas
to our rural counties. To date are well over 4,000 AIDS cases
have been reported from about 45 percent of our 254 counties and
many more can then be assumed to have cases of HIV infection.

The devastating impact that AIDS will have on rural
Texas is exemplified by the 108 counties of West Texas, 99 of
which average fewer than 10,000 residents, one-fourth of whom
live at or below the federal poverty level. These residents’
access to health and medical care is limited. They do, however,
have ready access to abusable drugs via the Mexican border as
well as some other high risk activities.

Yet the clinics to treat IV drug abusers are few and
far between in those areas and I believe this a very serious
universal problem -- funding for drug abusers.

There’s only one physician per 1580 Texans in that
area. Hospital care is provided by small facilities, most with
fewer than 100 beds. Tertiary care is available at teaching
centers in the widely separated metropolitan areas such as
Lubbock and El Paso.

Last year, Lubbock’s major hospital treated 14 persons
with AIDS at a cost of $242,000 plus $120,000 in professional
fees. Only 39 percent of these costs have been collected. In
1991 an estimated 91 persons with AIDS will be treated in Lubbock
at a cost of over $2.5 million; and projecting for the full 108
county region, costs in 1991 will be $15 or $20 million. These
small county hospitals caring for even one or two persons with
AIDS will be in jeopardy. The governments of small counties will
not have sufficient funds to defray the medical costs without
diverting them from other essential county functions.

Some hospitals will close, then, as some are now for
financial reasons. And there will be a migration of persons with
ARC and AIDS to the region’s teaching hospitals for care. And
because of the intensity of care required, personnel and
resources will be siphoned from elsewhere in the hospitals.

295

 

 
Community resources and support services for persons
with AIDS are scare in the small towns of West Texas. Also,
public transportation to carry a patient 25, 50 or 100 miles for
routine care and support does not exist.

And much of what I’ve said here, of course, is a
generic problem. Health care in rural areas presents a terrible
dilemma that’s overstudied and undertreated, if you will.

Our Department of Health has established about 400
clinic sites in rural areas statewide, but these are dedicated
entirely to preventive services, not treatment. The structure is
there to add education, counseling, antibody testing and partner
notifications services, but the money isn’t. We have been denied
the necessary federal support for these functions.

Our needs for urban areas also are severely under
funded. But we believe strongly that this approach,
prevention/detection of early infection, education, above all
extensive involvement of the local community to provide as much
out-of-hospital care as possible is critical in adverting the
highly unfavorable impact on the health care systems in rural
Texas.

In the past year we in Texas have been accused by some
of not trying hard enough for a fair share of federal funding and
of not contributing enough as a state government. And we, of
course, resent both comments. Public health officials in Texas
have been as aggressive as those anywhere in terms of our
studying, reporting and educating efforts within our means as
well as in seeking assistance for AIDS control.

Our legislature did take an unusually long time, I
believe, to recognize AIDS as a major state issue. But it
then made a major appropriation of funds for community-based
organization at a time when we were in a financial crisis with
state revenue shrinking.

We do believe, too, that Texas is having difficulty
getting its proper share of federal funding and my concern is
that perhaps people think the state isn’t that serious about
AIDS and then don’t pay appropriate attention to us. That’s a
slightly biased statement, of course.

One recommendation would be the substitution of a
single AIDS prevention and service block grant to each state’s
health agency instead of the inadequately coordinated, relatively
narrowly focused grants from multiple federal agencies to
numerous state and local agencies and institutions. It was
mentioned earlier about having to apply and send grant
applications to various federal agencies. They are all different

296
and all of our people are different. I think this was said by
the representative of the Robert Wood Johnson Foundation. Some
local organizations, particularly small service groups, really
don’t understand grantsmanship and they don’t know how to
effectively apply for grants. So I believe that we need in the
state a single coordinating agency to deal with AIDS funding and
so does the federal government. That completes my testimony,
sir.

CHAIRMAN WATKINS: Mr. Dimas?
MR. DIMAS: Thank you, Mr. Chairman.

Mr. Chairman, members of the Commission, it is an honor
and a pleasure to be here today. I’m particularly gratified to
appear before my good friend and esteemed colleague Kristine
Gebbie whose leadership in the public health community on the
AIDS issue --

MRS. GEBBIE: I/’11 get you for that.
MR. DIMAS: -- has been second to none.

Mr. Chairman, this afternoon I will present
information collected from state health agencies that shows that
AIDS spending from 1984 to 1987 grew tremendously, but that it
is still a relatively small portion of what health departments
do. I will also show that despite it’s recent growth, great
disparities continue to exist among states in the level of effort
directed toward AIDS.

Incidentally, the expenditures I will be discussing
today are for state health agencies and do not include Medicaid
single state agency expenditures.

Could I have the first slide, please?

This first slide shows that the growth in AIDS spending
has indeed been dramatic, increasing 15 fold from 1984 to 1987.

Next slide, please.

I hope you can all read it from there. Still, AIDS
represented only two percent of total state health agency
expenditures in 1987. To put this in context, however, it should
be noted that state health department chronic disease programs,
which include expenditures for such things as hypertension
control, heart disease, cancer, diabetes and kidney disease,
together comprised less than three percent of total state health
agency expenditures. So that two percent isn’t as insignificant
as it might appear.

297

 
 

 

Next slide please.

This third slide shows that the sources of funds for
AIDS expenditures are somewhat different than they are for total
state health agency expenditures, with AIDS services being
relatively more dependent on state funding.

Next slide please.

This slide shows that not all expenditures for AIDS are
from funds earmarked for that purpose. Specifically, over five
percent of total 1987 funding was rebudgeted from other programs.
From my prospective, Mr. Chairman, this represents good news and
bad news. The good news is five percent is a smaller percentage
than many of us expected to see when we did this analysis. The
bad news is much of these rebudgeted funds came from sexually
transmitted disease control programs, epidemiology programs or
other communicable disease control programs. We’re ina
position now where we just cannot continue robbing Peter to pay
Paul, with Chlamydia rates and syphilis rates on the rise again.

Next slide please.

This slide shows that the way AIDS dollars were spent
in fiscal year 1986 the most recent year for which we have these
data. You may not be able to see from there, but about half of
the expenditures went for prevention including laboratory
services, surveillance, counseling and testing and education.
Only about 15 percent were for patient care. Research
represented about eight percent (which, by the way, explains
some of the variation we observed among the states) while the
remaining dollars supported such things as planning,
administration, training, advisory groups and other activities.

Next slide please.

This table, which I’m sure you’re not going to be able
to read from there, but I have copies that I will leave with the
Commission staff, shows that even among the ten states with the
most AIDS cases, funding varied widely and not necessarily in the
relation to the number of cases or, as we’ll see in my final
slide, in my relation to state population. By the way, the
figures on this graphic represents thousands of dollars.

States on this table were arranged in descending order
according to the number of AIDS cases reported in 1987. To the
extent that cases and dollars are related, one would expect the
expenditures on this table to also be in descending order of
magnitude. But if you glance down the columns, you’ll see that
for none of those three columns is the relationship between
dollars and cases very strong. The relationship between dollars
and cases is strongest for federal funding, but even there there

298

 

 
 

 

is tremendous variance. For example, California and New York had
comparable numbers of AIDS cases, but New York spent 80 percent
more federal dollars than California. Even more dramatically,
New York had nine times as many AIDS cases as Massachusetts but
spent 75 times as much federal funding.

If you move back over to the state column, we find the
disparity even more stark. For example, California had three
times as many AIDS cases as Texas but spent 688 times as much
state funding. Could I have the final slide please?

This final table shows that even after you control for
population by examining expenditures on a per capita basis, there
were still large disparities in the amount of state and federal
funds spent for AIDS in fiscal year 1987. For example, while
California and New York and the District of Columbia were in the
$2 to $3 range, Pennsylvania and Texas were 7 or 8 cents per
capita. Incidentally, the national average was about 63 cents
per capita.

Again, while the greatest variance existed in state
funds, ranging from one cent to nearly $3, it’s also worth noting
that in New York, which had eight times as many AIDS cases as
Illinois, over 50 times as much was spent per capita from federal
funds.

In conclusion, Mr. Chairman, I should point that care
must be exercised in comparing states on the basis of
expenditures for several reasons. First, all state health
agencies are different and have different responsibilities. For
example, some operate hospitals or provide mental health and drug
abuse and alcohol abuse treatment services while in other states
those responsibilities are vested in another agency.

To some extent, states are involved in different kinds
of AIDS activities. For example, California and New York are
both involved in research while most other states aren’t.

Finally, I’d be remiss if I didn’t point out that many
states received increased appropriations for AIDS in fiscal year
1988. For example, I know that in Pennsylvania and New York
their budgets doubled from 1987 to 1988. I also know that in
the case of Texas, the legislature only meets bi-annually, so the
appropriations they were operating on in fiscal year 1987 were
actually enacted in 1985 when the state only had 500 AIDS cases.
Still, the information presented here leaves little doubt that
some state legislatures haven’t responded to the AIDS problem and
Sule States are getting left behind in the competition for
federal AIDS money.

Mr. Chairman, the AIDS virus doesn’t respect state
boundaries. If one state’s AIDS prevention activities are

299

 

 
 

 

inadequate, the whole country is the potential loser. It is my
opinion, Mr. Chairman, that with respect to the Commission’s
charge, the uneven distribution of AIDS money suggests the need
to re-examine the way the federal government allocates AIDS
funds. Thank you.

CHAIRMAN WATKINS: I thank you, Mr. Dimas. Next we’d
like to hear from Mr. William Bogan, Executive Vice President of
COSSMHO.

MR. BOGAN: Yes. I know you’re all familiar with our
organization from our boss, Dr. Delgado. I would also just say
that I’ve had the privilege of working with the Mayor’s office
in Washington to set up our AIDS program and that I’m a
Commissioner of D.C. General Hospital, which will be opening an
AIDS outpatient clinic very shortly. We also consult very
Closely with Mayor Art Agnos’ staff in San Francisco. So I think
we have a good sense from number perspectives of what some of the
state and local issues are.

I’m going to reiterate some of the comments you’ve
already heard already in terms of state disparity in funding and
I will have some recommendations to make. First I would just
point out that, as you’ve heard before, many people feel that
the federal level of spending on AIDS education and prevention
is still very low in contrast to the Institute of Medicine
recommendation of $5 per capita combined spending.

I had calculated that in fiscal year 1988 CDC spending
worked out to about $1.27 per capita and state spending for
education and information along with testing and counseling was
about 14 cents per capita. And that 14 cent figure comes from
tne GWU Health Policy documents that have been published.

There is also great variance, as my colleague just
pointed out, in state spending on the education and information
level. This is unpublished data which I used in my written
testimony, but the variation ranges on education and information
from 44 cents per capita in California to about 1 cent per capita
in Arizona and the figures for Texas were nine cents per capita
overall, which meant services, education, everything.

Interestingly enough, New Mexico was spending more than
New York state per capita on AIDS education information. When you
add testing and counseling to that, the numbers go up. They
shift a little bit. New York spends more on testing and
counseling than does New Mexico and several other states. But
again, a state like Massachusetts becomes a leader with 54 cents
per capita in spending.

And I differentiate between education information and
testing and counseling because I feel that besides the issue of

300

 

 
 

 

spending there’s an issue of priorities in AIDS education. But
on the level of funding if I could make one recommendation beyond
boosting the federal level -- can the federal government play a
role in leveraging more state spending? Can you put a minimum
requirement for applications for grants? Can you have an
incentive? You spend more at the state level per capita, you
get some more federal money.

I don’t know the answers on that. It may drive the
state folks and the federal folks crazy to do that, but perhaps
you can consider some appropriate mechanism to leverage more
state dollars in a way that will not punish some states that have
budget problems.

On the issue of priorities, again I want to focus on
the distinction we make between testing and counseling and
education and information. We make that distinction because
of the group we’re most concerned about, Hispanics. We feel
for those hard to reach populations testing and counseling
doesn’t penetrate into communities where you have a history of
under- utilization of health care services, where you have people
who deny that they are at risk for AIDS. These are not people
who are likely to respond to a call for voluntary testing and
counseling. We feel you have to take prevention programs, the
behavioral change programs into the communities, have those
communities empowered to run them, institutionalize them, build
in community norms which will reduce the risk taking behavior.
Testing and counseling we don’t feel will be effective in that
regard.

But if you look at the trends in some of the -- at
the federal level, at least, I think it’s instructive to see
what’s happening at the CDC level which, of course, influences
what’s happening at the state and county level. CDC data that I
was able to review showed that between fiscal 1987 and the fiscal
1989 request, the CDC budget was almost tripling. Over that time
the proportion spent on testing and counseling increased from 43
percent to 61 percent while that for education and information
was decreasing 57 percent to 39 percent.

Now I think what that tells me is that there needs to
be a debate on priorities. Should we be investing more money in
testing and counseling and less in prevention? I don’t have that
answer. I know what our opinion is, but I think that debate
needs to be reopened.

I would also point out at the same time the CDC budget
was tripling, the proportion devoted to minority specific
projects held constant pretty much ranging from five to seven
to six percent over that period. And as you’ve all heard before,
black and Hispanics account for 40 percent of the total AIDS
cases.

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Now, I think there are some good things that cCDcC is
doing which, positively effect the state and local level, and
that is the pass-throughs to community-based organizations. I
think that needs to be encouraged. I don’t know what the state
experience has been in Texas, but they’ve done some good work in
identifying Hispanic organizations. We worked with their staff
to get them and there’s some good grants out there now. But
I think that needs to be looked at as a priority for CDC
programming.

I also think that from my talk with various AIDS
coordinators where some states want to do more in prevention and
information, they are being discouraged in favor of testing and
counseling. Now I’m not sure that CDC should be quite as heavy
handed as they are in mandating those local programs in that
direction. Also needing to be re-examined is the degree of
flexibility states have in designing their own programs.

The other problem that I had identified in my written
testimony was coordination. You’ve heard that before that we
need to coordinate, coordinate, coordinate. You can see at the
local level where it becomes a problem when a local AIDS office
gets an announcement that there’s a meeting in Baltimore in two
weeks and they find out a day later that there’s a three day
conference in Alexandria, both sponsored by different AIDS
funding organizations from the federal government. That kind of
work sort of distracts the troops and I don’t think it has to be
that way.

I think really you’re talking about two types of
coordination here. One is at the federal level here in
Washington, the major AIDS funding institutions within DHHS need
to be brought together in a council, or a single authority. I
don’t know what that answer is. But at the policy and planning
level that has to be brought together. At either the regional or
subregional level, I think you need an implementing point so that
the local AIDS officials have some sense of where they’re going
with the federal monies.

I’ve had two responses from AIDS coordinators. One
says let us comment on proposals before they’re funded so you
know how they fit into our priorities. The other says ata
minimum tell us when you’re going to make an award so at least we
have a month or two to build them into our planning. So I think
there’s a range of interaction there in which certainly some fit
can be made to match the federal and local interests more
carefully.

There’s another issue of coordination which has to be
addressed and that’s with the private sector. I don’t think
anyone would heap praise on the federal government for their

302

 
leadership in stimulating the philanthropic response. It’s been
late and largely ineffective. We are now seeing Ford Foundation,
Robert Wood Johnson Foundation, several other large groups,
AMFAR is doing more in education, Dionne Warwick has set up a
foundation for minority education. There will be more
philanthropic money flowing into the AIDS field. The problem is
that the local AIDS coordinators also have no control over that.
They can’t build it into their planning and I think there is
precedent in some federal programs where a lead agency has tried
to coordinate foundation giving with federal funding or they have
required at least that applicants acknowledge that they have been
in contact with the area’s regional or local philanthropic
institutions. I don’t think that’s a burden to put on grantees
that they acknowledge that they at least know what’s going on
locally. And, in fact, if they would move to the federal
government playing a subregional or regional coordinating role,
why not put some coordination in there with foundations whether
it’s hosting meetings, having a clearing house function? There
has to be a way to bring these resources together to make the
work at the state and local level easier. I don’t think it’s an
undue burden to do that.

The last comment I would make, again goes back to our
priorities. The whole notion of community empowerment and the
emphasis on behavioral change. I don’t think the public health
and medical communities are the experts on that. I think youth
serving agencies, family service institutions, juvenile justice
authorities on youth problems, these are some of the experts that
need to be drawn formally into the advisory structures that shape
AIDS policy both at the state and local level. I know most local
advisory committees don’t have these people on them.

My final comment would be that although I know the
urgency of looking at primary prevention and preventing new
infections, I think we also have to recognize that there’s a role
for secondary and tertiary prevention. I think there is more
hope that those infected can forestall the development of
symptoms either through therapeutic regiments or better health
maintenance. That message isn’t out there. The money isn’t there
for the messages. I think it has to be there. So as you go on
about your deliberations if you could pay some attention to that
issue, I think there’s much more we can do to show that we value
the lives of those infected as well as those uninfected. Thank
you.

CHAIRMAN WATKINS: Thank you, Mr. Bogan. We have our
next witness, Dr. Joel Nitzkin, President, Association of County
Health Officials. Dr. Nitzkin?

DR. NITZKIN: Good afternoon. Thank you, Mr. Chairman.
I’m glad to be able to be here. I am Dr. Joel Nitzkin, Director
of the Monroe County Health Department, Rochester, New York and

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current President of the National Association of County Health
Officials based right here in Washington. I appreciate the
opportunity to present these views to you today, but quite
frankly wish I would have had more than just a few days to
accommodate both the trip to Washington and to prepare these
remarks. The basis of my remarks will be somewhat different than
the others presented. They’1ll be largely based

on personal experience within Monroe County and largely on
anecdotal impressions gathered from a lot of contact and
communication with local health departments both across the state
of New York and across the nation.

My personal experience in public health, now spanning
20 years of work at state and local levels including six years as
President of the New York State Association, and the last three
years as President of the national association, has convinced me
that a local health department is fundamentally different from a
state health department in several critical respects.

First, the local health department is the only direct
service agency in a community in a position to consider the full
range of preventive and therapeutic services that the community
might need and take direct action to meet whatever needs may be
unmet either through advocacy or by expansion of its own direct
service capacity.

The other difference is the role of the local health
officer as part of a local community power structure with direct
ties to major providers of other health and health related
services and not infrequently continuing close contact with local
news media. This is quite different from the usual role of a
state health agency which is more often seen as part of the
governor’s office or part of the health and social services
umbrella agency and with a clearly circumscribed role to play
within the state administration. And, of course, there are many
exceptions to these rules but I think that’s a fairly general
pattern.

Now I readily admit that many local health departments
are simply not interested in or capable of fulfilling the role
specified above either for historical reasons or because the
population base is simply too small to support that kind of
leadership capacity. It’s hard to avoid the impression that the
community, even if partially served by a branch office of a state
health agency, simply does without some of the benefits a full
service local health department can provide and suffers the
consequences of missing local leadership. It is from this
prospective that I would like to offer the following remarks
relative to the need for AIDS related funding from the federal
government.

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First, major roles of local health department relate
to general community leadership, education and delivery of
preventive services, especially those relating to screening,
counseling of screenees and case contact notification. In some
communities there may be no other institution to provide some or
all of the diagnostic, therapeutic and support services. The
need for general community leadership, education and screening
related activities are pretty much universal and, perhaps, best
costed out on a per capita basis without regard to the local
levels of AIDS related morbidity or mortality.

The case related contact notification support and
therapeutic service costs, however, can be roughly estimated on
the basis of the anticipated new incident cases per year within
that jurisdiction. So we have two different basis upon which to
build estimates for needed funding. One per capita and the other
based on case load.

The community leadership role articulated in the
standards as the AGPALL concept, costs money. In the Monroe
County Health Department in Rochester, New York, for instance,
this AIDS related leadership role consumes about 80 percent of
the time of one physician deputy director and significant time
of other top level staff. I roughly estimate the cost of this
function to the Monroe County Health Department to be in the
range of about 15 cents per capita, or about $100,000 per year
in this community of 710,000 persons and is a sum not recognized
in any budgetary allocation or tabulation as being AIDS related.

The need for education and policy guidance is
conditioned on the extreme emotionalism related to AIDS, its
consequences and the major risk factors. The education must be
direct, intense, up to date and frequently repeated especially
when erroneous messages are transmitted through the mass media
such as police officers needing yellow rubber gloves to handle
demonstrators or Masters and Johnson type reports on the
transmissibility of the HIV virus. These activities include,
but are not limited, to education of local physicians, non-
physician staff and providers of health and social support
services, education of the public and private sector policy
makers, training of local educators and general community
education. Yet other channels are used to educate and reeducate
specified high risk groups.

These educational responsibilities require staff,
funding and facile means of staying up to date on current
developments in the field. Not counting costs imposed on school
districts for comprehensive AIDS educational programming with
elements K through 12 and emphasis in grades 4 through 9; and
need enhancements to programming related to substance abuse,

305

 

 
STDs, HIV screening and pregnancy prevention. I would estimate
the total need for these educational services to be about $1 per
capita.

Not to be forgotten are non medical support services
for AIDS and ARC patients, HIV positives and the respective
family and non-family support systems. These are services that
keep family and friends reasonably enact and make what remains
of life reasonably liveable for the unfortunate victims of this
dread disease. Our local experience in the Rochester area leaves
me with the impression that optimal meeting of these needs can
probably be estimated in the range of $5,000 to $10,000 per
incident case per year. Now keep in mind for every incident case
there probably anywhere from five to 15 or 20 individuals and
families needing these kinds of support services because the
incident cases are just the top of the iceberg. But the incident
cases could be used as an indicator of the level of funding that
might be needed in that community for these elements.

I leave it to others to estimate the therapeutic costs
and other costs related to AIDS and HIV. Before concluding,
however, I think it’s important to develop some concept of the
respective roles of federal, state and local governments in
picking up the costs of those elements I have presented. While
the services I’ve described are apt to be largely provided by
voluntary and private agencies in many communities, it is
unlikely that much of the costs will be picked up by non-
governmental payers. Especially for the community based
leadership and educational components described above and
totaling about $1.15 per capita.

Given the respective abilities to raise and distribute
funds and provide skilled support, it seems to me that at least
half of these costs to be picked up by the federal government
with the rest to be covered at state and local levels if the job
is to be done on a reasonably nationwide basis. I think the same
is probably true of the $5,000 to $10,000 per incident case for
the support services noted above.

I leave estimations of the therapeutic services to
others to handle.

I don’t know if you’ve received a written copy of ny
remarks. If you have, I’d like to briefly walk through the pages
that follow of my double spaced testimony to give you an idea of
what we would tend to see from a local level is the full range of
programming that any community might have. This has to do with
all health and social service services needed from all sectors of
the community, the respective ethnic, minority groups, the
private payers and so on.

306
This is written up in a model standards type format
just for convenience in terms of articulating these concepts.
There’s a goal to minimize the impact of HIV and AIDS on the
community, some outcome objectives. But if you turn over to page
eight at the bottom, numbered at the bottom center, you begin to
get an idea for the range of services. There’s community
oversight. This is the focus by which representatives of the
various ethnic groups in the community, the various major
providers and others gather around a table to totally coordinate
what’s going on in that community for that community. We have
such a system in Rochester. I think it works exceedingly well
and it helps us balance and coordinate and certainly avoid
duplicating or conflicting with each other’s efforts.

Surveillance and epidemiology and screening, early
diagnostic services and therapeutic services of a wide range,
I think, have already been alluded to by other presenters today.

And we would see that as sort of covering the
waterfront. I’ve tried to approach this from the notion of the
totality of programming that ought to be directed relative to
AIDS and then how it be put together with a particular focus on
the role of the federal government in funding those portions that
may be seen as sort of community coordination and leadership and
public health service in nature.

Again, thank you for the opportunity to speak. I’d be
happy to answer any questions.

CHAIRMAN WATKINS: Thank you, Dr. Nitzkin. We’1ll start
our questioning with Mrs. Gebbie.

MRS. GEBBIE: Thank you. Since you raised the subject,
Dr. Nitzkin, of the relative roles of state and local public
health officials, I think it would be only fair to comment that
in the course of these hearings we have heard from and about
federal, state and local health officials. We have found
complaints about people on all three levels as well as some good
examples of leadership on all three levels. So it’s a little hard
to say it should be any one or that any one is more visible at
anyone time. I think it really depends on the locality.

I want to push you a little bit on this shared
responsibility issue, with which I agree. Your testimony worked
out a cost about a $1.15 per capita for a typical county progran,
and I’m not quarreling with $1.15. At this point, that’s as good
a number to talk about as any. If, in fact, we are three levels
of government as partners, one option would be to split it three
equal ways. Your testimony puts half of it on the federal
government and then says the other half is somehow split between
state and local. Would you explain why you put a different share
on the federal system then on that combined state/local. Would

307
you talk about how you would split that state/local portion? I
think you would agree with me that beyond what happens in any one
community, there are some additional activities that happen at
the state level and some yet further additional activities that
happen at the local level that have to be financed somehow or
other?

DR. NITZKIN: Yes, that may be true. I think the
concept of the share of the federal government being larger than
the share of the other two has to be basically do with some
basic political science and economic aspects of how our country
happens to be organized. The federal government is the only
level of government that can go into debt. The federal
government has got far greater ability through the federal income
tax and other mechanism to raise and distribute funds than do
state or local governments.

If we have a national need, and this is truly a
national need to deal with these elements of the AIDS crisis, the
only way we’re going to have anywhere near full national coverage
is to have the federal government play a major role with regard
to its fund raising and fund distributing capabilities. So lI
don’t see any escape from that conclusion, the adverse of it
being if the federal government does not take on that role, those
states that manage to have enough in the way of state resources
or localities with enough local resources can do fairly well.

But much of the rest of the nation without that kind of resource
base will simply do without and suffer the consequences, which is
something that I don’t think we want to see done.

The issue of dividing the responsibility between state
and local levels is a much more complex matter because of the
relative wealth in terms of tax base and property valuations, if
you will, of the respective jurisdictions because many areas you
may have urban areas that are probably more than capable of
picking up more than half of the cost for services in those
areas. In other areas, in fact, much of the country is rural.
Many, if not most, of those rural jurisdictions are so cash poor
that they may have to have the state and federal government pick
up virtually all of the costs of what may be provided in those
areas.

So, the state/local split is something that I think
is going to have to be worked out probably state by state and
probably with some attention to the respective wealth of the
different areas. But the role of the federal government, I
think, is clear and I think is nation wide.

MRS. GEBBIE: We haven’t seen a chart similar to the
one Mr. Dimas presented showing state appropriations and so
of counties. We’ve seen some data about how much has been
appropriated by some of the larger local governments in

308

 
California and New York. What is your sense at this point, based
on your anecdotal exposure to lots of county health departments,
of whether the typical local government in this country has given
its county health department some resources to deal with AIDS or
whether the typical county health department is dependent upon
what it gets from state and federal sources and reprogram dollars
to do their share of the epidemic?

DR. NITZKIN: If there’s anything that’s typical across
local health departments, it’s probably fairly massive
reprogramming of dollars. The health department given a fixed
sum of money has to do what it has to do in funds and supports
AIDS related activities by simply taking people and money away
from other things that it otherwise would have done. Additional
local funding for AIDS, I think, has only occurred on a fairly
substantial scale, I suspect, in those relatively few localities
that have borne much of the brunt of the AIDS epidemic to this
point in time.

Speaking for my own community, we have received modest
sums of money to enhance our educational programming. But the
community coordination role, which is played to a large degree
by the health department on behalf of and bringing around the
table all of the other organizations in the community, is
something that we’ve taken entirely from within our own
resources.

MRS. GEBBIE: Thank you.

I have a question I’m going to address more broadly
in a minute. But Dr. Bernstein, one of the issues we have
to look at is of states that just haven’t put much into this
epidemic. And it is a little hard for people from other parts
of the country to see a state that has had as many cases of HIV
infection as Texas has had which, to many states, still doesn’t
look poverty stricken even though you’ve been through some awful
budget cuts, I know.

DR. BERNSTEIN: It is serious. Believe me it is
especially when it comes to health.

MRS. GEBBIE: Your legislature doesn’t meet every year,
but yet most states have some mechanism for reprogramming in
between.

DR. BERNSTEIN: No.
MRS. GEBBIE: If the federal money available had
demanded match, would the legislature then have found some money

or would you have just turned that down and still gone with
nothing in AIDS in this intervening period?

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DR. BERNSTEIN: May I be frank?
MRS. GEBBIE: Certainly. That’s what we want.
DR. BERNSTEIN: She’s a very good friend.

MRS. GEBBIE: Aside from that. You don’t have to tell
them all of the things we know.

DR. BERNSTEIN: It was tough getting the legislature or
any leader in state government to pronounce the word "AIDS" until
the last session, which was in 1987. Very frankly, it was a
political problem. And I’m exaggerating about pronouncing the
word, but at least recognizing it as, a very serious health
threat.

MRS. GEBBIE: Is this the "a word" that you’re not able
to pronounce right now?

DR. BERNSTEIN: The four letter word, AIDS. And this
last legislative session in 1987 there was a good bit of support.
But from nothing the legislature -- and we had a terrible,
terrible time -- an awful fiscal deficit in the state,
appropriated about $3 million for the two year period. That’s
the only health program we have that received additional money.

Also they developed a great deal of interest and some
good strong laws generally, as some of the states have. And I
have no question that there will be a "great" increase in 1989
when they meet again. By great, I mean a sizeable increase.
They have taken many good steps, like our legislative task force
on AIDS which is charged with studying the fiscal implications
in this whole area.

I think you should know, all of this funding
comparison between the states is very difficult, and also between
counties. Maybe they’re fine within a certain state, but as you
well know the relationships are so different. The funding is so
different between state and county and city within the different
states. Even the governments are different.

We have been leaders in the areas of prevention,
education, testing and so on in our state. But there’s also
been a great amount of treatment done, costs picked up by the
universities and other public institutions. In fact, our
Department runs a couple of small hospitals that always have
eight or ten AIDS patients in them. And I don’t know where that
money comes from. That’s not a line item.

And the same goes for staff work costs as was
mentioned. I spend about 40 percent of my time on AIDS --
sometimes more than that. We’ve had to move people from other

310

 

 
programs. What I’m getting at is we have spent a lot of money,
not earmarked or identified but we have found it.

I don’t know what to say about reprogramming of budget.
I cannot speak for the legislature. You know, the governor has
his duties, but the legislature would just as soon have him be
mostly ceremonial and kiss babies and so on, not changing the
budget. I’m just being very frank about it.

MRS. GEBBIE: But without official reprogramming, you
did indeed do AIDS activities during that period? Your agency
did AIDS related activities during the period in question?

DR. BERNSTEIN: I thought you were talking about the
state budget.

MRS. GEBBIE: Well, I was.

DR. BERNSTEIN: Yes, we can do a certain amount and we
did. And I think as far as our activities, I think we did pretty
7211. But as I mentioned in my testimony, we were denied some
federal funding. Our department of education, a really good
operation and very interested in the subject. They applied for
a grant for curriculum development in AIDS specifically and were
turned down.

Texas, Oklahoma and Pennsylvania are the only states
not given a federal grant for AIDS education for professionals.
This was a grant out of HRSA, I believe. I don’t understand why.
In our own large CDC grant it looks like we’ll get less than half
of what we asked for. And I’m concerned about it. And another
point I said before about coordination, I’m told some of the NIH
grants deal with public health matters, that is deal with some of
the prevention activities. There just needs to be a better
system of coordination at all levels -- however that’s
accomplished so that people know where to apply, how to apply.
Then the federal government knows that everybody knows and the
money is going and what it’s being used for.

MRS. GEBBIE: I’m going to ask about one other. There
are several things that we might follow up on, but there’s one
other big question for all of you while I still have this
chance. We have heard, again in various places, at various
times, that it is state health departments that are the road
block. They are inventing regulations or restrictions or
misunderstandings that prevent appropriate dollars getting to the
local agencies that could do good. We have also heard that the
county health departments if they are a part of that funding
stream, are ignorant of grassroots organizations that are really
doing good and they’re hogging the money to themselves. We have
heard that grassroots organizations are springing up out of
nowhere without any real understanding of what they’re doing just

311
to get their hands on new money that’s coming along and thus
fouling up the beautifully elegant things that the county health
department or the state have figured out how to do in that area.

I would doubt, based on what we’ve heard so far, that
we‘re going to recommend a system in which the federal government
hires enough check writers to just give individual checks to
anybody who wants money to do something on AIDS. It’s still
going to somehow be funneled through something resembling a
network that might include state health agencies, local health
agencies. But we also want it to connect with the right kinds of
very basic activities including minority based organizations,
community based organizations of all kinds. What can any of you
tell us to enlighten us on ways to remove those road blocks that
might keep a state from taking a year to distribute money it’s
received to the local level or ensure that a county involves
grassroots operations?

DR. BERNSTEIN: If I may start. You alluded to it
earlier, that is my own military life and I’m sure the Admiral
agrees, no one thinks that the headquarters above them knows very
much. I mean it’s just a given that, it’s higher headquarters
fault whatever happens.

I think the way to avoid it is by having a single
funding entity, at least within the state, a single body that
deals with funding. But I think a body can be so developed as
ts have involvement of all levels. This should include local
service organizations, and a broad range of people and
interests.

MRS. GEBBIE: Other comments?

MR. DIMAS: If I may take up on your analogy, you spoke
about obstacles in the funding stream. From my perspective it’s
less a funding stream than it is an effort of continually going
back to a well, because funding is now provided almost
exclusively through project grants. To continue with that
analogy, gravity being what it is, a stream will find its way
around obstacles. Water in a well is just going to stay there.

I think part of the problem is that the flow, if you
will, is fairly irregular by virtue of the fact that it’s driven
by project grants rather than some kind of formula grants or
possibly a combination of the two.

MRS. GEBBIE: So if people were not having to keep

going back and writing grants, they might do better at channeling
it to the appropriate outlets?

MR. DIMAS: I think that’s possible. It’s difficult to
anticipate at the time you’re writing a grant proposal everyone

312
who ought to (or who might think they ought to) get a piece of
it. And once that proposal is off your desk, there’s not much
you can do to pull it back and change that.

MR. BOGAN: Yes, I have several comments to make. One
is when you talk about where the problems are in the different
points of the system, I just mentioned some of the examples of
the barriers we encountered throughout our work. In 1985 there
was an announcement of minority emphasis awards to be made to
community based organizations with federal funding and
administered by private organizations. There were no minorities
on the review panel. They would not put on anyone. We had to go
to Congress and get a Congressman to intervene so there would be
minority reviewers on minority grants to try to get a little
more sensitivity.

There was a state department of health that was putting
out minority money. They said they talked to a Hispanic group
and they said AIDS isn’t a problem. Well, they talked to a
political group, not a health group. Finally, we had to give the
names of Hispanic organizations and lot of those were funded,
they did some good projects but they didn’t know the community
infrastructures.

We did a conference in 1986 in a major city. That
major city which has 40 percent of the Hispanic AIDS cases
couldn’t send a Hispanic to present at our conference, couldn’t
announce any Hispanic programs, could only talk about vague
plans.

And finally, last summer we had a call from a
community group in a southwestern state, a county of 60 percent
Hispanic. They would not put Hispanics on their AIDS advisory
council. My boss went down, had a little meeting and I think
there are two on that advisory council now. So there are
barriers at all levels of the system.

On the issue of grassroots groups springing up and sort
of running for the money, I don’t see that as a big problem in
terms of the Hispanic community. What we are seeing is that
there are established health and human service providers who are
feeling a demand for services. We are encouraging them to go
after the money so that those programs become a part of the
Hispanic community.

An AIDS organization that comes from outside the
Hispanic community will not know how to reach Hispanics. You can
teach the Hispanic organizations how to do to deliver AIDS
education. You can’t necessarily teach an AIDS organization how
to deal with out of school Hispanic youth who are using drugs and
in the juvenile justice systen.

313
So I’m not sure that the grab for money is quite as bad
as one might portray it. 1/11 just reiterate a couple of points
on the realm of recommendations. One is mandating some basic
requirements for advisory rules I think is not unreasonable.

I think you really have to look within the federal
agencies on the accountability issue. That’s something very
simple about grants management, do they have the staff to
administer the grants and do the accountability reviews? Are
they good people? Our organization has a lot of federal grants.
If those people don’t have the time to deal with you, things are
going to slip.

I think there’s also an issue which I would raise and
the state and local people might want to comment on. I know
at the local level here in Washington, they can’t build
administrative functions into their federal grants, they can’t
get the city to fund the administrative staff to deal with the
issues of coordination and administration. We have a personnel
freeze right now, as does I think the city of San Francisco.
So these offices if they’re calling local agencies a stumbling
block, it’s for a very good reason. They don’t have the staff
to do the job.

Last year the coordinator for San Francisco said he had
not had a personnel increase in two years. So I think there’s a
real issue there and there is a federal role on what’s allowable
as a grant cost.

DR. NITZKIN: Well rather than cast aspersions and
point out examples of inept state or local health departments or
inept community groups I think we ought to take a look at the
flip side of the equation. We have a massive nationwide problem.
We have a substantial sum of money to deal with. And I think the
opportunity exists to create a situation in which we can
strengthen the respective providers. In theory, anyway, state
and local health departments and community groups éach should
have their own specific roles to play and they should compliment
and interdigitate with each other. Unfortunately, people being
people and politics being politics, that often doesn’t happen
that way and often there’s no incentive provided for a given
state or a given local jurisdiction who has not given their state
health agency or local health agency the ability to do that to
do so.

The vision of scare of funds and not enough to go
around creates a situation in which people start scrapping with
each other for it rather than finding ways to work together to
get the job done.

I think there are a few things that could be done with
regards to the AIDS related funding that could be extremely

314
helpful in this regard, not only create a situation in which
those funds would be better spent, but probably have even more
far reaching consequences in terms of upgrading some of our
weaker state and local health departments and even some of the
weaker community groups that might also be involved in this
effort.

I think number one we have to develop some notion of
what the money is going for and some common means of expending
it. Now, on the epidemiologic end a lot of attention was paid
very early on to what we define as an AIDS case and what is not
an AIDS case. I think we could go through a similar kind of
activity and try to identify those kinds of services and funded
activities that really relate to a per capita basis and those
that may be hinged on the local level of morbidity and mortality.
And then we could have some kind of a standard to go by. We
could talk in terms of kinds of performance expectations that we
expect to see in a community. We can then, perhaps, figure on a
demographic basis if there are different levels of risk that are
easily attributable to communities with different age structures,
to various Hispanic populations, to black or other minority
populations. That could be figured into the formula in a sense.
Then the funding could be given and I strongly support a funding
-- a formula rather than a grant based -~ project grant base
basis with the idea that in return for that formula based funding
there are going to be parameters that are going to be looked at
in terms of how that agency performs that will create a situation
in which the funding is there, and the federal government is
showing a leadership role by providing the funding.

I think rather than withholding it and seeing if the
states or localities could cough it up, I think you will find if
the feds take the role and begin putting in some funding, that’1l
make it a lot easier to provide supplementary state and local
funds.

So I think that process would correct itself. I think
we’ve seen examples of that in other program areas, especially in
some of the older categorical grants in many areas.

That’s one element of it. The other element of it is I
think regardless of who gets the money or where it’s spend, there
should be as a matter of open, readily accessible information for
any state or local or community group that wants to access it the
ability for them to tell who was getting what money for what
purpose in their state. At this point in time that information
is simply impossible to come by.

A state doesn’t have --

MRS. GEBBIE: In all states or in your state?

315
DR. NITZKIN: Pardon?

MRS. GEBBIE: In all states or in your state?
DR. BERNSTEIN: In my state it isn’t impossible.
DR. NITZKIN: Pardon?

DR. BERNSTEIN: Nobody has a problem in finding out who
we give the money to.

DR. NITZKIN: Well, I think given the variety of
different funding streams from different federal agencies --

MRS. GEBBIE: I’m sorry. I probably shouldn’t have
interrupted you. But you think it’s a problem, at least to
locate who is spending what on AIDS?

DR. NITZKIN: Yes. Or who is getting what from what
sources. A state health agency who wishes to oversee the
expenditure of AIDS funding and AIDS services in the state I
don’t think necessarily has to have every penny flow through
their agency funnel. If they’re in a position to find out whose
doing what, there’s a lot that they could do. Obviously they’re
the strongest if all the money flows through their hands. The
same thing might be true at the local level. I know we’ve been
very effective as a local health department, although we don/t
get much of the funding, but just knowing where it is enables us
to coordinate, to prioritize, to identify needs and so on. And I
think there are probably some fairly simple mechanisms that can
be done to try to make that information readily available and
accessible.

MRS. GEBBIE: I want to ask Dr. Bernstein whether you
think other state officials would concur with the point just made
about a formula grant approach rather than the competitive
project grant approach that’s in place now? Does that make some
sense to you?

DR. BERNSTEIN: I think it would be better.

MRS. GEBBIE: If that’s so, I’m going to ask the
question we typically ask. Could you, with Mr. Bogan adding
the idea about the kind of controls you’d need to get the right
community input, and the other three of you representing the
agencies, give us a rough sketch of what the formula might look
like that would work for this epidemic? What are the factors
you’d put into the arithmetic to make it reasonable and
appropriate to distribute the money. Just give us a rough cut at
it so we could see what that would look like and how that would
spread the money differently from what you’ve shown us is the
present case?

316
MR. DIMAS: I’d be happy to participate in that effort,
but I’d like to sound one cautionary note before we proceed with
it, and that is that we mustn’t throw the baby out with the bath
water.

A formula grant will not be a panacea because, as you
know, the problem is different in different parts of the country.
The problem in Minnesota is distinctly different than it is in
New York, so I think there may still be a role for project
grants to address high risk populations or particular needs in
particular jurisdictions. But certainly the services that
everyone ought to be providing, the prevention services, and the
education and testing and counseling that need to take place
could, perhaps, be done through formula grant.

MRS. GEBBIE: Fine. Save some money out for that. I
think sometimes people who haven’t worked with those grants have
trouble thinking about how it might turn out to be equitable
because just straight per capita doesn’t seem to make sense. So
if you could cooperate over the next -- what have we been giving
people, three weeks to four weeks? Five minutes? To give us an
example of how that might work, it would be very, very helpful.
I’ll get off my soap box now.

CHAIRMAN WATKINS: Dr. Lilly?

DR. LILLY: I don’t have much to ask. As usual
Mrs. Gebbie has thought of virtually everything that I might
have wanted to develop.

I just want to stress that I’ve been quite stunned by
your table number two, Mr. Dimas. The difference from one state
to another and we’ve heard what some of Texas’ problems are.
Pennsylvania, it seems to me, is in just as bad shape and I’m
wondering if the problems there are the same that Dr. Bernstein
has given us, that is (a) fiscal crisis within the state and,
(b) just embarrassment about the whole situation?

MR. DIMAS: The impression I have from talking to staff
in Pennsylvania is that, whatever the origin of the problen,
Luere apparently has been some embarrassment that has taken place
and, as I mentioned in my testimony, their state appropriations
doubled from 1987 to 1988.

DR. LILLY: Well, I missed that. I missed your saying
that.

DR. BERNSTEIN: We’re over our embarrassment, too, I’m
sure.

MR. BOGAN: If I could add one comment on that. I know
our experience here locally has been that we doubled the budget

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between 1986 -- 1987 and 1988. The proposed ’89 budget came in
and it was a no growth AIDS budget in this city, which has been
one of the nation’s leaders in funding. Part of the rationale
that was used was the promise of more federal money. So I’m not
sure that increased federal share is going to automatically
leverage local spending. It may be an excuse to stop local
spending.

DR. LILLY: Well that’s another thing that comes out of
this chart. The differences in the ratio between state funding
and federal funding from one state to another, whereas one state
will have supplied a great deal more state funding than your
federal sources. In another state, it will be quite the reverse.
That, in itself, doesn’t bother me. I suppose my final question
is to put everything on a per capita basis, and you’ve already
discussed this to some extent. I’m wondering if just efficiency
of the use of the money comes into this at all?

DR. NITZKIN: Well, I think we could talk in terms
of a modified per capita formula, although I don’t think the
modifications would be extremely difficult or extremely complex.
If, for instance, we’ve identified certain ethnic and minority
groups of being the substantially higher risk, i.e. in the need
of substantially more in the way of preventative services, there
could be different capitation rates for the population estimates
in those particular groups. And in addition to simply giving the
funding if there were clear performance expectations, I think
that would clarify -- and a community who could use the money
better, who could use it more efficiency, who could achieve those
performance expectations with less expenditure in state or local
monies, you know, more power to them. I don’t think that would
be objectionable. But if the money came with that kind of both
guidance and incentive in the fact that, you know, a very bright
light would be shining on just how they would be doing, I would
think that the kind of gamesmanship that gets played, the kinds
of petty political agendas that get played out whenever there is
some new source of money on the horizon could be largely side
stepped. Not entirely, but I think that would make a big
difference and that would certainly strengthen the hands of those
people within each of the agencies at each of the levels who
really wants to get the job well and properly done.

DR. LILLY: Yes, sir?

DR. BERNSTEIN: Another point, though, about the ethnic
situation. Our minorities are not over represented in Texas. We
have a lower representation than the national figures. Same is
tcue with drug abuse, that is AIDS from drug abuse.

DR. LILLY: But waiting for minority involvement in the
problem would not --

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DR. BERNSTEIN: That would hurt us even more. That
doesn’t mean we shouldn’t emphasize prevention. In fact, we’re
very concerned -- we don’t want to see that happen because we
have so many minorities.

DR. NITZKIN: Let me point out what may be another very
unpleasant reality. I think there are those who have taken a
look and tried to do some simple arithmetic in terms of seeing
what it would take it terms of dollar support to take what we now
know about prevention of the spread of the HIV virus and turn
that into actual community service. And I kind of suspect that
all of those calculations came up with numbers much larger than
we ever thought we could get through the current, at least
federal administrative and political process.

One of the best reasons to go with the kind of approach
that we’re talking about that’s formula driven on a per capita
basis for those services that are really delivered on a
population base rather than individual therapeutic services on a
per case base otherwise, is it gives us a mechanism by which we
can rationally go to those who decide on those allegations or
elected representative both administrative and legislative and
say, listen, this is what we need to get the job done. If you
give us the support, we can do this and if you can’t, I think,
quite frankly, they’1l have to share some of the responsibility
for these goals not being accomplished.

CHAIRMAN WATKINS: Dr. Lee?

DR. LEE: I don’t know. The fact that the states are
so different in their funding and react so differently doesn’t
surprise me at all. I would be amazed if it was uniform. If
New York is spending 600 times more than Massachusetts, it seems
the money is there. The feds have appropriated money and the
recipient who goes looking for it is getting it. He’s getting
600 times more than the guy who obviously isn’t going after it.
So I wonder if it’s the federal government fault? I wonder if it
isn’t a matter of local interest? I also have a lot of worries
about formula giving.

If somebody doesn’t want to spend the money on local
AIDS education and you give it to him, he’s very likely to spend
it someplace else, in the first place. And in the second place,
we're trying to save money in this country and not give money to
people who really aren’t terribly interested in getting it.
Anyway, that’s the way I see it.

I can’t see what we can do to help 5,000 or 20,000 or
whatever local health officers do their job. Now, if they can’t
do their job for some reason, we got to look upstairs. And the
thought that comes to me is in our system who is responsible,
really? You know, is it the Secretary of Education, is it the

319

 

 
Surgeon General, is it HHS, is the NIH, is it the Institute of
Medicine, is it the Congress, is it the Presidential Commission
on the HIV Epidemic? I don’t know either whose job it is. It
may be our most important goal is to figure out some process
whereby we do know who is in charge of this process so that if
you want money, you can go to that person. Who would you go to
now?

DR. NITZKIN: Well, getting back to some concepts,
perhaps, of public administration and political science. If
there’s any kind of service or protection that we think is so
important that everybody in the jurisdiction, be it the national,
the state or the local jurisdiction, should enjoy the benefit of
or get the protection of government must be involved in a very
major way. There is no other agency or institution no matter how
community minded that can cover the entire jurisdiction and have
total community coverage. So I think right away we’re dealing
with the respective governmental agencies.

As a matter of practicality, at least from my view
taking a look at it from an urbanized county health department,
the kind of picture that I see in most states regardless of their
organizational patterns is generally speaking you have reasonably
autonomous, reasonably self-sufficient in terms of leadership
capacity local health departments. You have a state health
department that plays a variety of supportive kinds of roles for
them and then the state health department takes on the direct
service roles for the less populated areas. And quite frankly,
for those urban areas that failed to generate their own
leadership as best they can.

So I suspect you’re really talking if you’re taking a
look nationwide at the 50 states and probably 200 to 300 local
health departments that would be dealing with this way and I
don’t think it would be that difficult to come up with some means
by which they can be identified and given this kind of
responsibility with full knowledge and concurrence and support
from the state.

DR. LEE: Some of them are interested and some of them
aren’t. I mean the person in South Dakota is not as interested
as the person in central Bronx.

DR. NITZKIN: By tying the dollar allocations to
performance expectations if the community in terms of, you know,
receiving the money will not do the performance, they don’t get
the money. It’s not a competitive brand, it’s a formula base --

DR. LEE: How do you measure performance in South
Dakota?

DR. NITZKIN: Pardon?

320
DR. LEE: How do you measure performance in South
Dakota when nobody has AIDS in South Dakota? Is there anybody
with -- no.

DR. NITZKIN: Well, you know --

DR. LEE: When you work it out per capita to me that
doesn’t make any sense either. I mean you got to spend $20 a
head in Harlem to make the point and you may have to spend
nothing in a community with a very excellent public school
progran.

DR. NITZKIN: I think if you take a look at the
different aspects of the AIDS related programming and you
separate the community coordination and the educational
activities from those activities which are care related, I think
you’1l find the costs coming a lot closer. Sure, different areas
may have different cost basis because of different salary
scales, but those differences will be fairly small. And what I
see when I talk to my colleagues from rural counties across much
of the United States, especially across the areas of the midwest
where there’s virtually no AIDS morbidity at this time, it’s an
issue they have to deal with, they have to address. And they
have the opportunity through preventative activities to prevent
the experience that’s already been seen in some of the other
urban areas. And even a place like the Bronx, I think when you
take a look at educational costs per capita to get the job done,
it probably won’t be that much different than South Dakota. The
costs are huge because of number one, the number of cases and
the money that has to be spent on those cases. And number two,
perhaps, because the Bronx may be more heavily represented than
anybody else with those ethnic and minority groups that do
require more in the way of per capita expenditures to properly
cover.

DR. LEE: Well, I’m going to leave this to the
Chairman here who is very interested in these educational
matters. I, in a prior session, wondered why our public school
system doesn’t take care of this. Mrs. Gebbie here is head of a
public health program, why isn’t -that part of her job to do that?

MRS. GEBBIE: To do what?

DR. LEE: To educate her constituents about AIDS.

MRS. GEBBIE: It is. I don’t think anybody from an
official state health agency that’s been here or from a county

health agency that’s been here hasn’t said that it isn’t their
job. What we’re looking at is the resource question.

321
DR. LEE: Yes, but one is spending 600 -- is getting
600 times as much money for that as the other. So somebody just
is doing their job a lot better than somebody else.

MRS. GEBBIE: Maybe some of these people could clarify
the difference between what an individual local or state health
director stands up and says I’d like to do and what ends up in
their checkbook, which is not unlike the difference between what
the federal agencies who have been here would like to do and
what ended up in their checkbook.

DR. BERNSTEIN: These funding decisions just aren’t
made by the health directors. There is a political body that is
either with the Health Officials or not for all sorts of reasons.
That’s how the decisions are made.

MR. BOGAN: I’d just like to make one point about the
educational systems. I agree that the school systems can play an
important role in AIDS education, but if you look at minority
communities you see drop out rates by the 10th grade of maybe 40
to 50 percent.

DR. LEE: Well, that’s why I’m saying you’re going to
have to spend a lot of money in the Bronx and I don’t think as
much in a place where every single kid is in an excellent school
and has parental involvement --

MR. BOGAN: Yes, but you’re also talking about reaching
an out of school population.

DR. LEE: -- and everything else. I don’t see why you
have to spend everything everywhere. You have a lecture once a
week. A gang, don’t do this, don’t this that --

MR. BOGAN: Lectures aren’t all that effective, I’m
sorry.

DR. LEE: -- and don’t do the other thing and that’s
the end of it. Anyway, Jim?

CHAIRMAN WATKINS: We have our next panel here and I
wanted to move along. We may have some additional desire from
the Commission to communicate with you all. We appreciate very
much your coming before us today. We don’t have much time left
before we make our impact, if there’s going to be an impact, on
the final report to the President. So you have the open door to
us to give us any additional ideas that may come to your minds
that you’d like to see included in the record, the official
record for us. So that door is open to you and we thank you for
coming.

322

 
I’d like to move to the final panel of the day.
Federal Funding for Prevention and Education. We have Dr. Gary
Noble and Dr. Stephen Bowen from CDC and we have Dr. Roy Pickens,
Assistant Director for AIDS at the National Institute on Drug
Abuse (NIDA).

We welcome the two of you back. You’ve been witnesses
before the Commission at an earlier time or we certainly
communicated with you frequently and we’re delighted to have
you back with us. We’d like to start with a statement from
Dr. Noble.

DR. NOBLE: Thank you, Admiral Watkins, members of the
Commission.

I am Gary Noble, the Deputy Director for the Centers
for Nisease Control in charge of the AIDS program and pleased to
meet with the Commission to discuss the funding of CDC’s AIDS
prevention programs. I have with me Dr. Stephen Brown, the
Deputy Director for AIDS in the Center for Prevention Services
at CDC. Dr. Bowen will be able to answer questions relating
specifically to the awarding of monies by CDC to state and local
health departments.

In the fiscal year 1988, the current fiscal year, CDC
has a budget of nearly $305 million and in fiscal year 1989 we
have requested just over $400 million to carry out CDC’s programs
to prevent and control the spread of HIV infection in the United
States. These funds support surveillance, epidemiologic and
laboratory studies, prevention information and education
activities targeted to four groups. With the addition of new
programs and the expansion of others, our budget has grown
significantly since 1981 when we spent about $200,000. During
this current fiscal year AIDS will account for 40 percent of
CDC’s budget.

You’ve heard from Dr. Mason in some detail in the
past. Today I want to discuss the kinds of funding mechanisms we
use, some administrative issues related to the distribution of
resources and the adequacy of our resources.

I’d like to categorize our spending into three areas,
cooperative agreements, contracts and in-house spending. We use
cooperative agreements to finance joint programs of assistance
with many recipients. These can be either single one time
projects or can assist in the conduct of on-going nationwide
programs. An example of these efforts is the cooperative
agreement we have with the U.S. Conference of Mayors to provide
seed money to minority community organizations to begin AIDS
prevention programs and a cooperative agreement with the National
Science Foundation to identify behavioral research needs related
to AIDS prevention.

323
On-going nationwide programs include the AIDS
surveillance and prevention cooperative agreements that we
have with all state and some local health departments. These
agreements support surveillance, seroprevalence studies,
education risk reduction activities, counseling, testing and
partner notification services and other activities including
programs directed toward reducing the risk of AIDS in minority
populations.

Another example of an on-going program is our school
health education program in which $11.2 million in cooperative
agreements were awarded in the last fiscal year to 15 state and
12 local education agencies to support AIDS education in schools.
In this current fiscal year approximately $30 million will go to
school health education programs in all states.

We have a two-tiered funding strategy. We support
programs to prevent AIDS among minorities, for example, by
awarding funds to state and local health departments. These
agencies, in turn, subcontract with local minority organizations.
This year we will also award grants directly to national minority
organizations to compliment the state and local effort and we’re
employing a similar strategy in the school education programs,
where we’ve awarded funds to 15 national organizations who serve
youth in addition to the funds I described going to the states.

We use contracts to purchase services or products. For
example, we have the contract with Ogilvy and Mather to assist us
in our national AIDS public information campaign. We have a
contract with Aspen, Incorporated to run our clearinghouse. We
have a contract with the American Social Health Association to
operate the National AIDS hotline. And we have a contract with
a publishing company to print the 109 million copies of the
brochure "Understanding Aids" which will be mailed to all
households in late May and early June.

As we mentioned earlier, AIDS programs and budgets have
been increasing dramatically each fiscal year. This means that
each year we’ve been faced with instituting new programs which
require considerably more work than the continuation of on-going
programs. With the lead time for establishing new programs
combined with the late appropriations of funds in many fiscal
years, the result is that new programs usually are implemented in
the fourth quarter of the fiscal year. Implementing new programs
often involves developing new concepts of strategies, working
with newly hired personnel unfamiliar with specific programs and
all of this takes time.

The rapid growth of AIDS prevention activities has
placed considerable burden on our partners in the state and local
health departments who are the primary recipients of our

324
prevention awards. To ease some of the burden of responding to
many different grants, we’ve consolidated seven different
programs at CDC into a single award for each recipient and we’ve
established a common award date for all of these programs. And
we plan to streamline and simplify the process even more for the
funding fiscal year 1989.

Having just participated yesterday in one of the
nogotiations with one state it’s really amazing how much time and
effort goes into this process both at the state and the federal
level.

We’ve been well served by the competitive procurement
process. All of the contractors for our major projects have been
selected competitively. However, it’s a time consuming process
and we would like to consider the proposal to have the authority
to award sole-source contracts for AIDS-related work up to some
limit, perhaps, $1 million giving us flexibility for a more rapid
response while retaining the benefits of competition for larger
contracts.

Do we have enough money to do what needs to be done and
can health departments and other recipients effectively implement
all of the expanding programs? I don’t believe that we’ve
reached the saturation point. In our latest funding cycle for
this fiscal year states have requested nearly twice the amount of
money that we have available to award for prevention and
surveillance cooperative agreements. Obviously, the states don’t
believe that they have reached their limit for effective use of
federal funds.

We can expect some inefficiencies in the gearing up to
implement the newer recently expanded programs. However, as the
dollars are translated into human resources, I’m confident that
we will see the state and local areas effectively using the
resources provided.

An area of critical need both today and in the future
is trained personnel to implement programs that are needed and
funded. We had a meeting of consultants to advise us how states
might need assistance in implementing their prevention programs.
Each of these consultants placed the highest priority on the need
for experienced disease prevention specialists. By the end of
this fiscal year we will have 25 public health advisors from CDC
assigned full time to work in AIDS areas with the highest need.
We would like to make more such assignments.

The pool of experienced public health advisors is low,
however, due to past restrictions on FTE ceilings. The question
of whether or not CDC has enough financial resources to give
state and local areas relates to the question of how much the
federal share of the perceived needs should be. For example,

325
we are requesting funds for FY ’89 that are equivalent to
approximately one-half of the estimated state needs, which total
more than $200 million that we estimate is needed to fully
implement the counseling, testing and partner notification
recommendations of CDC. However, it’s unclear whether the states
and communities have the ability to fund the balance of the
estimated need that we’re facing.

Historically, the FTE ceiling has been a major
constraint on CDC AIDS operations. In FY 1988 we had an increase
to 416 FTEs for our AIDS-related work from a ceiling of 278 in
1987. However, this was not really an allocation of FTEs. Of
the 432 FTEs that we will use in this fiscal year, we’ve actually
had authorization for only 165 of those. The rest have been
diverted from non-AIDS areas.

The addition of new responsibilities has created other
problems. These are some factors that in the future may increase
our need for resources. We need to expand surveillance programs.
We need to more fully implement our recommendations for
counseling, testing and partner notification. We need to
increase assistance to local minority organizations. We need
to deal with sexually transmitted diseases because of their
relationship to increasing the risk of transmission of HIV
infection with the presence of genital ulcers. We need better
behavioral research and evaluation to understand how to change
behavior.

In closing, let me say that our experience with the
AIDS problem has been that the epidemic of HIV infection
stretches the limits of our planning and budgeting systen.
However, we have in place at CDC and in states the basic elements
of a comprehensive program to prevent and control the spread of
HIV infection. With this program now in place, we are better
able to cope with the changing demands of the HIV epidemic.

Dr. Bowen and I will be happy to answer questions.
Thank you.

326
CHAIRMAN WATKINS: Dr. Bowen?

DR. BOWEN: I didn’t have a prepared statement to make.
I’m here to support Dr. Noble’s testimony and to answer
questions about state AIDS money.

CHAIRMAN WATKINS: Fine. Thank you, Dr. Bowen.
Dr. Pickens?

DR. PICKENS: Thank you, Mr. Chairman and members of
the Commission. I am Dr. Roy W. Pickens, Associate Director for
AIDS, and Director, Division of Clinical Research of the
National Institute on Drug Abuse of the Alcohol, Drug Abuse and
Mental Health Administration.

We’re grateful for the opportunity to participate in
this hearing on the agency’s AIDS prevention and education
efforts. While the Centers for Disease control has been tasked
with the largest proportion of the federal prevention and
education mission, ADAMHA does play a significant role in this
effort. This role is in four areas.

The first and largest role is in the area of
intravenous drug abuse and its relationship to the spread of
the AIDS virus. This role has been assigned to NIDA.

A second area concerning the psychological aspects of
AIDS is carried out by the National Institute of Mental Health.
Third, the agency provides financial assistance to state and
local treatment and prevention services through its block grant
programs. Fourth, the agency performs a number of prevention and
education activities aimed at substance abuse through its Office
for Substance Abuse Prevention or OSAP.

In the area of AIDS and intravenous drug abuse,
prevention of the spread of the virus that causes it is
imperative. As I stated in my earlier testimony, the most
effective way to prevent the spread of AIDS among intravenous
drug abusers is for abusers to stop using drugs. As long as
individuals continue to inject drugs, it is likely that many will
continue to share needles. Therefore, as indicated in your
interim report, high priority must be given to the expansion of
drug abuse treatment in order to help addicts discontinue their
drug use. However, while helping addicts to quit using drugs is
our ultimate goal, many intravenous drug abusers will be
unwilling to enter drug abuse treatment and will continue to
inject drugs. Some will refuse counseling or suffer a relapse,
and an effective AIDS prevention strategy must, therefore, go
beyond the focus on drug abuse treatment alone.

Education is the basis for AIDS prevention.
Intravenous drug abusers and their sexual partners must be

327
reached through a variety of resources, provided with accurate
information regarding their personal risk for contracting AIDS,
how the virus is transmitted, how to access treatment and how to
reduce their risk of acquiring and transmitting HIV.

At NIDA, a total of $65 million is being spent in FY
1988 on these activities.

A major undertaking is NIDA’s comprehensive community
outreach demonstration project designed to prevent the further
spread of AIDS among three high risk populations: IV drug
abusers who are not in treatment, their sexual partners and drug
abusing prostitutes.

The goals are to reach the target populations, assess
behavior that places them at risk for AIDS, employ interventions
designed to change at risk behavior, refer at risk persons to
treatment, assess effectiveness of interventions and treatment
referrals, determine why some subjects at risk do not or can not
change at risk behavior, and determine seropositivity rates.

Each project is funded for three years and will employ
a variety of intervention methods including the use of outreach
teams of trained indigenous workers -- outreach through hospital
emergency rooms and health facilities, through the criminal
justice system and in drug abuse treatment programs.
Comprehensive outreach programs have been funded at the present
time in eleven major cities across the nation and we are
anticipating funding projects in twelve more cities during the
present year.

In addition, NIDA is funding more-targeted projects in
twenty four additional cities. These projects are targeted at
particular sub-populations or designed to test a particular
outreach or intervention method. By the end of this fiscal year,
we expect to have prevention programs in over fifty cities
throughout the United States.

In the area of behavior change, research on the primary
prevention of AIDS through changing high risk behaviors is a
priority at the NIMH. NIMH, the National Institute on Mental
Health, currently supports AIDS research centers at Columbia
University, the University of California at San Francisco and
the University of Miami. These centers have crucial access to
persons at high risk through their established links with
community organizations.

In addition, the multi-disciplinary approach utilized
by the AIDS research centers has facilitated the development of
innovative research strategies. Collaborative projects have been
undertaken across center sites to maximize the yield from the
research findings.

328
In addition to research center, NIMH is currently
supporting AIDS prevention research grants as well. NIMH support
of AIDS prevention projects in the research centers and through
individual research projects totals approximately $4.5 million.

In terms of providing financial assistance to states --
ADAMHA has provided treatment and prevention services funding to
the states since fiscal year 1982 through the alcohol and drug
abuse and mental health services block grant. That law requires
that each state set aside at least twenty percent of its
substance abuse allotment for prevention services. States are
free to prioritize and target these populations and areas of need
they deem critical with these funds.

At current rates, approximately $50 million per year
are spent nationally on substance abuse prevention. A majority
of these funds are directed at youth programs designed to
discourage young people from either ever starting to use drugs or
from heavy involvement in the drug culture. The focus of this
prevention effort is on youth who are preliminarily involved with
drugs but have not yet become addicted.

The ADMS block grant received a substantial
enhancement with the enactment of the Anti-Drug Abuse Act of
1986. An additional $162 million was provided in FY 1987 and
$156 million in FY 1988 solely for substance abuse treatment and
prevention. This program, known as the Alcohol Drug Treatment
Rehabilitation Block Grant, has also made an impact in the drug
abuse prevention area.

Last but not least, the Office of Substance Abuse
Prevention, OSAP, was established with the passage of the Anti-
Drug Abuse Act of October, 1986. While OSAP does not have a
mandate for activities directly related to AIDS, all of OSAP’s
programs are indirectly applicable to IV drug users. Through
NSAP!S primary prevention and early intervention strategies, the
intent is to prevent initiation of alcohol and other drug use
among youth or to curtail use early in the substance abuse cycle.
Young people who are prevented from using drugs do not become IV
drug abusers, thus eliminating the possibility of contracting
AIDS through contaminated needles.

Specific recommendations for improving federal funding
of AIDS prevention activities are included in my written
testimony. I will be pleased to answer any questions that you
might have.

CHAIRMAN WATKINS: Thank you, Dr. Pickens. Why don’t
I start out the questioning here for this particular panel.

329
In December, we asked NIDA to determine the cost of
providing treatment on demand to IV drug abusers. We wanted to
know what the cost would be of maintaining a treatment capacity
capable of treating one third of the intravenous drug users at
any one time. I’d just like, for the record, to know what the
current status of that analysis is. Where do we stand on that?

DR. PICKENS: We’re in the process of looking carefully
at that data following the recommendations that you made in your
interim report. That information is undergoing review at the
present time by the department.

CHAIRMAN WATKINS: I think it would be extremely
important for us to try to get together with you in a timely
fashion. We’ve only got a few more weeks before we have to go to
press. Do you anticipate that we are going to be able to see at
least some preliminary information on that for our final report
to the President?

DR. PICKENS: I don’t know what the time table is for
final recommendations from the department. I do know that the
aepartment is looking at some of the data that we have provided
them in terms of the cost of --

CHAIRMAN WATKINS: When you go back, would you find out
and then give the Executive Director a call?

DR. PICKENS: I certainly will give you the time table
for that.

CHAIRMAN WATKINS: Let us know what your time table is
and how much information we’ll be able to review with you before
we go to press so we’ll know at least where we stand on it.

DR. PICKENS: I’11 be happy to do so.

CHAIRMAN WATKINS: Maybe this is to Dr. Noble perhaps.
Give us information on the evaluation component of the education
prevention effort. How do you measure it? What’s the
evaluation regime? What are you demanding of that so that we
don’t have a loosely controlled system that we have to look at
later on and say, well, gee, we didn’t know how to measure this.
Is that well under way and is that an integral part of the
education prevention funding stream?

DR. NOBLE: Yes, we view evaluation as the essential
component. We’re spending a very large sum of federal monies and
we feel it’s essential that we have an evaluation strategy. The
ultimate test for effectiveness of education is the rate of new
infections confirmed by laboratory testing. So, we view, in a
sense, our seroprevalence studies, our special family surveys,
our thirty city surveys and the other surveys including the pilot

330
study in households, as the ultimate evaluation. What is the
incidence of new HIV infections in specific populations? We feel
that is really core to an evaluation of progress toward
containing the epidemic.

Beyond that, a surrogate evaluation is what people tell
you about what they believe or know, or what their behaviors are.
The national health interview survey that’s conducted monthly by
the National Center for Health Statistics is a key part of that.
We've seen an increasing percentage of the population with
clearer understanding of the risks and what aren’t the risks.

Obviously, we also require evaluation reports of the
recipients of our funding. I’d like to ask Dr. Bowen to comment
a little more about what we require of our state and local
government recipients in terms of their reporting.

DR. BOWEN: The major way, as you probably all know,
that the Centers for Disease Control funds AIDS prevention is
via cooperative agreements with state and some local health
departments, as Dr. Noble has previously mentioned. We do have
a quarterly reporting requirement which includes summaries of
activities carried our which are federally funded as well as
numbers of people receiving counseling and testing and the
results by demographic variables such as age, sex, race and in
the coming year by risk categories so we can see what impact the
counseling and testing system is having on various populations.
We need to know who is using these facilities, whether we’re
@sing enough to attract people who are at high risk of infection
to receiving counseling and testing services.

Among the other components of the reporting
requirement are periodically collected information about
knowledge, attitude, beliefs and behavior which are obtained by
population-based surveys, or surveys in sexually transmitted
disease or drug treatment clinics. States are required to
evaluate the other components of the prevention programs. For
example, we require data about how many community-based, minority
and AIDS service organizations are funded and we require
summaries of their activities. We carefully track the minority
funding because minority communities have been greatly impacted
by AIDS and we know that this is of great concern to the nation
and to the Congress. All of the activities that are funded, the
public information campaign, the health education and risk
reduction activities, counseling and testing activities all have
to be summarized on a quarterly basis from each project area.

DR. NOBLE: I would add that our center for health
promotion and education has for some time also been conducting a
behavioral risk factor survey, a random digit dialing telephone
survey to which questions about AIDS and HIV infection are being
added. That will be expanded to other states.

331
 

 

CHAIRMAN WATKINS: Do you have any early indication on
education and its impact on real behavioral change? We’ve had a
lot of anecdotal reports here coming before the Commission that
there’s considerable question as to the effectiveness of
educational impact on behavior for teenagers in high school,
juniors and seniors in high school. Is your process of
evaluation sufficient to cover specific groups and specific
problems regarding the effectiveness of education progran.

DR. NOBLE: Getting reliable information on behavior
is not something you necessarily get easily. For example, it’s
relatively easy to get the kinds of things that I’ve shown you
before from the National Center for Health Statistics health
interview survey. That’s knowledge, attitudes and beliefs.
Questions on behavior will be asked but they’ve not yet been
included. It is difficult in a family setting when, someone,
who is often an elderly lady who’s doing the interviewing, goes
to sit in your living room. Ina family situation, it’s not easy
to get reliable information about behavior, so we have to go to
other measures for that. We have the largely NIH funded
multiple AIDS cohort studies behavior of homosexual men. CDC is
funding innovative risk reduction and community demonstration
projects. In these special studies which aren’t nationwide
random surveys, we do have very clear evidence of major
reductions in high-risk behaviors especially in homosexual men.
I’m sure you’ve had testimony on those kinds of changes in
behavior primarily among high risk homosexual males, for example.

What is more difficult to get is data to document
changes in behavior among college age or other low risk
heterosexual populations, or in drug abusers.

CHAIRMAN WATKINS: Recognizing the difficulty and
perhaps even the expense and the human resource involved in
somcthing like that, isn’t it something that’s worthy? It is
something that we should know about sufficiently to make any
recommendations about prevention on programs. Is that of value
to you or is it all under control and you really don’t need any
additional emphasis there?

DR. NOBLE: Well, I’m not sure exactly--

CHAIRMAN WATKINS: We’ve had a lot of extensive
behavioral survey work for the military, very expensive, very
manpower intensive, but it was done during a time when we had
difficulty recruiting people. It gave us tremendous demographic
data that permitted us to focus resources in the right area to
do the right things. We had the same thing done on drug abuse
before we had testing on drug abuse, and it was very accurate.
The data that we got out was that we were fifty five percent in
use, eighteen to twenty one year olds, of marijuana. In fact,

332

 

 
 

 

that’s what the urinalysis showed on the first go around. So, it
seems to me that, while it’s difficult, it’s also important, and
we should emphasize it.

DR. NOBLE: Let me say a little more about that. We
recognize, and I’m sure you’ve heard testimony on this subject,
that we badly need good data to update Kinsey. We need to know
what are the behavior patterns of our population? How many
bisexual men are there? How many exclusively homosexual? How
many people who use drugs? This is a study that is being done.
The CDC, including the National Center for Health Statistics, is
working collaboratively with NICHD to pilot test a survey of
sexual and drug risk-taking behavior. That is currently funded
and will begin data collection in the field during the summer and
fall of 1988. The question of getting, on an ongoing basis, the
kind of evidence of behavior change is another facet of that.
Getting a one time look at the U.S. population the Kinsey kind of
report way is one thing. Getting ongoing evidence of change
requires, aS you say, more money and more time, but we are
working toward that end. Following the CDC/NCHS/NCHD study,
scates will be funded and required to obtain such data on an
ongoing basis as part of CDC/state cooperative agreements.

CHAIRMAN WATKINS: Would you do that in the same way
you do your family surveys? If you go into three pilot cities,
for examples, would those be cities that you might want to also
target for behavioral surveys at the same time so you have some
kind of correlation for the future?

DR. NOBLE: Again, we are just awarding at the end of
this month the contract for the pilot household studies and we
will expect the contractor to include questions about behavior as
they collect the blood samples. What we have to very carefully
evaluate is the reliability of that information and the
participation rates and the characteristics of those who refuse
to participate compared to those who do, because we have serious
concerns from other studies that those who don’t participate in
such a study will not be at the same risk as those who do.

MRS. GEBBIE: A related question. Assuming you start
finding from some parts of the country or some population groups
that behavior change is happening or that seroprevalence is
stabilizing, it seems to me one of the next questions is what
made that happen, which takes you back to that whole range of
things that are happening in the states. There is a component,
as I recall, of each state grant that has something to do with
evaluation.

To what extent have you taken a hand in those
evaluative steps to make certain that across the country in
different states data are being collected about the programs
performed so that comparable questions can be asked about them?

333

 

 
At least comparable data sets are available so that if we had two
states that said they put equal effort in the counseling and
testing and one had a change and one didn’t, you could look back
and see that their programs were different or there was some
other factor there or it related to their drug and alcohol
program, for all we know.

DR. BOWEN: Just briefly, one of the major
difficulties is describing any measurable outcome to a
particular intervention because there’s the background of a
whole lot of other things going on. Even if you measure
seroprevalence or change in behavior, ascribing that to a
particular intervention such as a national mail out or a state
counseling and testing program or any other particular
intervention is extremely difficult.

Another problematic area of program evaluation is how
much change is significant and how do you measure that over time?
Some of our concerns in the area of development of methodology
for asking about behavior and getting reliable reporting about
high-risk behavior have to do with measurement that over time
without some other ways of verification? Will people tell you
what you want to know? Is the behavior change that is being
reported, if any, sufficient to stop the spread of the AIDS
virus? That’s why we want to put data on self-reported behavior
together with seroprevalence and repeat seroprevalence
information to look at incidence. If you have cohorts, under
study, you can look at incidence of seroconversion or repeat
measurements of seroprevalence in the population to help measure
changes in infection rates or transmission over time.

Beyond that, we do try to provide technical assistance
to our cooperative agreement grantees to help them carry out
program evaluation. We don’t have, I think it’s fair to say,
enough well-trained people on our staff who have expertise in
survey methodology, evaluating behavior risk factor surveys,
prevention programs of community organizations and public
information campaigns. That’s an area we could use additional
personnel to help to assist the states to do carry out their
prograns.

MRS. GEBBIE: That really finally walked into what was
part of my question. It wasn’t clear from your earlier comments
whether everything was okay or whether there are some resources
you could use. If we were starting all over today in setting up
an AIDS program and you could tell us anything you needed, have
we put relatively too little into this area? Are there some
things that we should say in our report?

CHAIRMAN WATKINS: Could we have a demonstration
project, for example, in two areas that you might be anticipating
for your survey right now plus some additional resource to try to

334
sample the water to see the degree of efficacy of such an
approach and parallel the other things you’re doing?

DR. NOBLE: I am not an expert in behavior research,
but I would say, from talking to people from the Kinsey
Institute, for example, June Renish, and talking to our own
people at CDC who have a long history of interviewing partners of
sexual contacts to identify partners at risk, it’s a difficult
area. It takes experienced personnel. It isn’t something that
can be done by just any professional.

To answer your question, I would say I would think that
we could use more trained personnel to do this. It’s a complex
area though because getting reliable answers to questions asked
by a federal agency or even a contractor of a federal agency
isn’t the easiest thing to do when you start talking about very
personal behaviors.

MRS. GEBBIE: But I think I got a yes out of that, that
you could use more resources to do it. I take that to mean that
if we asked, you could provide us with a little paragraph or some
numbers. We could start over again. You could use on the
magnitude of five more million dollars or $2.98.

CHAIRMAN WATKINS: If you went to the top three
research people in the nation and told them to design a strategy
that’s reasonable, that’s within cost, for a demonstration
project, what kind of resource do you need, where would you focus
it to do the best correlation you could possibly find? Perhaps
do it in concert with the Department of Defense who is working on
other things. We know the proclivity for people to come in the
military. We know their exact seroprevalence status when they
come to the MEPCOM for their test. There’s a way to begin to
correlate behavior linkages and you begin to pull a package of
purcveys, it seems to me, together that will lay a ground work for
the future that may give us another clue to the seroprevalence.

MRS. GEBBIE: But I don’t want just the seroprevalence.
I want also some of the data on what might have affected the
seroprevalence. With that regard, I think we have to be real
careful to keep your two agencies together because you’re in the
same overlapping community. We’re putting community wide efforts
on drug abuse, on AIDS, on this and that and, if we don’t find a
way to correlate our information, we’ll never know what to take
to the next state the next week to make it work.

DR. NOBLE: We have made attempts to do this through
demonstration projects and innovative risk reduction projects.
They haven’t been without problems. When you start asking a
group in a high risk area to develop strategies to change
behavior, educational packages with videos or illustrated
materials, they get into very graphic things. They get into

335
 

 

discussions of things that cause concern on some parts of
society.

MRS. GEBBIE: I hate to tell that but we’ve heard that
before. The question is still how do we start evaluating it?

DR. NOBLE: Right, I understand, but my point was we
are in the middle of some of these demonstration projects. We
will be able, from the study by the Gay Men’s Health Crisis,
for example, to say what the benefits of different intervention
strategies are, e.g., a video alone, a video with counseling, and
a video plus follow up. Perhaps Dr. Pickens would like to say
something.

DR. PICKENS: Let me add two things. One is that we do
work cooperatively with the CDC in terms of the intravenous drug
abuse aspects of AIDS.

Secondly, our community demonstration programs all use
tne same evaluation instrument. That is, we’ll be collecting
identical data in fifty three sites that range from Boston to
Puerto Rico to Los Angeles to San Francisco and Houston and so
forth.

In addition, we’re collecting an enormous amount of
information on drug use practices by addicts in the various
cities. We can examine drug abuse patterns in the different
cities and relate this to seroprevalence of HIV infection. We
have a separate contractor who is coordinating the data
collection activity, and we just received our first report from
them this week on seroprevalence rates and drug use practices in
some cities around the country. It surprised me to find out the
extent to which cocaine is being used intravenously in the
cities.

We, too, are concerned about the validity of the
reports that we are getting from addicts. We do know that these
interventions have been effective in changing behavior. Addicts
are coming in to treatment now and reporting that one of the
reasons that they’re coming in to treatment is fear of AIDS. So,
knowledge about AIDS has changed their behavior and has
apparently motivated them to seek treatment.

At the same time, when we ask the addicts if they are
still needle sharing and the frequency with which this is
occurring, we don’t know how valid that self report is. This is
one of our highest research priorities at the present time. We
must find out what is going on.

Drug abusers can be amazingly honest in reporting their
use of drugs and the extent to which they use drugs. But, among
all drug users, the intravenous drug users are perhaps the least

336

 

 
 

 

reliable in the accuracy of their self reports. This is totally
illicit behavior, and there are a number of practical reasons for
this as well.

Often addicts will not admit to doing things that they
think might receive the disapproval of people working in
treatment programs. Consequently, we do worry about the accuracy
of what they’re reporting to us. But the research projects that
we’re initiating now hopefully will provide some information on
this issue. But this is very difficult research to undertake.
You can’t just follow the addicts around. We’re looking at
various methods of validating the addicts self-reports. For
example, by collecting needles and analyzing the needles for the
presence of different blood groupings to tell whether that needle
has been shared. If we know an addict’s blood groupings, we can
take residual blood from a needle or syringe and determine
whether only that addict has been using the needle or if that
addict, as well as other people, have been using that needle as
well, that is, needle sharing.

These are the kinds of measures we’re going to have to
resort to to answer that question, but it is a very good question
and it’s something that concerns us greatly.

MRS. GEBBIE: And between you, you could give us a
short summary of what resources, perhaps in addition to what you
have now, would be necessary to really make those happen in a
timely and useful way?

DR. PICKENS: Yes.
MRS. GEBBIE: Thank you.

DR. BOWEN: We could certainly make an attempt. Let me
just make a brief comment first on the issue of resources. There
are a number of areas where we could certainly use additional
funds and personnel. It takes a while to effectively translate
those into programs, as you know, but if it would help the
Commission, we can certainly make some estimates of what we would
need in additional areas such as fully funding counselling and
testing, to control genital ulcer producing sexually transmitted
diseases, to provide follow up services for seropositive
individuals and a variety of other things related to that.

CHAIRMAN WATKINS: Dr. Lilly?
DR. LILLY: I want to approach one topic a little bit.
Under the leadership of Senator Helms and Representative

Dannemeyer, aS you’re very well aware, an amendment was passed
that has been somewhat difficult for educators. I’m wondering to

337

 

 
what extent that amendment by Congress has influenced the plans
that you might have had and how you’re facing life under those
circumstances.

DR. NOBLE: The amendment that you refer to did require
us to rewrite our announcement of availability of AIDS prevention
funds for the current fiscal year but it will not delay the award
date for this fiscal year. However, the question of what impact
that amendment will have is yet to be learned because it will
depend on whether the states choose to be aggressive and develop
educational programs that might test the limits of that amendment
or whether, out of concern that the funds might be withdrawn,
they will be cautious, timid in program development; in fact the
risk is that the entire award might be withdrawn for an
infringement on a single issue. Only time will tell. There is
certainly some concern about a chilling effect but I think we
will have to wait and see.

DR. LILLY: Dr. Pickens, do you have any comment on
that?

DR. PICKENS: No. By that, I mean it did not affect us
to the same extent that it affected CDC, but I agree also that
time will tell the ultimate impact of this.

DR. LILLY: How do you expect to measure the ultimate
impact or do you expect to?

DR. NOBLE: Well, I suppose that we’1l have to look at
what the states are doing with their educational monies, what
kind of programs -- it’s difficult to have a controlled study
because we don’t have one half of the states working without the
Helms Amendment and one with the Helms Amendment so it’s not a
controlled scientific evaluation. It’s a little like Dr. Bowen
said earlier. It’s hard to evaluate the impact of a single
element, of a national household mailing, for example, because
there are so many other things always happening in addition.

So, to isolate the impact of that alone will be difficult.

MRS. GEBBIE: One piece of that though I think is the
question of how you went about telling the states that. I’ve
been so busy here I haven’t the faintest notion what you told my
state or any other. There’s a big difference between just
mailing it out silently or mailing it out and saying this is a
hot topic and boy, you’d better be really careful because
there’s a problem here, or mailing it out and saying we think
this gives you plenty of room to do good public health practice.
Do what you think you need to do. What did you try to say to the
people in states who are just finished writing their grants?

DR. NOBLE: The announcement was published in the
FEDERAL REGISTER, February 29th. We can provide this to you. It

338
provides the wording from the legislative language, public law
100-202, but it also reports the clarifying language from the
conference report which went on to say that "The above language
shall not be construed to prohibit descriptions of methods to
reduce the risk of HIV transmission, to limit the eligibility of
federal funds of a grantee or potential grantee because of its
non-federally funded activities nor shall it be construed to
limit counseling or referrals to agencies that are not federally
funded."

It goes on to say, “The Surgeon General’s report on
AIDS contains messages which are consistent with the provisions
of this legislation." We’ve taken the language, a degree of
explicitness in the Surgeon General’s report, as a standard, if
you will, for going forward. It also requires the establishment
of local peer review panels which we felt was the best way to
determine whether something was construed to be offensive to the
general adult population. What a peer review panel will approve
or has approved in New York City may not please everyone in
Congress, however. So the question will be are these community
review panels considered to adequately represent the intent of
the language to have materials which are not considered
offensive to the adult population?

CHAIRMAN WATKINS: Dr. Lee?

DR. LEE: I think you were all here, when I was a
little confused by the states’ problems. I expect some states
to do it right and some states not to do it right. I notice that
the cDC in 1988 is giving money to all the states. Is that
correct?

DR. NOBLE: States and some local governments.

DR. LEE: So really, by 1988, could you evaluate their
efforts?

DR. NOBLE: We have been giving monies for prevention
and epidemiologic studies, prevention specifically, counseling
and testing, to all states for a number of years. Those are
awards to state departments of health. There are also awards to
other components of state agencies. For example, our Center for
Health Promotion Education, as I mentioned, awarded fifteen
states departments of education monies last year. This year it
will be to all state departments of education, about $30 million.

DR. LEE: Are you the main agency? How many agencies
give money for prevention and education?

DR. NOBLE: We are certainly the main agency, but NIDA,
for example, awards funds.

339
DR. LEE: How about the Health Resources and Services
and Administration?

DR. NOBLE: Yes, they have different funding
mechanisms. For example, they have one specific awarding
mechanism for AZT which goes to all states.

DR. LEE: But they’re not as much into education and
prevention?

DR. NOBLE: No. They have their educational training
centers now, I think, in six states.

DR. LEE: As far as I can see, if they’re still having
problems in 1988, it’s the effectiveness of the local health
officer, as far as I can see.

DR. NOBLE: Let me make a couple of comments about
some of the questions that have been raised about the uneven
distribution of federal funds. First, I would say that the
analysis that I believe was presented in the earlier panel didn’t
include some things that go to states. For example, I mentioned
the state departments of education. That wouldn’t be in that
analysis, I believe. It wouldn’t include cooperative agreement
funds to New York City, San Francisco and Los Angeles or other
awards for community demonstration projects for perinatal
demonstration project or the other special grants.

The question of how funds are awarded or should be
awarded is obviously one that we’ve discussed on many occasions
with our colleagues in the state and local governments. CDC has
historically had a very strong relationship with them. We have
considered state and local governments our primary constituency
since the responsibility for health in our nation is vested first
in state and local governments and then with the federal
government. So we have a very strong and long tradition of
working with state and local governments.

It isn’t a formula. It’s based on a number of things,
the number of AIDS cases, the size of the state, the quality of
the proposal for spending, what the need is to build core
capacity. Even if we may not think that the proposal is well
presented, we feel that there should be a core capacity in every
state. In the last fiscal year, for example, we placed emphasis
on building core capacity and giving some states more than might
have been expected based on the number of AIDS cases they had, as
well, as resource needs in local areas. This year the emphasis
is more toward a uniform distribution based on cases and the
population. But, as you pointed out in the earlier comments for
the prior panel, needs are not uniform across the states.

340
 

DR. LEE: Don’t you agree that it’s wrong to do a per
capita type of thing?

DR. NOBLE: Yes, we don’t think that a per capita
formula is desirable and I don’t believe anyone that I’ve heard
testifying today would recommend a straight per capita. Part
of the federally awarded funds could be based on some kind of a
formula -- I don’t like the word formula -- but some kind of an
agreement which takes into account state population, city
population, the number of AIDS cases and what resources may be
available from the state level. These are all things which can
be considered, should be considered.

DR. LEE: One last thing for our report. What kind of
money are you talking about wanting for this particular effort
and how many extra FTEs do you want for say ‘89?

DR. NOBLE: Well, we expect, just in a recent analysis
of additional FTEs, as we approach the beginning of the next
fiscal year, ninety one is a figure that we feel would bring us
up to capacity. Congress passed a law which did a very
interesting thing this year. It exempted for the first time ail
of our assignees to the state and local government if over fifty
percent of the funding came from the local or state government.
That gave us a one time windfall, if you will, of FTEs that we
are then able to apply to our own hiring needs. So we haven’t
yet really fully realized the impact of that law but it does give
us the flexibility for assigning more people to help the states.
The problem now becomes one of finding qualified people. We’ve
got to build capacity. There aren’t an unlimited number of
people out there with that kind of expertise and we’re finding
that the immediate result is a crunch for trained professionals.
In fact, we have a committee at CDC that’s been working now for a
number of weeks to expand our capacity to recruit public health
advisors, train public health advisors and appropriately assign
them. That will take some time.

DR. BOWEN: I’d just like to say that we are working on
some estimates of the different program areas, what we think it
might take to increase our capacity to deal with some of the
problems and to fund the states more adequately. We’ll be glad
to supply those figures to the Commission.

DR. LEE: That’s the only way we can help you, if we
received information like that.

CHAIRMAN WATKINS: Mrs. Gebbie?

MRS. GEBBIE: The funding issues in this area have
grown on everybody. I don’t really recall too many people
sitting down and taking time to think out in advance what would
be the ideal way to fund AIDS programs. It’s kind of been yell

341
for money, scramble with what you’ve got and then yell. We asked
the previous panel to design what they might see as a first cut
at a method for allocating money across the states. Not straight
per capita but something that took into account what would be
useful, but got out of the better grant writer syndrome. Even
you said quality of the written application has an effect.

Dr. Pickens’ testimony suggests a method for getting
the money out there routinely and suggests a method so that there
is a very clear multi-year commitment so you don’t keep going
back thinking it’s going to evaporate which causes some problems.

Have you at CDC or could you in a very short time
give us your idea of what that kind of multi-year organized
commitment would get us out of this scrambling recycle system --

DR. NOBLE: Just last week I sent a memorandum to all
of our directors asking them for ideas for proposals how to
simplify, streamline the award process. As you’re well aware,
the award process is extremely time consuming.

We just finished reviewing 64 applications from 64
state and local governments. They average about two inches in
thickness each and it’s obviously taking a great deal of time at
the local and state level to prepare those. It has taken an
amazing amount of time at our level to review them and then to
negotiate a very detailed agreement. We need to find a way to
simply that and to continue.

Part of the problem is the funding cycle. We are now
in early 1988 preparing budget proposals for fiscal year 1990; we
would expect Congress to act on this budget in a year and a half
which we would then expect to award to the states in close to two
years from now. That’s a very long time in the future to be
setting budgets, given the rapid changes that we’ve seen in the
demands. And it partly accounts for, I think, the fact that the
states are requesting twice as much money as we have currently
appropriated.

MRS. GEBBIE: Aside from that, I think this issue of
longer term commitment is a key piece of it. So if you could get
that information back, I would appreciate it.

The couple of other things I want to ask about you
could respond to us in writing so that we don’t end up sitting
here all night tonight.

The first applies to both agencies that are
represented here now, and that is the impact of reallocated
staff. It’s clear from previous testimony that work is falling
behind or going undone in other areas that, until AIDS came
along, looked like they were pretty important. I’m not so sure

342

 
they aren’t still important. Some of them inter-relate with
AIDS. That is if we counter AIDS, we’ll probably put a good
dent in other sexually transmitted diseases. The Commission
would like to know, I certainly would like to know what would
your needs to be if you could clean up that reallocation, get
everybody back to doing what they were supposed to do and then
had the staff you needed to keep up today’s effort in AIDS?

Related to that to the extent it’s possible to identify
what hasn’t gotten done in the last couple of years, what has
fallen off the table because of this epidemic that is of critical
public health importance in either substance abuse or in other
public health programs.

And then the last question is related to NIDA and it’s
really my ignorance, I think, more than anything else --

CHAIRMAN WATKINS: If I could just add on that last
issue, if you could take the data you presented to us in your
formal statement, Dr. Noble, and give us the impact of what you
told us in there numerically where you said the remainder has
been diverted from non-AIDS areas. We’d like to see that in
specific terms. If we could see that, it gives us the
ammunition to feel a little bit more comfortable because anytime
we ask for FTEs, we have to know what we’re talking about. We
had a problem with FDA on this same issue, and we found out what
we were doing is significantly robbing Peter to pay Paul and
putting off other drug development issues in the future that
simply were going to go sit on the shelf and hurt many
Americans.

MRS. GEBBIE: Read on face value the chart at the last
of your testimony, Dr. Noble, which says that we had 251 people
sitting around in CDC with nothing better than to do who were
available to work on AIDS. And I’m not certain that’s an
accurate statement. Maybe 251 of them or 50 of then.

CHAIRMAN WATKINS: You get an A for can do but probably
an F somewhere in there is brooding, waiting to be exposed for
something down stream that we don’t know about yet. I have to
assume that those were useful people doing useful things at one
point.

DR. NOBLE: Yes, we believe so.

DR. PICKENS: I might add that at the present time at
NIDA that AIDS accounts for over one-half of our institute’s
budget but only nine percent of our FTEs are assigned to AIDS.

MRS. GEBBIE: So there may be some issues there about

not only redirected staff but adequate management staff to do
what you’re supposed to do with this huge allocation of funds?

343
DR. PICKENS: Well, even if staff are not officially
assigned to AIDS, we are certainly using them for this purpose.
The other day I was telling someone about the impact that AIDS
has had on our Institute’s research program, how we’ve had to
move people around to get the job done. This person said, well,
there’s a word for that. It’s called management. And that’s
essentially what we’re doing now. You know, we’re breaking down
barriers, institutional barriers to get the job done. And we’re
getting the job done but it’s a difficult task.

DR. NOBLE: I doubt that you can see this from here,
but the overall impact, I think, can be seen that the white bars
represent what we would call our core non-AIDS FTE assignments
over the last eight or so years. And that does demonstrate the
decrease.

MRS. GEBBIE: Steadily falling.

The question about NIDA is something that has come
to me from a couple of people in the community and I’m just
unfamiliar enough with the organization to answer it. With
regard to this epidemic, you’ve got responsibilities in research
and program evaluation and your paper really talked quite a bit
about that. I, at least, also see you as being in a position to
provide leadership on the service side of what’s actually going
on in state and local governments. Even though they asked to
have block grant authority and can make their own decisions, they
need help with service techniques and allocation of service that
would really attack this epidemic.

What it apparently sounds like to some people and
almost reads like to me in the paper is that your tilt between
those two isn’t quite right yet and you’re still really putting
your efforts on the research side and not so much on the service
side. Can you respond to that at all?

DR. PICKENS: Well, there are three issues here. One
is that service is being provided by states through money
distributed to them by the block grant programs. We feel that
states are in a better position than the Federal Government to
aefine their own critical service needs. We think the block
grant is an appropriate mechanism for distributing funds to
states to allow them the opportunity to provide services for the
people in their local communities.

At the same time, the people in those local
communities are turning to NIDA for leadership. Sometimes when
I go to meetings and meet people from outside of Washington, I
am impressed by the extent to which they are looking to us for
guidance in this area. We have tried to respond to this by
developing informational and educational material that can be
of help to people throughout the nation. We’re also training

344
 

 

workers in drug abuse treatment programs to help them better
understand the nature of AIDS, how to counsel AIDS clients and
the like.

In our Institute’s AIDS program, there are five
elements that range from surveillance to delivery of drug-abuse
treatment for addicts. Research is just one of those elements.
We think that research is a necessary element in our program
because we want to continually evaluate what we’re doing to make
sure that it is effective. And when we find something that’s
more effective than something else, to be able to divert the
resources in that direction.

| So if you look at the total continuation of ADAMHA’s
AIDS program, there’s the block grant program on one hand that
provides money to the states to use as they see fit. On the
other end, there is research to evaluate and the effectiveness
of various risk reduction strategies. We also have technology-
transfer mechanisms to deliver the results of research back to
communities so that they can benefit from what we’re finding.
We think that’s a very appropriate way for defining our role,
at least, in the AIDS problem. Does that answer your question?

MRS. GEBBIE: It helps, yes.

DR. PICKENS: There are multiple things that we are
doing and they range from providing money to states for services
to doing research. But is a continuum, and the research, I
think, is nicely balanced with the other activities in which
we’re currently engaged.

Our total AIDS research budget at NIDA for 1989 is
going to be right around $26 million dollars and you’1]l have to
contrast that to some $93 million that’s going out for community
demonstration programs, risk reduction programs and the like.
And it is certainly not out of balance with respect to there
being too much research.

MRS. GEBBIE: Okay. That’s helpful. The last piece of
that is to get to get back to that model of the state that isn’t
doing it right. What position are you in if you encountered a
state -- I’m sure there wouldn’t be one like this -- that has as
yet only three cases of AIDS, says we don’t have much of a
problem in this area and what we really need to spend all of our
money on is the chronically mentally ill. So thanks a whole lot
for the AIDS education, but we don’t want to reprogram anything
in service. That doesn’t fit with what generally people are
saying about this epidemic. What position are you in to deal
with that?

DR. PICKENS: Well, we’ve taken a fairly aggressive
stance in terms of working with all states regardless of their

345

 

 
 

 

level of HIV infection or AIDS. I think this gets back to
defining the leadership role in AIDS that the federal government
should be fulfilling. For example, there may be states with
very low rates of AIDS who may say, "Well, why do we need to
invest any of our money in this problem?" We’re going out to
those states and we’re showing them graphs of what happened in
New York City since 1978 to the present in terms of HIV
infection. And we are telling them that the same thing can
happen to them

We’re also showing them graphs of seropositivity rates
for HIV in other cities throughout the nation. In intravenous
drug abusers in each of those cities, the HIV infection rates are
Slowly going up. It may have taken longer for the virus to get
there, but once it got there you’re seeing increases in
seropositivity rates in those areas.

So, one of our roles in responding to the AIDS problem
is getting information out to states that feel they don’t have a
problem right now and therefore they don’t need to worry about
AIDS. And we want to impress upon them that although they may
not have a problem at the present time, they’re likely to have a
problem in the future and now is the time to start to deal with
that problem.

I might add that in our community demonstration
programs, the first phase was directed toward cities that had
high rates of IV drug abuse and high rates of AIDS among IV drug
abusers.

The second phase of that program, which is currently
underway, is directed towards cities that have high rates of IV
drug abuse but as yet low rates of AIDS infection.

So we have shifted from the focusing on cities that
have high rates of the problem to also including cities that
currently have low rates of the problem but because they have
high rates of IV drug abuse and because needle sharing is so
ubiquitous among IV drug abusers, they are going to have
problems unless they start to deal with those problems today.

So we’re focusing on the AIDS problem in a variety of
ways.

MRS. GEBBIE: Thank you very much.

CHAIRMAN WATKINS: While I’ve got you here, Dr. Noble,
we‘ve had a lot of testimony come before us from San Francisco
and New York in particular about the migratory aspect of the
epidemic. The health officials of those areas are worried about
it because where there is the best education, the most
acceptance, the best health care continuum, people seem to be

346

 

 
 

 

moving in that direction. What kind of data do you have on this
phenomena? How valid is it, can it be extracted if we don’t

have it already and do you have any of those answers tonight? I
mean I don’t expect the data, but is that something you have
available? Do we really have a migratory movement of people into
these areas?

DR. NOBLE: We will have to provide information for you
because I don’t have at this time any information. I’m not sure
how readily available it is going to be. We can go to our
counterparts in the state and local governments and ask them, but
from the federal data we wouldn’t have that kind of information.
We don’t collect anything except origin, that is where is the
case reported from. When we get the national AIDS case
surveillance, for example --

CHAIRMAN WATKINS: It was my understanding that the
forms filled in do allow for the initial infection and then where
they are now being --

MRS. GEBBIE: Or where they die. You eventually
collect death certificates so if their place of death was
different from their place of diagnoses. I’m sure you have that
data on those who have died.

DR. NOBLE: As I say, we’ll have to get back to you
because I’m not prepared to answer that question fully. We may
have more than I’m aware of. We’re not sure that the death
certificate reporting is complete. Now, of course, the National
Center for Health Statistics ultimately will get the death
certificate data, but that’s, of course, a year or two later than
the kind of surveillance that we get.

MRS. GEBBIE: But your charts, at least, show a
significant portion of the 1986 cases -- those diagnoses in 1986
already having deceased. So if some run were made on those, it
might be at least an initial clue or some other method. But
that’s one that occurred to me when this came up.

CHAIRMAN WATKINS: You can give us a call on where you
stand in your ability to get that data and then we can talk about
timing on it because it’s come up enough times now that I think
it’s the kind of thing we either want to put to confirm or
disprove.

DR. BOWEN: I was just going to make a comment that
there is information in the AIDS case reports about where the
person was living at the time the diagnoses was made and later
where the person died. Neither of those may directly be relatable
to where the person became infected, and that is something that’s
much harder to track. After the diagnosis of AIDS is made,
people may go to other states to receive services is another

347

 

 
component of that. You would probably have to collect a
different mechanism for collecting that information.

In terms of where people go for counseling and testing
services, we could collect data about that in the future but we
have not been collecting it up to now. We don’t know how many
people go across state lines to receive counseling and testing
services, for example.

MRS. GEBBIE: That’s the issue.

CHAIRMAN WATKINS: I think that’s the important thing
to know because we’ve had enough of this allegation that it’s
important for us to know the degree to which we should target
funds into highly impacted areas, for example, and the fact that
they’re coming, perhaps, out of the midwest or some other place
where gays are in the closet or whatever it is, and they’ve come
forward to the areas that are more receptive to treatment and
care on a humanitarian basis. Then we ought to know that because
it seems to me that then it makes the point pretty clearly that
we can target to high density areas and that this is a
nationwide investment they’re going to have to make.

DR. NOBLE: I think we have some, again, anecdotal
evidence that the reverse occurs. Someone who migrated to an
area where their lifestyle is more acceptable may go back to
their origins to be with family.

DR. LILLY: A question that’s occurred to me several
times. This is a good chance to ask it. What is the accuracy of
AIDS reporting? In other words, what fraction of cases do you
think are missed in the CDC statistics and is there a
geographical variance in that factor?

DR. NOBLE: Yes, we are concerned about that. An
analysis was done several years ago of discharged diagnoses from
hospitals and death certificates to see if we were missing those
in our case reporting. We found very high reporting, about 90
percent, at that time. We’ve become aware subsequently that
reporting is lagging behind in some areas.

If you look at the end-of-year case reports from the
state of New York, for example, the increase that was predicted
wasn’t seen at the end of calender year 1987 compared to 1986 and
in talking with people at the state level we recognize that there
is an increasing burden of work and hence an increasing delay in
reporting.

We are in the process of undertaking a more systematic
evaluation of case reporting, as we did before, to see through
discharge summaries and death certificates how that correlates
with the case reports.

348
DR. LILLY: Well, but I’m wondering, at what point did
Liberace get counted, for example --

MRS. GEBBIE: Now we’re at the real question.

DR. NOBLE: As you’re well aware, there’s been quite
a dialogue in the correspondence columns of THE WASHINGTON POST,
for example, about the responsibility of physicians to put an
accurate diagnoses on a death certificate or in the interest of
the family not putting that on. And that’s not an issue that’s
easily solved.

DR. LILLY: Do you have any way of estimating how much
of that then simply escapes you altogether?

DR. NOBLE: Yes. There is a -- we are looking at
deaths -- changes in deaths, for example, in unmarried males 20
to 40 from pneumonia. The British, for example, I saw a poster
at the conference in London, two months ago where they had looked
at just at this issue, non-AIDS reports of deaths from pneumonia
in males 20 to 40 unmarried. And they saw a significant
increase. I know early on this was true in New York City,
narticularly in IV drug abusers.

DR. PICKENS: Yes. Don Des Jarlais, one of our
grantees, reported to this committee some months ago that there
has been an increase in deaths among intravenous drug abusers in
New York City over and above that attributed to AIDS. These are
addicts that died from some infectious illness but did not meet
the criteria for being considered an AIDS case. HIV infection
is probably increasing death rates in more way that can be
attributable to AIDS itself.

DR. NOBLE: After returning from that London conference
I’ve asked Jim Curran’s group to look at this in the U.S. I
think they already have done that in the past.

CHAIRMAN WATKINS: I/’d like to close out the panel by
just stating that we very much appreciate your coming in and
staying at this late hour to give us the data. We have
additional dialogue we want to continue with you all as we move
towards the end of our reporting period.

I’d also like to know a little more -- Dr. Noble, I
don’t want the answer tonight, on the eight different sites that
you have down there, 150 AIDS people working three miles from
your center that the -- you’ve got 35 percent now that are
drifting around in leased facilities. Are you not getting to
the point where it makes a lot of sense to pull these people
together? Are we getting to that point and do you have a package
that we can look at to see if there’s a sensible way or are you

349
satisfied that you can live with that arrangement? You make the
point in your statement but you don’t say much after so I’m not
sure why you made the point unless you’re trying to tell us
something.

DR. NOBLE: Well, yes. I think that we feel that
we are much more efficient if we are housed together working
together instead of being scattered all over the city and
constantly moving into yet another leased facility.

Jim Curran’s group just last week moved into the motel
next door which we recently acquired. And--

CHAIRMAN WATKINS: Well, at some point it becomes cost
effective to do something else. Are you at that point because
you’re talking two years now before you get started in a budget
process anyway. Is this a temporary problem or is it a permanent
problem?

DR. NOBLE: The Director of CDC, Dr. Mason, shortly
after he arrived in 1983 hired a firm to make a five year
building and space plan because he recognized the increasing
space problems. We have not been able to implement that five
year plan, however, and we would like to proceed.

CHAIRMAN WATKINS: Well, that’s within your normal
budgetary submission or are you going to be hammered out of it
because of fiscal constraints anyway?

DR. NOBLE: It does require approval in the Executive
Branch, which we’ve not yet obtained.

CHAIRMAN WATKINS: Well, if you want us to consider
the issue, then we need to have more data on it. You brought it
up and I’m just asking you if you feel that there’s something
substantive here we can get at that really is effecting the
efficiency of dealing with the AIDS issue.

Thank you very much for coming. We appreciate your
effort very much. And I’d like to thank before we close the
hearings today our own staff work. I think Dan Wartonick and
Bert Swift, Jackie Knox, Chris Grady, Cynthia Flynn and Pat Jones
have done a superb job in putting this most difficult two days
together to try to put our arms around the financial aspects of
ththee.epidemic.

Thanks very much and we stand adjourned.

(Whereupon, the hearing of the Commission was
adjourned at 6:20 p.m.)

350
APPENDIX
Kevin C. Heintz April 26, 1988
P.Q. Box 746

North Beach, Maryland 20714

Presidential Commicsion On The Human Immunadefictrency Wir. -
Epidemic

655 15tn Street NW, Su:te Fol,

Wachington, B.C. 20005

Re: Tez'imoany tor the bearing scheduled on April 26, 1988.

Do to the early symptoms of AIDS, dementia anc fztique, m,
once thriving buciness began to slip. Since this was early in the
fight *againet AIDS the symptoms were neither recognized nor
treated. As the eymptome progressed my business failed and ! vias
forced to close the doors and file chapter 7 for the corporaticn
and alea file personal bankruptcy. Towards the close of the
business my symptome were co severe that routine matters were
left unettended. One item that was inadvertently forgotten was
regular peruse] of mail, and the renewal notice for my
healthireurarce policy wae nat acted upon. I also on several
eaccaeione forgot to clase the store.

The lose of m. Business wae an emational hardship Io wae not
Prepared to bear. With my life mow full of anxtety my heelth
began a rapid decitine.

The claging of mv business came at a cost of 257,000 Bollare
im assets, sbout 180,000 Dollars of incompleted business, and the

loss of future profits. Two years later personal losses do to the
bankruptcy are still a problem. The IRS hae a Tein on my home for
tax assesment and I have no resources to settle the account. At
the time of the bankruptcy I also lost my credit, automobile, my»

etanding im the community, and my confidence.

A month after I closed the bussiness I became so sick that !
wae not able to go grocery shopping. I saw a doctor three times
before he took a chest xray and he then informed me that he would
not be able to treat me and I should took for another physician.
I returned ta my old physician in Washington and he treated me
for PCP. My medical bills for the first bout of PCP were 70% paid
by Maryvland State Medicaid with the balance outstanding. I was
nat given extended eligibility ta Medicaid since my income was
626.00 Dollare per month and Medicaid is cut off after 470.00
Dollars. In order to qualify for further Medicaid I have to
accumulate 1,500.00 Dollars in claimable medical expenses every
fix months. This process ic called a spindown and has no
concider tion for hon-st ability to fulfill these debts.

Several manthe later, I returned to the emergency room with my
second bout of PCP. The Hospital called my physician whe told
them that since I was on Medicaid he would no longer treat me.
After fourteen hours of trying to find a physician who would

accept Medicaid I was admitted to the hospital under general care

without a physician.
During the Five months between my initial disability and
eligibility for Seacial Security Gieability paxments I had no
income. My SSD award i¢ 624.00 Dollars Fer month. I collect 79.00
Dollars per month in food stamps, and receive energ, asesistance
in the winter months which last year amounted to 240.00 dollars,
My home maintenance costs are minimal because I live in a lew
income area. I have no leisure ervypenset. My month’ - erypenses are:
morgage 610.00 Dallars, electricity 45.006 Dollars, caoking gas
18.00 Dallars, heating averages 70.00 Collars, transportation to
medical care 60.00 Dollars, and telephone 40.00 Dollars. Despite
the fact that the telephone affords a nececsary Tink with medical
care and family cupport, C&F hae no provisien for the ci. cabled,

These coste tote! &43.00 Dollars per month, 227.00 Dollars more

than my tncame.

At the time my illness began AZT wae nat approved and wa

wn

not available for anyone wha hed PCP. My phyeician tald me
“nothing helps and your life e+ pectancy is & months". This was
subst-ntiated by T other phosiciane,

Toam ricit Thing te Bie with ut as fight, I went ta the
Vibrary fo read medical journale, cantected other PWAs, end
subscribed to several treatmert news letters. I discavered that

about 154 of PliAs are surviving because ther refuse to accept the

medical profession’s "nothing" treatment. At that time the three

3
moet common alternative treatments were meditation-sieualization,
leoprinosine, and Ribavirin. Meditation was readily accepted
although never prescribed. Isaprinogine received heavy criticism
amoung the medical community which made it very difficult ta
obtain, causing most PWAs ta stop taking it. Three and ahal¢
years later iscmrinosine is the subject of research and, provided
FDA approval results, will be availible in the fight te save
lives. In the mean time men, who kece teen denied it hove died,
Ribavirin bas not ¢choeern any reat promise in the treatment of

AICS. Pibsslrin hee thovae, lese tr ee

v

try tregtments

tested at NIH.

Be continuing m. rezetict JT teind medications 1 reu'te
combine ta both inhitrt the virus sat .' Se ten ate

system. Some of theee drug I can get in the US but athers have
ta be bought from overseas through other channele. Since I have
been on this combination I feel better than I have in two yeare
and my blood count hate stabilized. The drugs obtained from
overseas cannot be tested bo the FDA for treatment of AIBS until
they have been tested for toxicity. Thie takes 18 months.

The costs cof these a ternative medications vary but the
channels which bring them ta the PWA are all non or low profit.
My current cost for alternative drugs 1s 525.00 Dollars per
month, which is paid by friends and memoral funds. The combined
cost of these drugs is less than the cost of AZT.

4
If the treatment of AIDS remaine unattended then America

will continue to es,+!ience its own Hoioc ust.

uy
TESTIMONY OF JO IVEY BOUFFORD, M.D.

PRESIDENT, NEW YORK CITY HEALTH AND HOSPITALS CORPORATION

TO THE
PRESIDENTIAL COMMISSION OF THE HUMAN IMMUNODEFICIENCY
VIRUS EPIDEMIC

WASHINGTON, D.C.

APRIL 26, 1988
 

 

Admiral Watkins and members of the Commission, thank you for the
opportunity to appear before you to make recommendations on the
financing of the care for people with AIDS. The New York City
Health and Hospitals Corporation (HHC) is the largest municipal
hospital system in the country. We care for more people with AIDS
than any other single provider. The lessons we have learned and
our experiences in treating people with AIDS will be increasingly

applicable to providers and policy makers throughout the country.

Before discussing specific recommendations for the financing of
care for people with AIDS, I would like to briefly mention some of

the major concepts that have a bearing on this issue.

The care and treatment of AIDS patients involves unique and
challenging clinical realities. The complex interaction of
medical, social and psychological needs that must be addressed in
caring for AIDS patients demands an interdisciplinary approach and
appropriate case management services in both inpatient and
outpatient settings to ensure continuity of care. Reimbursement
for these services has historically been non-existent or

inadequate. Without appropriate reimbursement for the costs of

 

 
 

 

treating AIDS patients, the already disproportionate burden on
public hospitals as the providers of last resort will increase.
Equity in distribution of the responsibility of caring for AIDS
patients would be promoted and the burden on public hospitals
eased if reimbursement mechanisms removed the threat of financial

risk.

The care of AIDS patients who are also IV drug users is especially
complicated and costly. The growing recognition of the
interrelationship between these two major medical and social
problems has brought to our attention the larger implications for

financing drug treatment programs generally.

Financing the post hospital care of AIDS patient desperately needs
to be addressed as well. Since the level of care required by AIDS
patients varies often dramatically over time if we are to maintain
continuity of care, there must be appropriate incentives for the

Gevelopment and the provision of a wide range of services. This

 

 
 

 

is true for the full range of long term care options including
chronic care services, home care, supportive housing and

ambulatory care.

Homelessness is a particularly difficult problem for persons with
AIDS which must be addressed within the larger context of housing

needs without necessarily a medical model.

At HHC, we have had to grapple with each and every one of these
issues over what is approaching a decade of unprecedented caring

for patients suffering from this tragic disease.

HHC and the Care of AIDS Patients

HHC has 11 acute care hospital with 8300 beds, five long care
facilities with nearly 2500 beds, and over 40 community-based
ambulatory care centers. We also operate the citywide Emergency
Medical Services system, which responds to 775,000 calls
annually. Our mission is to provide high-quality medical care to
all, regardless of race, sex, diagnosis or ability to pay. our
patient population is predominately from low-income and minority

communities.

HHC is a major provider of health services in New York City,
providing half of all ambulatory and emergency room visits, half

of all inpatient psychiatric services and a third of all inpatient

 

 
 

 

drug detoxification services as well as about 10-15 percent of
outpatient drug treatment slots in the City. Public hospitals
such as HHC have traditionally been the health care providers most

affected by the social and economic changes in our society.

Most recently, public hospitals especially those located in urban
areas, are at the forefront of confronting AIDS and increased drug
abuse. HHC’s patient population reflects this most recent and
tragic challenge. With 16 percent of the medical-surgical bed
capacity in New York City, we are now providing over one-third of
the City’s inpatient care for persons with AIDS. Our average
daily AIDS inpatient census is now 450 -- double the census two

years ago.

A full 75 percent of our AIDS patients contracted the virus as a
result of intravenous drug use -- either through direct IV use,
sexual contact with an IV user, or being born to an IV drug
abuser. By contrast, IV drug abusers make up less than 10 percent
ef the AIDS population in San Francisco and just over one-third in

the City of New York.

The relationship between AIDS and drug abuse will be an

increasingly critical problem for all health care providers and

 

 
 

public health planners throughout the country. I want to commend
the Commission for your recognition of this relationship in your

March Interim Report.

iInterdisciplinary Care

As you know, AIDS is a complex disease -- one that carries with it
a range of medical, social, and psychological needs, each of which
must be addressed by the health care system to provide quality
Care. To meet this challenge clearly calls for an
interdisciplinary approach. Unfortunately, such an approach is
the exception rather than the rule in the organization of health
care in most settings and is more expensive than the traditional
model of service delivery. Any financing recommendations must
adequately reimburse for an interdisciplinary approach which
includes such services as case management, legal, psychological,

social work, and respite care.

s ate rden on rails

The AIDS epidemic is a problem facing our society as a whole and

the responsibility of care must be shared among all sectors of
providers -- public, private and voluntary. As noted earlier,
with only 16 percent of the med/surg beds in New York City, HHC
now cares for about 35 percent of the hospitalized AIDS patients
in New York City. If the public sector continues to care for this
disproportionate share of the AIDS patients, in 1991 up to 25
percent of HHC’s total med/surg capacity would be filled with AIDS
patients. At some of our hospitals, the proportion of AIDS
patients would be considerably higher. Such a scenario would
seriously compromise our ability to provide care for our
traditional patient population and thus prevent us from fulfilling
our mission as a public hospital system to assure access to care.
Our hospitals are all presently operating at over 95 percent
occupancy everyday. It is important to note that if in 1991, 25
percent of our med/surg beds were occupied by AIDS patients, only
8 percent of the voluntary sector’s med/surg beds would be caring

for persons with AIDS.

A similar issue arises with regard to long term care services for
persons with AIDS. While HHC’s long term care beds make up about
5 percent of the City’s capacity for this level of care, we are
among the few long term care providers in the entire City caring
for AIDS patients. The public and private sectors must share this

responsibility equitably.
 

 

The public sector simply cannot continue to bear such a
disproportionate share of the responsibility of caring for persons
with AIDS. We need the voluntary sector to expand the amount of
care they provide to persons with AIDS -- in both the acute anda
long term care settings. The federal government must, therefore,
ensure reimbursement for the full cost of AIDS patient care in
order to prevent any financial disincentive for caring for AIDS
patients which could ultimately result in the "dumping" of AIDS

patients on the public providers.

Interrelationship of AIDS and Drug Abuse

It is rare to have an epidemic of this magnitude and severity in
which such a large percentage of the patients are afflicted with
an associated addiction and risk behavior that makes it difficult
to attract them into care or to retain them in therapy. There is
no doubt that our battle against AIDS must be accompanied by a
battle against drug abuse, and that battle must include a
significant expansion of drug treatment slots. Medicare and
Medicaid reimbursement must pay for the additional costs of
treating a drug user with AIDS - whether it is in or out of the
hospital setting.

 

 
 

 

mel nes

Homelessness is a particularly difficult problem for persons with
AIDS. Overall, about 15 percent of our hospitalized AIDS patients
are homeless and do not need long-term health care services. They
simply need a clean place to live where the necessary support
services can be provided. Many are ambulatory and could even go
to an outpatient clinic if they only had an apartment. The housing
needs of these AIDS patients are not met by any current
institutional models. The Federal government must provide funding
to major urban areas to construct and rehabilitate housing units
for people with AIDS and to subsidize rents in existing

apartments.

Post=-H al ¢

AIDS patients also require a continuum of care as they experience
different levels of acuity of their illness over what is a
relatively brief period of time. Continuity of care is, again,
not historically a well developed feature of our health care
delivery system, which has tended to be built largely around acute

hospitalization. Although there is a great deal of discussion

 

 
about projections of acute bed needs for AIDS patients, the need
for appropriate ambulatory care services, long term beds, home
care, etc. is equally critical and, in fact, interdependent.
Furthermore, our experience has shown that AIDS patients fluctuate
frequently between levels of care required. Yet our health care
system and its payment mechanisms do not facilitate such movement
back and forth across levels of care. Thus, increasing numbers of
AIDS patients remain in hospital beds weeks and sometimes even
months, much of that time not in need of acute hospitalization.
Children with AIDS needing difficult-to-find foster care
placements and AIDS patients with a history of IV drug abuse are
more likely than other AIDS patients to face these post acute care

placement problems.

The Federal government must address the adequate reimbursement for
the delivery of ambulatory care for AIDS patients. This will help
assure that there are ambulatory care services for the increasing
numbers of persons with AIDS. Our ambulatory settings need to be
reimbursed adequately for all costs of caring for a person with
AIDS including drug therapy and mental health needs. Medical
practice with regard to AIDS is shifting so that increasing

proportions of persons with AIDS and Hiv-infected persons may
receive ambulatory therapies and require more intensive medical

care. Thus, the volume of services needed 1s sure to increase

even more quickly than the caseload.

AIDS also poses a special challenge in the provision of long term
care services. HHC’s chronic care AIDS program is one of the few
of its kind in New York City and one of a handful in the nation.
This program, soon to be expanded to 52 patients, is administered
in two of our facilities using interdisciplinary teams similar to
the ones in our acute care facilities. Financing recommendations
must provide for payment for all costs associated with caring for
these patients, and support long term care facilities to expand
their admissions beyond the more ‘traditional’ nursing home
patient. There will need to be different staffing patterns and
additional staff training and education if a long term care
facility is going to provide the proper care for a person with
AIDS. There is a need to explore some new and innovative long
term care approaches that specifically address the needs of AIDS

patients.

Finally, in a very real sense, the AIDS epidemic is putting a

dramatic focus on the weakness and in some cases, the failure of
-il-

our overall health care delivery system. There is something
inherently wrong when patterns of care are determined either by
who is paying for the services or what is covered by a particular
plan. For example, if there is adequate reimbursement for home
care, physicians and other caregivers will make a greater effort
to get a person out of a hospital and into a community based
setting. This is not just true with AIDS but with all patients in
the health care delivery system. The system should be driven by
the best pattern of care for a patient -- not by what services are

reimbursed in a certain setting.

Recommendations for the Financing of Health Care

To deal specifically with the financing of the care of AIDS we
must deal with the existing payor system. Because of the
convoluted system of financing health care in this country,
recommendations can only be a patchwork of adapting existing
programs to provide adequate health coverage for people with
AIDS. My recommendations, which focus on improvements in private
insurance, and access to and coverage by Medicare and Medicaid,

include the following:
- 12 =<

Support for initiatives that address the growing problem
of the uninsured, such as 8. 1265 which requires
employers to offer health insurance coverage to all

employees who work at least 17.5 hours per week;

Support for S. 24 and H.R. 276 which waive the 24 month
waiting period that currently prevents a person with AIDS

from qualifying for Medicare;

Establishment of a Federal AIDS DRG(s) for Medicare
patients that adequately reflects the costs, length of

stay, and intensity of illness for these patients;

Increased reimbursement for all patient care to reflect
the increased costs associated with implementation of the

CDC Universal Infection Control Precautions;

Increasing the Federal Medicaid matching rate for home
care to a minimum of 75 percent for those States that

have a comprehensive plan for home health care; and
 

 

- 13 =

o Expand the Centers for Disease Control definition of ATDS
to encompass the types of care needed by people who have

ARC or are HIV infected.

Let me describe each of these recommendations in greater detail.

New York City, like the rest of the country has seen a rapid
growth in the ranks of those citizens who have no health
insurance. Over 37 million Americans are not covered by a health
plan -- 1.3 million of these people live in New York City. The
number of uninsured has increased rapidly in New York City by 22
percent from 1980 to 1984. Fully 34 percent of all New York City

residents between the age of 18 and 34 are uninsured.

Health insurance in this country is traditionally provided through
the workplace. HHC therefore supports S.1265 which requires
employers to offer health insurance coverage to all employees who

work at least 17 1/2 hours per week.

Persons with AIDS meet the disability criteria for Medicare and
many can meet the work history requirements. Nonetheless, Federal

rules require a person to be disabled for five months before they

 

 
 

 

can receive Social Security Disability payments, and then that
person must receive these cash payments for 24 months before he or
she qualifies for Medicare. More than half of those with AIDS
will die within 24 months and while they live, the nature of the
disease may disable them for several months, but allow
intermittent periods of work. The 24 month Medicare waiting
period prevents a person with AIDS from qualifying for the

Medicare benefits they could otherwise receive.

Congress has already exempted those under 65 with end-stage renal
disease from the 24 month waiting period. We believe that persons
with AIDS should receive the same exemption, and therefore,

support the enactment of S. 24 and H.R. 276.

Another approach would be to extend to 29 months for people with
AIDS or HIV the COBRA provision allowing 18 months of health
insurance coverage for employees who have involuntarily left the
workforce. After 29 months, the person with AIDS or HIV would

then be eligible for Medicare.

I must emphasize, however, that many patients who are being served

in public hospitals do not have a stable work history and would

 

 
 

 

- 15 -

not meet the work history requirement for Medicare or work-related
extensions of coverage. For the population which we serve, the
only clear opportunity for health care coverage within the
existing system would be the expansion of Federal support via the

Medicaid program.

We have completed a study that gave us some indication of the
minimum cost of inpatient AIDS treatment at HHC facilities. We
found that the average per diem cost of treating an AIDS inpatient
is about $800, compared with $650 for a non-AIDS patient, a
difference of about 25 percent. These figures reflect minimum
costs and did not include consultation services by physician
Specialists, nor non-surgical procedures since comparable data
were not available for non-AIDS patients. Nor did they capture
the intensity of services such as direct nursing, housekeeping,
and laundry/linen, which we believe are higher than average.
These studies looked only at the care AIDS patients received
during one hospital stay, so the lifetime costs of treatments are
yet to be ascertained. These are critical for health planning,

and we are looking to determine those costs as well.

Many of the cost issues I have mentioned could be mitigated by the

 

 
- 16 -

DRG system, if in fact, the DRGs in which AIDS cases fall are
appropriate. The State of New York recently moved to an all payor
DRG system with 15 specific AIDS DRGs. Although we are optimistic
that the DRGs are appropriately weighted, we recognize that
adjustment may be necessary after more experience with the DRG
system. We also recognize that there are still many costs
attributable to the AIDS epidemic that are not reflected in DRGs
and for which hospitals will not be reimbursed. To that end,
Federal DRGs for Medicare-covered patients should be developed for
AIDS that adequately reflect the costs, length of stay, and

intensity of illness of these patients.

The higher costs for treating uninsured AIDS patients cannot
continue to come out of limited City tax levy funds. A separate
etudy on nursing care hours showed that AIDS patients require
about 40 percent more direct nursing care than our average
med/surg patient and that pediatric AIDS patients more than twice
the nursing care hours of our average pediatric patient. In
addition, the CDC has recommended a set of universal infection
control precautions to protect patients and staff. These
precautions imply higher costs for caring for all patients (not

just AIDS patients) with regard to significant increases in the
use of disposables, such as gloves and gowns and a decrease,
albeit difficult to quantify, in staff productivity.
Reimbursement methodologies for all patient care must reflect

these increased costs to the provider.

Very few states are doing comprehensive home care programs through
Medicaid. Even states like New York that have comprehensive plans
are hindered in providing home care services because of the high
turn-over of home health care personnel. States should be
encouraged to expand their home care programs, providing for
adequate wages, benefits and training. The Federal government
should increase the Federal matching rate to a minimum of 75
percent if the state has a comprehensive plan for home health care
and should provide special funding for home care to meet the
special needs of people with AIDS. The states should use part of
this additional money to train and pay a higher wage to home

health care workers.

Conclusion

In closing, I would like to stress that AIDS is a national issue.

While four years ago, New York City represented 52 percent of all
~ 18 =

AIDS cases in the United States, today that figure is only 30
percent, largely due to increasing incidence elsewhere in the
country. The identity of the prime risk group has also shifted, a
fact that has great significance for future planning. Five years
age, it was 14 percent IV drug users nationwide. Today, nearly 45
percent of the new cases are in this category. The very real
housing and long term care needs of the AIDS population in
general, and especially of those who have been or are IV drug

abusers, must also be on the federal government’s agenda.

We in New York City’s public hospitals are seeing the impact of
this shifting epidemiology -- the complexity of the treatment
programs needed, the difficult and often uncooperative group of
patients, the expense of caring for the severely ill with AIDS and
mounting an additional attack on their drug abuse, the
inadequacies of current national health policy on prevention

etrategies and support of treatment programs.

As noted earlier, the tragedy of AIDS highlights the weaknesses in
our overall health care and social services delivery system,
weaknesses that have traditionally had a disproportionate impact

on public hospital providers. These include the importance of an
 

 

- 19 -

interdisciplinary approach, the inability to address the
concurrent problems of drug abuse and homelessness, and the
inadequacy of alternatives to acute hospitalization. Hospita)
staff cannot be asked to face these problems on their own and
neither individual hospitals nor public hospital systems can meet
this challenge alone. We need all levels of government and all
sectors to support the care being provided both in and out of the
hospital setting through creative approaches to models of care,
appropriate distribution of cases, and much needed enhanced

financial reimbursement.

 

 
 

 

American Hospital Association

AU fy

 

Capitol Place, Building #3
50 F Street, NW

Suite 1100
Washington,DC 20001
Telephone 202 638-1100
Cable Address Amerhosp

Statement of William H. Johnson
Chairman, Special Committee
on AIDS/HIV Infection Policy
of the American Hospital Association
Before the Presidential Commission

on the Human Immunodeficiency
Virus Epidemic

Good Morning. My name is Bill Johnson, Chief Executive Officer of the
University of New Mexico Hospital-Bernalillo County Medical Center, and
Chairman of the American Hospital Association Special Committee on AIDS/HIV
Infection Policy. 1 am pleased to have this opportunity to share our
experience with the costs and financing of AIDS care in New Mexico, as well as

to discuss the recommendations that our AHA committee has developed.

The University of New Mexico Medical Center is a 344-bed tertiary care
facility located in Albuquerque. We have cared for the majority of AIDS
patients in our state, as well as a number of patients from the surrounding
region. Our scenario is different than the one you have heard/will hear about
this morning from my colleagues in New York City. However, | think our

experience carries some important lessons for many areas of the country.

To date, the volume of AIDS patients we have served has remained manageable.

We are currently providing services to about 27 AIDS patients, most of whom

 

 
are being cared for on an outpatient basis. Critical to our ability to
effectively manage our patients has been the development of an alternative
care network for individuals with AIDS. Outpatient and community-based
services are not only less expensive, but they often represent the most
appropriate and compassionate care as well. New Mexico is currently one of
only three states with a Section 2176 waiver permitting the state Medicaid
program to pay for a broad’ range of home and community-based services
specifically targeted to individuals with AIDS. Due in large part to this
continuum of care and our active outpatient clinic, we have been able to hold
the average length of stay for an AIDS patient down to only 7.0 days in the
first eight months of this fiscal year; that is, from July 1987 to February
1988. Consequently, our lifetime inpatient costs are now averaging about
$20,000 per case, significantly less than a few years ago. These costs are
also lower than those experienced by many other institutions around the
country, where lifetime inpatient costs appear to have ranged from $25,000 to

$50,000 per case, or even higher.

If the first lesson | have to share with you is that outpatient and
community-based services can be cost-effective, the second lesson is that
these services are not free and do require a significant commitment of
resources. While the availability of a network of support services has
significantly reduced the use of expensive inpatient hospital care, there has
been a parallel growth in the use--and thus, cost--of out-of-hospital care.

For example:

* The number of outpatient visits per patient has increased dramatically

over the past year. In fiscal year 1987, 27 AIDS patients accounted
for 955 outpatient visits in our clinic. In the first eight months of
this fiscal year, the same number of patients have already logged in

1,121 visits, more than in the entire previous year.

* The per patient cost of this outpatient care has also risen
dramatically--leaping from $7,800 in fiscal year 1987, to an average of
about $14,000 in the first six months of this year--in large part
because of the introduction of the drug AZT. And these figures do not
include the growing number of individuals with AIDS-Related Complex

(ARC) and HIV infection that are seeking treatment.

Payment for care varies considerably. Roughly 30 to 40 percent of our AIDS
patients at any given time are covered by private insurance. However,
anywhere from one-third to one-half of our patients are sel f-pay. In reality,
the vast majority of these self-pay patients are non-paying patients because
they lack the resources to pay for their care. In sharp contrast to many
other states, only about 10 to 15 percent of our patients are covered by
Medicaid because, in spite of New Mexico's efforts to be responsive to the
needs of individuals with AIDS through the Section 2176 waiver, our basic
Medicaid program is so restrictive that many cannot qualify for coverage. For

example:

* An individual who qualifies for Medicaid by virtue of eligibility for
SSI--as is the case with most AIDS patients--is permitted to have an
income of only a little more than $4,000 per year, less than 50 percent

of the federal poverty level.
* The categorically needy under AFDC are even worse off; a family of
three must be below 35 percent of poverty in order to qualify for

assistance.

* There is no medically needy program at all in New Mexico; that is, a
patient with high medical bills who is not a welfare recipient cannot

"spend down" and thereby become eligible for Medicaid.

Even for those who do meet the strict eligibility criteria, reimbursement for
care is very inadequate. On average, we lose about $3,000 per Medicaid AIDS
admission. Yet this is better than the approximately $7,000 we lose for each

patient who does not have any coverage.

We have managed to cope with the costs of AIDS care to date only because of
our relatively small caseload and our success in meeting the needs of patients
outside the hospital setting. If the number of patients increases
significantly, or if the nature of our patients’ needs changes dramatically
--for example, if we experience an increase in the percentage of AIDS patients
who are homeless, or if additional expensive therapies are developed--our
ability to provide care will be jeopardized. Moreover, changes in the payer
mix may have a dramatic impact. If private insurance continues its retreat
from the coverage of AIDS care, the burden of uncompensated costs will become
unmanageable. In our state we cannot count on the Medicaid program to pick up
the slack, and the hospitals do not have the resources to absorb the growing

burden.

The most important lesson | have to offer is that we must come to grips with

the need to develop a continuum of care that is adequately financed or risk

 
 

being overwhelmed by the problem. AIDS has presented new challenges to us in
the health care field, but perhaps more importantly, it has illuminated old
problems that have eluded resolution for years--the emotional, social and
financial stresses that can result from catastrophic illness and the worsening
problems of medical indigence and inadequate health insurance coverage. None
of these are unique characteristics or byproducts of AIDS, but the rapid
escalation of the disease, its particularly savage course, and its current
prevalence among younger people in their most productive years have added new

dimensions to the challenges of caring for the terminally ill.

The AHA's Special Committee on AIDS/HIV Infection Policy, of which | have had
the privilege to serve as chairman for the last nine months, has given
considerable thought to the complex issues involved in financing care for
individuals with HIV-related illnesses. This panel of experts represents a
broad spectrum of experience with the AIDS epidemic, and includes
representatives from high-prevalence areas such as San Francisco, New Jersey
and Florida, as well as individuals from medium-size cities and one from a
smal! rural hospital. 1! have attached a summary of the Committee's
recommendations and copies of our reports for your review and information.
Many of the issues we are discussing today are dealt with in greater depth in

our report.

A fundamental issue the Committee has grappled with is whether AIDS care and
health care coverage for HIV-infected individuals can be addressed adequately
within the traditional pluralistic approach to financing health care, or
whether a separate public program must be created. Such a determination
involves basic philosophical choices that must be made within a context of

harsh political realities.
We believe that every effort should be made to assure that care for
individuals with AIDS and HIV infection can be addressed under a pluralistic
system of private and public financing. Reliance on a pluralistic system
allows for targeting of finite public resources to those most in need, while
distributing the cost burden across a number of payers. Complete transfer of
responsibility for AIDS care to a public program would not only shift the
costs for those who could afford to pay onto an already strained public
sector, but would also raise serious questions about the general long-term
viability of private insurance as the American health care financing mechanism

of choice.

Moreover, establishment of an A!lDS-specific public program would require a
large commitment of outlays at a time when both state and federal governments
are confronting increasing budget deficits. But perhaps even more
significantly, expanding public programs only for AIDS would overlook the
needs of many others with catastrophic illnesses, such as Alzheimer's disease
and terminal cancer, who have encountered similar difficulties in financing a
range of needed care. Not only would such a move likely create substantial
pressure for public funding programs for a variety of other illnesses, but it
would also permit the weaknesses present in our current insurance and payment
system to go unaddressed. These problems are only likely to multiply as our

ability to predict illness improves.

Clearly, if we are to address AIDS under a pluralistic financing system, we
must take action to preserve the private sector roie. Steps that may be

necessary include:

 
* Prohibiting coverage exclusions or significant benefit limitations

based on HIV status in small and large group health insurance policies.

* Providing incentives for creative ways to spread risk through new
pooling mechanisms, such as multiple employer trusts or state or
regional pools to help make affordable coverage available to the

general population.

* Encouraging formation of reinsurance programs specifically for AIDS.

* Exploring ways of subsidizing the premiums for the continuation
coverage required by the 1986 Comprehensive Omnibus Budget
Reconciliation Act (COBRA), for individuals who are disabled when they

leave employment.

We must also make health care coverage available to the unacceptable number of
uninsured individuals in this country--a problem that is being exacerbated by
the high costs of AIDS. Some 37 million Americans do not have access to a
health care plan, public or private, although 86 percent of these individuals
have some connection to the work force, either by direct employment or by
being the dependent of someone who is employed. One option the AHA Supports
is mandated employer-provided insurance, such as proposed in the recent bill
sponsored by Senator Kennedy. We believe the time has come to make provision

of health care coverage a condition of doing business.

Federal incentives for formation of state risk pools also may offer a partial

solution. However, this mechanism may be of limited use if self-insured
employers continue to be exempt from participation under ERISA. Moreover,
these pools generally require a considerable subsidy in order to make coverage

affordable.

Finally, it is clear that many individuals with AIDS will not be able to
afford private coverage, even if it is partially subsidized. The growing
number of intravenous drug abusers and poor children with AIDS clearly
indicates that, increasingly, adequate public coverage must be available to
meet the needs of these patients. Unfortunately, today Medicaid covers only
about 38 percent of the poor nationwide. Because of state discretion in
establishing income thresholds and covered services, the adequacy of Medicaid

coverage of the poor varies widely across the country.

For the long term, we believe that Medicaid will require significant

restructuring if it is to adequately serve the poor. But there are a number
of options that might be pursued now to greatly improve Medicaid eligibility,
coverage, and reimbursement for individuals with AIDS and other catastrophic

illnesses.

Among the initiatives that could increase the percentage of poor eligible for

Medicaid are:

* Establishing a minimum national Medicaid eligibility floor set at 50
percent of poverty, with a phased-in plan for moving to 100 percent of

poverty.

* Adopting a medically needy program in all states. Fourteen states,

including New Mexico, still do not use this option.
* Allowing states to establish higher income thresholds under the
medically needy program, thereby enabling them to serve a greater
percentage of the poor while accessing federal dollars. Currently, a
state is prohibited from setting its medically needy threshold at a
level greater than 133 percent of its AFDC payment level. In most

states, the AFDC payment level is abysmally Jow.

* Giving states the option of further raising the income threshold for
the disabled, so that they will have more flexibility in targeting

their dollars.

In addition to improved Medicaid eligibility, the scope of covered medical
services is a very important issue for AIDS patients. Although expensive
hospital care is often covered, many of the support services that would allow

treatment in the community or at home are not.

One of the components critical to both the quality and effectiveness of care
for AIDS patients is case management. Congress recently gave states the
option of paying for case management services for selected groups of
patients. However, this option is not widely known. One way to encourage
states to utilize it would be to provide an enhanced federal match; for

example, 80 percent.

The availability of support services to maintain AIDS patients in the
community is also essential, as we have demonstrated in New Mexico. Many of
these services can be offered to AIDS patients under the Section 2176 waiver

but a number of states have expressed reluctance to use this mechanism.
-10-

States might benefit from having the option to provide these targeted services
without a waiver. In addition, some or all of these services could qualify

for an enhanced match.

It is impossible to talk about improving access to needed care without
discussing reimbursement. As the experience of my hospital illustrates, we
cannot continue indefinitely to absorb huge losses on medically necessary care
provided to individuals with AIDS or other catastrophic illness. We need to
identify new methods of reimbursing providers for heavy care patients, perhaps
through demonstration projects. It is also imperative that alternatives to
hospital care are adequately reimbursed so that there is an incentive to

provide care in the most appropriate setting.

While many of the initiatives discussed here today can go a long way toward
addressing the gaps in our current health care system, we must recognize that
one of the characteristics of the AIDS epidemic that has distinguished it from
other catastrophic illnesses is its concentration in certain geographic

areas. Even if we are able to implement sorely needed changes in our
financing system, some areas may still continue to bear a heavy burden. To
deal with this strain, a block grant assistance program based on prevalence
might be explored. However, it is imperative that efforts to deal with the
financing of AIDS care not be limited to this "quick fix" approach, since
regretfully it appears that we will be dealing with this disease for many

years.

Over the past several months this Commission has conducted a very thoughtful

exploration of the multiple challenges that AIDS has put before us. However,

 
-11-

! would venture to say that few issues are as profound as the need to address
the financing of care for individuals with HIV infection. Ultimately, our
ability to provide the many services needed by these individuals depends on
the viability of our insurance and payment system. The efficacy of the
recommendations you make will depend heavily on your ability to identify

mechanisms by which sorely needed action can be funded.

On behalf of my hospital and the American Hospital Association, | thank you
for the opportunity to share these views. | will be happy to take any

questions.
+k
:

 

ROBERT H. SWEENEY
President

TESTIMONY ON FINANCING INPATIENT HOSPITAL CARE

FOR CHILDREN WITH HIV INFECTION

Before the Presidential Commission.on the HIV Epidemic

April 26; 1988

Statement of
ROBERT H. PARROTT, M.D.
Director Emeritus
Children's Hospital National Medical Center
Professor, Child Health and Development
George Washington University

Washington, D.C.

on behalf of the
National Association of Children's Hospitals

and Related Institutions

 

The National Association of Children’s Hospitals and Related Institutions, inc.
401 Wythe Street, Alexandria, Virginia 22314
Phone (703) 684-1355
SUMMARY

Main Points

No nationwide data on the inpatient care of children with
HIV infection are available. A new survey should produce such
data in June. Children's hospital experience suggests:

e cpCc data underestimate the number of cases of children
with HIV infection. Nineteen children's hospitals alone have
reported more cases than CDC has for the nation.

e A relatively small number of hospitals located primarily
in the Northeast and California are the major providers of care
to children with AIDS. But their distribution is growing.

e The number of new cases seen by children's hospitals is
doubling annually. The case mix also is changing from blood
transfusions to perinatal transmissions.

e Children's hospitals are beginning to experience problems
with abandoned children with AIDS and expect them to grow.

e The financial charges for children's hospitals’ inpatient
care for children with HIV infection appear to be substantially
higher than their average charges for other patients.

e Medicaid is the major payer of care for children wtih HIV
infection, yet it is a marginal payer. On average, Medicaid
reimburses children's hospitals for 77 % of their costs.

Short Term Recommendations

e Congress should enact S. 1871/H.R. 3648, the “Pediatric
AIDS Resource Centers Act,” at a federal cost of $25 million per
year, to support hospitals experienced with pediatric AIDS.

e Congress should enact S. 945/H.R. 3009, the "Abandoned
Infants Assistance Act,” at a federal cost of $20 miilion
annually, for foster care demonstrations.

e Congress should enact Sec. 302 of S. 2122/H.R. 4072, the
"Medicaid Infant Mortality Amendments," at an estimated annual
cost of $14 million increasing to $19 million by FY 1993, to
assist hospitals with disproportionately large Medicaid
populations in treating extremely sick infants with very long
stays and high costs of care.

Long Term Recommendations

e Congress should undertake comprehensive reform of
Medicaid to benefit all poor children, not just children with

AIDS.

 
PARROTT, ROBERT H., M.D.

Home Address:

Professional
Address:

Born:
Personal:

Education:

Internship:

Residencies:

Professional
Appointments:

9852 Singleton Drive
Bethesda, Maryland 20817

Children's Hospital National Medical Center
lll Michigan Avenue, N.W. teins
Washington, DC. 20010
(202) 745-4004

December 29, 1923, Jackson Heights, New York
Married - Six Children

Fordham Preparatory School and Fordham University
New York, New York
1538-1949 (pre-med)

Georgetown University School of Medicine
Washington, D.C.
1945-1949 (M.D. )

Hospital of Saint Raphael
New Haven, Connecticut
1949-1950 (Pediatrics)

Children's Hospital of the District of Columbia
Washington, D.C.
1950-1952 (Pediatrics)

Director Emeritus
Children's Hospital National Medical Center
1985 -

Senior Vice President for Academic Affairs/
Chairman, Child Health and Development
Children's Hospital National Medical Center
1984-1985

Director

Children's Hospital of the District of Columbia
and Research Foundation

Washington, D.C.

1962-1984

Physician-in-Chief

Children's Hospital of the District of Columbia
and Director, Research Foundation

Washington, D.C.

1956-1962

Staff Pediatrician and Chief, Pediatric Unit
Laboratory of Clinical Investigation

National Institute of Allergy and Infectious Diseases
National Institutes of Health

Bethesda, Maryland

1952-1956
Parrott, Robert H., fi.D. -2-

Boards:

License:

Medical
Societies
and

Fraternities:

Chairman, Department of Child Health and Development
George Washington University School of Medicine
1971 - 1985

Professor, Child Health and Development
George Washington University School of Medicine
1969 -

Professor of Pediatrics

Georgetown University School of Medicine
Washington, D.C. |

1965 - 1969

Clinical Professor of Pediatrics
Georgetown University School of Medicine
Washington, D.C.

1956 - 1965

Instructor, Epidemiology and Communicable Disease Control
Catholic University School of Nursing

Washington, D.C.

1953 - 1956

Instructor - Pediatrics (1950 - 1954)
Clinical Assistant Professor (1955 - 1956)
Georgetown University School of Medicine
Department of Pediatrics

Professorial Lecturer
Howard University School of Medicine
1967 -

1) Diplomate, National Board of Medical Examiners, 1950
2) Licentiate, American Board of Pediatrics, 1954

District of Columbia, 1951, #1523
Marviand, 1973, .#D15859

1) Member
District of Columbia Medical Society, 1954 -

2) Member
American Medical Association, 1954 -

3) Member
American Academy of Pediatrics, 1955 -

A) Member
Committee on Control! of Infectious Diseases

1967 - 1973
Parrott, Robert H., M.D. -3-

B) Member
Committee on Research
1978 - 1984

C) Member (Chairman)
Council on Pediatric Research
1984 -

4) Member
Society for Pediatric Research, 1957 -

5) Alumni - AOA - 1962

6} Member
Southern Society for Pediatric Research, 1962 -

7) Member
Infectious Diseases Society, 1963 -

8) Member
American Pediatric Society, 1965 -

9) Member
Anerican Academy of Medical Directors, 1976 -

10) Fellow and Charter Member
The American College of Physician Executives, 1982 -
Mr. Chairman and members of the Commission, I am Dr. Robert
H,. Parrott, Director Emeritus of Children's Hospital National
Medical Center and Professor of Child Health and Development at
George Washington University, in Washington, D.C. I serve as
chairman of the hospital's AIDS advisory committee. I also am
co-chairman of the pediatric subgroup of the Mayor's Task Force
on AIDS in the District of Columbia and chairman of the NACHRI
Committee on Children with HIV Infection. NACHRI is the National
Association of Children's Hospitals and Related Institutions, and
I am pleased to join you today to present the association's
concerns regarding the financing of inpatient hospital care to

children with HIV infection.

NACHRI is the only national, voluntary association of
children's hospitals. It represents nearly 100 institutions,
virtually all of which are teaching hospitals and involved in
conducting research. Most are also regional medical centers,

receiving referrals from larger geographic regions.

Perhaps of special significance to this commission are the
following facts about children's hospitals. They are largely
urban hospitals with special missions of serving poor children
as well as the very sickest of ail children. On average, more
than a third of the care children's hospitals give is for low

income children, and more than a quarter is for children covered
2
by Medicaid. Compared to a general hospital, a children's
hospital provides more than three times the volume of care for
Medicaid patients. Thus, it will come as no surprise to you that
children's hospitals, by virtue of their mission and location,
are already major providers of care to children with HIV

infection.

Children's Hospital National Medical Center 1s a member of
NACHRI, and it 18 representative of the children's hospitals I
have described. For more than a century, Children's Hospital
National Medical Center here in Washington has been committed to
providing high quality care to the injured or sick child -- and
extended social and emotional support to the patient's family.
Our 279 bed facility provides needed care to all children
regardless of their families' ability to pay. We serve children
and their families throughout the metropolitan region and Mid-

Atlantic states.

As you heard in the testimony last January of our Clinical
Immunology Nurse Specialist, Dorothy Ward-Wimmer, R.N.,
Children's Hospital National Medical Center is a major provider
of inpatient care to children with HIV Infection. Since 1985,
the hospital has followed more than 150 cases of children who are
either HIV seropositive or also have symptoms of the infection.
We project that by 1991, the hospital will have seen a total of

more than 800 cases, with nearly 500 of them current in that
year.

In this testimony, I will draw on the special experience of
children's hospitals across the country and my own hospital to

answer two questions.

1) What are the facts known to children's hospitals today
regarding the costs of inpatient care for children with
HIV infection, and what new data do we expect to be

available to us in the next few months?

2) What recommendations do we offer the Commission for its
consideration in addressing the special financing needs

of inpatient care for children with HIV infection?

Facts on the Financing of Care

In discussing the facts on financing inpatient care, I
untend to emphasize the statistical limitations to the data
available to us, explain what those data tell us, and describe

the efforts underway to develop much more reliable data.

It 18 very important to recognize at the outset that to
date, cost data for the care of pediatric patients with HIV

infection have been very limited for several reasons:
4
@ No nationwide cost figures have been published. Those
data that are available are based on cases still too few in
number to provide the basis for statistically valid estimates of

average costs.

e Since the severity of illness among children with HIV
infection can vary substantially from child to child, and over
time for each child, it is difficult to determine yet a composite

estimate of the cost of care for all children wath HIV infection.

e The population of infected children is changing rapidly
and dramatically. Initially, most pediatric HIV cases were the
result of transfusions of blood or blood products. Today, the
majority of new cases is occurring among infants born to mothers
who are HIV infected. These infants have a 30-60 percent
likelihood themselves of being HIV infected. Such children have
a different set of care needs and a different set of cost
implications, beginning at birth and ranging through the first

months and years of life.

e Finally, most financial data available from hospitals are
"charge" data, rather than "cost" data, due to the accounting
difficulty of assigning direct cost assessments to hospital
services provided to specific patients. In particular, such
charge data may not reflect totally the special costs of care of

children with HIV infection, including more intense nursing
2

services, more intense social services, and particularly the
increased supplies and staff time needed to comply wath federally

mandated “universal precautions.”

Given these caveats, I shall give you a general financial
profile of the experience of children's hospitals, based on a
NACHRI survey of 28 hospitals last fall, and more detailed
information based on the financial data developed by our own
hospital and the confidential data of children's hospitals in New

Jersey and California.

The NACHRI survey results make several important points:

e The Centers for Disease Control (CDC) data
underestimate the number of cases of children with HIV infection.
Last fall, 19 children's hospitals reported a greater number of
cases of symptomatic children receiving care in their facilities
than CDC reported for the entire nation. Many experts estimate
the number of HIV infected children to be at least 10 times the

number of cases qualified to be reported.

e Currently, just a few hospitals located primarily in
the Northeast and California are seeing most of the cases. But
new cases are being reported throughout the country. In general,
hospitals have experienced a doubling of the number of new cases

they see each year.
e In addition to the growing numbers, the mix of cases 15
changing, from blood transfusion and blood product related cases

to perinatal transmission.

e Although they anticipate future problems, to date
children's hospitals have not experienced significant numbers of
children infected wath HIV who have been abandoned in the
hospital. Nevertheless, the average length of stay for a child
with clinical AIDS in a children's hospital 1s between 10 and 15
days, with two to three stays per year. In contrast, the average
length of stay per admission for all cases in acute care

children's hospitals is 6.6 days.

e Charges for children's hospitals’ inpatient care for
children with HIV infection appear to be substantially higher
than their average charges for other patients. Anecdotal data
suggest children with HIV infection incur charges ranging between
$775 and $1,800 per day and between $15,000 and $28,000 per
discharge. In contrast, total charges per day for all patients’
acute care in children's hospitals average about $1,000 and

charges per admission average about $6,800.

e Increasingly, Medicaid is the major payer of care for
children with HIV infection, especially for those born to IV drug

abusing parents.

 
The picture outlined by the NACHRI survey of lengthier and
more expensive stays plus hospital care more dependent on public
financing 18 borne out by the specific children's hospital data

currently available.

Washington, D.C. Children's Hospital: National Medical
Center has developed financial data and financial projections
based on 45 medical cases of children who were HIV positive
between July 1985 and September 1987. For fiscal year 1986/87
(July 1986 through June 1987), the average length of stay per
patient was 13.91 days; the average charge per day was $1,460;
and the average charges per discharge was $20,306. In contrast,
for all patients in the hospital for the same period, the average
length of stay was 7.33 days; the average charge per day was
$1,261.00; and the average charges per discharge were $9,208.00.
For the current fiscal year, we project for children with HIV
infection an average length of stay of 13.76 days; average charge

per day of $1,142; and average charges per discharge of $15,718.

In considering these data, it is important to keep in mind
that throughout this time period, Children's Hospital National
Medical Center did not experience insurmountable difficulties in
placing children in family, foster, or alternative care when
medical discharge was appropriate. However, we are now beginning

to experience such problems with HIV infected children and expect
8
them to increase significantly with our growlng patient

population.

California A children's hospital in California 1s
following nearly 200 cases of children who are symptomatic or
positive, and it currently is averaging a new case each week.
The majority of these cases have involved children infected by
blood transfusions, which reflects the fact that the hospital is
a center of care for children with hemophilia. An analysis of
financial data on 25 admissions for 12 patients between October
1986 and February 1987 found the length of stays to range from 2
to 54 days, with an average of 15.9 days. Excluding one
unusually high cost admission, the average charge per day was
$1,755; and the average charges per admission were $27,900, with
charges ranging from $2,363 to $131,377 per admission. For these
admissions, the hospital incurred total charges of about
$569,395, of which only 60 percent was reimbursed. Of the 12
cases, 7 or nearly 60 percent relied on public financing,
primarily California's Medicaid program. Since many of the
hospital's cases have included children who are hemophiliacs,
placement of children ready for medical discharge has not been a
problem until recently, when the hospital has begun to see a
growing number of cases of perinatally infected children born to

an IV drug using parent.

New Jersey A children's hospital located in New Jersey has
9
seen since 1983 more than 200 cases of HIV positive children, the
majority of whom involve children born to infected parents. For
1987, the average length of stay per admission was 23 days (this
average is skewed by a single patient who had a 269 day stay),
with an average of two stays per year per patient. For the
first three quarters of 1987, the average charge per day was
$775, and the average charges per discharge were $18,000. In
1987, the hospital experienced difficulty in placing only five
children in home, foster, or alternative care, necessitating

longer hospitalizations than were medically necessary.

Separate from these inpatient financial data, the hospital
reports average out-patient charges of $1,500 per month, with the

average charges for ambulatory services of $13,200 per year.

New Data Precisely because the data on financing inpatient
treatment of children with HIV infection is so limited, NACHRI
has joined the National Association of Public Hospitals, the
Association of American Medical Colleges’ Council of Teaching
Hospitals, and the National Council of Community Hospitals ina
Major survey, now underway, to document their member hospitals'
collective experience in treatment of pediatric patients with HIV
infection. The study is one of the first nationwide attempts to
collect data about utilization patterns of inpatient and out-
patient services, costs and revenues, and discharge placement.

Preliminary analysis of the data will be released in
June.

10

Recommendations

 

As preliminary and anecdotal as the data I have srezentred

a

may be, NACHRI feels confident in drawing three conciusions fro

them, which are relevant to recommendations for pubi.c2 s@iriecv

development with respect to financing inpatient hospittai care far

children with HIV infection.

1)

2)

Even in the absence of HIV infected children waa a2
abandoned in the hospital, children's hospuziils
experience significantly longer than aver@cp stav:n amd
higher than average charges for the inpatizmt case of
children with AIDS for whom hospitalizatiam is.

medically necessary.

For the growing majority of children with fv
infection, Medicaid will be the primary seurce o3
financing for care. Yet, Medicaid is wide:, recramized
to be a marginal payer of care for inpatient? caze ip
general and children's hospital care in particrslay.
NACHRI estimates that nationwide Medicaid rveLmsuersee
children's hospitals for 77 percent of their costa amd
61.7 percent of their charges on average ior all

patients, due in part to the very limited scope of ne
ll
Medicaid programs 1n some states. Pediatric HIV
infection only magnifies the already serious
inadequacies of the 50 state Medicaid programs as the
largest source of public financing for the health care

of poor children.

3) Financing inpatient care for children with HIV
infection 18 a serious problem today for those
relatively few children's, public and teaching
hospitals providing care for disproportionately large
numbers of infected children. It also is a long term
challenge to a much larger number of children's and
other hospitals that now are seeing small but fast
growing numbers of cases. This will be especially true
as the cases increase in states where Medicaid already
ig a very limited payer, placing the hospitals
providing care for these children under substantial

financial pressure.

In light of these three conclusions, we give the Commission

two sets of recommendations for short term and long term action.

Short Term Recommendations Our short term recommendations
are directed at taking advantage of public policy initiatives
already introduced in Congress which could provide relatively

quick relief to hospitals now bearing the burden of care. These

 
12
bills would be more likely to be enacted if given the

Commission's endorsement.

e Congress should enact S. 1871/H.R. 3648, the "Pediatric
AIDS Resource Centers Act of 1987." (A copy is attached.) If
enacted with appropriations, this legislation would provide $25
million annually. for each of three years, for Public Health
Service grants to hospitals already experienced in caring for
children with HIV infection and working with community-based
programs of foster care and home care. Such funds would both
strengthen the ability of these hospitals to continue to handle
their very large pediatric AIDS patient loads and establish them
as models for other hospitals that will be confronted with
comparable care demands in the future. For FY1989, the
Department of Health and Human Services (DHHS) plans to issue
about $4.3 million in demonstration grants for pediatric AIDS
health care.

e Congress should enact S. 945/H.R. 3009, the “Abandoned
Infants Assistance Act of 1987" (a copy is attached), which
would authorize $20 million annually for each of three years for
demonstration grants for foster care for infants abandoned to
hospitals, "particularly infants with AIDS." In contrast, DHHS
1s issuing only $1.2 million in grants for foster care
demonstrations during the current fiscal year. Such expanded
funding could provide relief to New York City hospitals and

others, which already are experiencing serious problems in
13
placing abandoned infants. The grants also could assist
children's hospitals and other hospitals to prepare for the

increased foster care and alternative care demand they are just

beginning to experience.

e Conagress should enact S. 2122/H.R. 4072, the “Medicaid
Infant Mortality Amendments of 1988;" in particular the Sec. 302
mandate (a copy 1s attached) that every state Medicaid program
make exceptions to their reimbursement limits in cases of
extremely sick infants with high costs and long stays, 1f thev
are receiving care in hospitals with disproportionately large
Medicaid populations. Most states place limits on their Medicaid
reimbursement in terms of the numbers of days or total payment
they will cover. About half of these states do not provide
exceptions to some or all of their limits, which therefore
results in significant shortfalls in Medicaid payments to
children's hospitals and other hospitals. NACHRI estimates that
Medicaid reimbursement shortfalls account for about half of the
uncompensated care children's hospitals incur. The Sec. 302
mandate is designed precisely to require state Medicaid programs
to take into account the kind of financing problems that
hospitals carrying large Medicaid patient populations encounter
with new cases of infants born with HIV infection. The
Congressional Budget Office estimates the cost of implementation
would be $12 million in FY1989, rising to $19 million annually by

FY1993.
id

Long Term Recommendations As I noted before and cannot
emphasize too much, the problem of children with HIV infection
only magnifies the serious and fundamental inadequacies of
Medicaid coverage for poor children. The nation cannot expect
to address meaningfully the costs of financing care for these
children -- in the hospital when it 18 appropriate and 1n home or
alternative care settings when it 15 appropriate -- until it
undertakes major reform of Medicaid. Today, approximately half
of all poor children do not qualify for Medicaid coverage, and in
many states Medicaid pays for only a portion of the care for

children who are eligible.

This means that any long term, public policy response to the
financing needs of care for children with HIV infection should
not be designed to benefit these children exclusively. Instead,
it ghould build on fundamental reform of Medicaid to benefit all
poor children by expanding eligibility, broadening the range of
gervices covered, and most importantly increasing the resources
available for Medicaid. In particular, the Commission should

urge Congress and the states to do the following:

e Congress should require all states’ Medicaid programs
to provide exceptions to payment limits for inpatient care for
very sick children of all ages and in all hospitals, regardless

of the number of Medicaid patients the hospital currently 1s
seeing.

e Congress should reqwire all state Medicaid erearane to
expand Medicaid coverage to home care wod conmanity—based
services that will maximize placement of children un teme, Poster

care, and alternative care settings where nedicalivy aprrpruwate.

e The above payment and coverage nanteties sted be
coupled with increased federa)d “edicaiad matctinns fumds Tor aid
eligible children, not just AIDS patremts. Seducasa Pudong
improvements specific only to 41% intected patnents or omiy tm
HIV infected children would in #31 UsheJ.heodt esmecerhaie ine
inadequacies of Medicaid coverace, siumce many states Tunance
Medicaid policy changes by redistraratimg » Lumited peo!) of

dollars rather than adding new Tumds to ut.

e The Commission should make clear up wis own reper amd
recommendations that HIV infectiem amome adalts and cmilidvew 31s
not only a crisis in itself 15 terne of personal sad Tumarcial
tragedy; it also i8 a grave reminder of ithe weri90ws steerieanings
of U.S. health care financint, oth public and pravate. TI the
growing number of perinatally inferted childres call aiterion to
the limitations of Medicaid, tihe cdalarem off middle and opmer
income families infected by bivwed transimsiem riluestrate
limitations of commercial coweraqge gm teems of Lark of

avallability, pre-existing cendistipms, om eligqvgiiity, asset
L6

"spend down" requirements, and payment limits on catastrophic

cases.

Home and Foster Care Services

The Commission's staff asked that our statement speak to

the need for home, foster care, and alternative care services for

children with HIV infection, who otherwise might be abandoned in

hospitals,

resulting in unnecessary inpatient costs.

Throughout my testimony, I have tried to emphasize two

points regarding abandoned children requiring unnecessary

hospitalizations.

1)

2)

Until recently, children's hospitals have been
relatively successful in placing their patients with
HIV infection. It is important for the Commission to
keep this 1n mind when considering the financial data
we have presented. The children's hospital data
reported to date are by and large not inflated by
medically unnecessary hospitalizations. Inpatient care
is often necessary, and it 18 expensive because of the

special care these children require.

Children's hospitals 1n some communities, including

Washington, D.C., are now beginning to encounter the
17
difficulties with abandoned children that already have
become serious problems for public hospitals in New
York and elsewhere. Meeting the substantial demand for
care which we project will require a comprehensive
approach to home, foster, and alternative care. It
will necessitate Medicaid waivers for home care
services, enhanced funding for foster care payments,
new funding for alternative care, and new funding for
support services, including day care and counseling.
We discuss these in more detail in NACHRI's testimony
of last fall to the House Select Subcommittee on
Education. I am attaching a copy for your hearing

record.

On behalf of NACHRI, I thank you for the opportunity to
present our views. Both the Association and I would be happy to

respond to any questions members of the Commission might have.
FINANCING IN-PATIENT CARE FOR INDIVIDUALS WITH HIV INFECTION

Testimony before the
Presidential Commission on the Human
Immunodeficiency Virus Epidemic

April 26, 1988
Washington, D.C.

Richard N. Yezzo
President
St. Clare's Hospital and Health Center
New York, New York
I am Richard N. Yezzo, President of St. Clare's Hospital and
Health Center in New York City. I appreciate this opportunity to
appear before the Presidential Commission on the Human
Immunodeficiency Virus Epidemic.

St. Clare's Hospital is a 250 bed not-for-profit hospital
located on the west side of midtown Manhattan. In 1985, in
response to a directive from His Eminence John Cardinal O'Connor,
Archbishop of New York and a member of this Commission, St.
Clare's Hospital initiated a comprehensive program for the care
of individuals with HIV disease. This program, known as the
Spellman Center for HIV Related Disease, currently consists of a
60 bed dedicated acute care unit (including a 15 bed unit for
prisoners with AIDS which will be expanded to 25 beds in July); a
dedicated outpatient clinic; an AZT program and a dental clinic.
In the near future, the Spellman Center will add a methadone
maintenance treatment program for intravenous drug abusers who
are HIV positive, two 18-bed residences for homeless individuals
with HIV disease, and a 30 bed neuropsychiatric or chronic care
unit for individuals with AIDS suffering from dementia and other
neurological conditions associated with HIV.

It is estimated that by 1991 there will be 145,000 patients
with AIDS in the United States and that it will cost between $8
billion and $16 billion to provide the health and social support
services they will require. Medical care costs alone for
individuals with AIDS currently amount to approximately $1.1
billion and are expected to increase to $8.5 billion in 1991.2
However, these figures are conservative since they do not include

-jl1-

 
 

 

care provided to those with AIDS Related Complex (ARC) or other
HIV related disease. These figures clearly show that we must act
now to develop and implement cost-effective quality comprehensive
programs to meet the needs of individuals with HIV infection.

For a response to the AIDS epidemic to be effective, it will
have to be based upon two fundamental concepts. First, it must
be acknowledged that the HIV epidemic is a societal problem and
the development of an effective response to the AIDS epidemic
will require a collaborative effort by all levels of government
as well as the private sector. Secondly, we must also recognize
that due to the broad range of clinical manifestations associated
with HIV infection as well as society's fearful reaction to those
who are HIV positive, the needs of individuals infected with the
AIDS virus go beyond the narrow definition of health care. If
cost-effective care is to be provided, the United States health
care system must move beyond its traditional emphasis on hospital
based acute care services and recognize the important role of
sub-acute and community based services in providing care for
those with HIV infection.

The AIDS epidemic clearly shows that the existing health and
social services system is unable to meet the wide ranging needs
of individuals with HIV infection. This is due in large part to
the fact that the evolution of the health and social services
system has been driven by the reimbursement system. The existing
reimbursement system emphasizes institutional care, especially
acute hospital care. It has been, to date, virtually
unresponsive to alternatives to acute care and in particular to

-=2-=

 

 
 

community based services. We must modify the current
reimbursement system to ensure that reimbursement rates are
programmatically driven. The focus should be on the development
of appropriate descriptions for services for AIDS patients to be
followed by the development of licensure categories and
reimbursement rates. This may require changing the nomenclature
currently used by regulatory agencies as well as health care and
social service providers. For example, the New York State
Department of Health is currently reviewing and modifying the
definition of Intermediate Care Facilities (ICFs) so that these
facilities can be designed to meet the needs of those with HIV.
Reimbursement for ICFs will be developed which will adequately
cover the program costs for these patients. This is
significantly different from the usual attempts to place AIDS
patients into facilities not adequately reimbursed to provide
the services needed by this population.

From the time they are diagnosed with AIDS till when they
die, individuals with HIV will, on average, require three
hospitalizations and in the acute stages of AIDS, these
individuals will utilize more hospital resources than other
patients. Patients with HIV disease utilize more nursing hours
per patient per day than other medical-surgical patients (6.5 vs.
4.2 at St. Clare's) and they generally require specialized
medical services as well as extensive psycho-social support. At
St. Clare's Hospital, a recent analysis indicated that for a
patient with HIV infection the per diem cost for routine care is
almost $150 more than for general medical-surgical patients. For

-3-

 

 
 

 

hospitals without a dedicated program, the cost difference
between medical-surgical patients and those with AIDS or ARC
would be even greater.

It is important to recognize that reimbursement rates do not
fully cover hospital costs incurred when caring for a person with
AIDS or ARC and hospitals are currently absorbing these losses.
However, as the number of AIDS patients grows and the lack of
alternative services continues, it will become increasingly
difficult for hospitals to absorb these losses. This will
result in a number of hospitals quickly reaching the breaking
point and/or begin 'dumping' AIDS patients.

To assist hospitals in caring for individuals with AIDS, the
federal government must begin reviewing and revising the
services covered by the Medicaid program as well as increasing
the reimbursement rates for care provided to individuals with
AIDS or ARC. The Medicaid program plays an important role in the
care of individuals with AIDS or ARC. Nationally, 54% of AIDS
hospital admissions are covered by the Medicaid program and for
some hospitals this figure may be as high as 65%. In the
future, the Medicaid program will be the source of payment for an
even larger number of AIDS patients as the number of intravenous
drug users with AIDS or ARC increases. Consequently, Medicaid
must begin providing a higher hospital reimbursement rate for the
care of individuals with AIDS.

New York State has implemented a program which provides an
enhanced Medicaid rate for patients with HIV infection who are
cared for at hospitals designated by New York State's Department

- 4 =

 

 
 

 

of Health as comprehensive AIDS Centers. Yo xyeceive this
enhanced rate, a designated AIDS center nest provide and/or
arrange for individuals with AIDS to receive tne level of care or
services they require. This reimbursement system has facilitated
the development of comprehensive prograns while assisting
hospitals to provide quality care.

For inpatient care, designated AIDS casters are paid a
hospital specific Medicaid rate for AIDS patisvts om a per diem
basis. Each hospital applying for designaticm as. a canprehensiive
AIDS center submits a budget to the New York Sittate: Tepavtmenmt. of
Health indicating what it will cost the hospiittead. ¢@ wgrowide
and/or arrange for the level or types of services, reummiced! by the
New York State Department of Health. The Department of Health
reviews the budget, allowing or disalloving cemts,,, amd the
inpatient rate is determined through negotiiaciiens: betweem the
hospital and the Department of Health. At st. Clare"s Youmiltal,
our enhanced Medicaid rate was approximately $150 abowe vur
Medicaid rate for non-AIDS patients in 1987. salaries acraumt for
approximately 77% of our budgeted operating expemses with nursing
representing 34% and medical salaries an aditdeanad ut. In
hospitals which are not designated AIDS centers, reiminersement
for patients with HIV is done under a case payment. system based
on non-Medicare AIDS DRGs.

With respect to outpatient rates for AIDS petients,, New York
State Department of Health has set up a priscimy system for
designated AIDS Centers. Six categories of oxtpatiemt visits for
AIDS patients have been developed with different. Medicaid rates

- 5 -

 

 
 

 

for each type of visit. These rates range from $264 for an
"initial visit" to $34 for a therapeutic visit. For non-
designated AIDS center, the facility receives the usual amount
for a clinic visit - approximately $67.00 - regardless of the
type of visit. Unlike the inpatient rates, the outpatient rates
are not hospital specific - they are applied uniformly to all
designated AIDS centers. While New York State is to be commended
for recognizing the higher costs of caring for AIDS patients, the
system for outpatient reimbursement is more complex and
cumbersome than should be necessary.

As far as I know, this program of enhanced reimbursement for
AIDS patients is unique to New York State's Medicaid program.
The ability of hospitals in other states to provide quality
comprehensive services may be compromised by the lack of
responsiveness by state Medicaid programs and other third party
payors. While the New York State system does not necessarily
have to be adopted fully by other states, there should at least
be some discussion between the rate-setting authorities and
hospitals in other states to address the cost issues.

The Medicaid program varies from state to state with some
states having very liberal programs while others are more
restrictive in services and population covered. This has a
significant impact on hospitals and the care provided to
individuals with AIDS. A recent study of AIDS patient care in
public and private teaching hospitals revealed that nationally
the per diem costs per AIDS patient is $635 and while only a
. Small regional variation in costs exists, revenues received vary

- 6 -

 

 
 

 

significantly. For example, the per diem hospital costs for AIDS
patients in the northeast amounted to $633 and revenues received
averaged $546 with a difference between costs and revenues being
a loss of $87 per day. In the south, the per diem hospital costs
for AIDS patients averaged $626 but revenues received averaged
$282 resulting in a loss of $344 per day.° A recent study showed
that in 34 states where the Medicaid program covered less than
45% of individuals at or below the poverty level, hospitals were
reimbursed for only 52% of the costs incurred in caring for a
patient with AIDS. In 16 states with more generous Medicaid
programs, revenues received by hospitals covered 82% of costs. 4
Hospitals cannot continue to absorb losses averaging $2,907 per
AIDS admission.> The Federal and state governments must review
their Medicaid programs and increase their Medicaid reimbursement
rates as well as encourage other third party payors to do
likewise. An increase in hospital reimbursement will not only
facilitate the development of quality comprehensive AIDS program,
as is evident by the success of New York State's program, but
would also alleviate the financial pressures which may encourage
hospitals to 'dump' AIDS patients.

The answer to the cost issue related to AIDS care is not
simply to increase reimbursement for acute care. Sub-acute care
and community based services are crucial components in providing
care to individuals with HIV infection. In analyzing the costs
associated with inpatient hospital services provided to -
individuals with AIDS, it is important to remember that
individuals with AIDS or ARC often stay in hospitals longer than

-7-

 

 
 

 

medically necessary due to a lack of sub-acute and residential
facilities as well as community based services. At St. Clare's
Hospital on any given day 10% of our AIDS patients cannot be
discharged due to placement problems (e.g. no housing, requires
sub-acute care).

The lack of sub-acute facilities or community based services
can be attributed in large part to inadequate reimbursement. In
most states, for example, nursing homes under the Medicaid
program are reimbursed approximately $50 per day per resident.
However, it can cost an estimated $200 per day to care for an
AIDS patient in a long-term care institution. ® For community
based programs, the problem is that a number of state Medicaid
programs do not cover or only minimally cover many of the
outpatient services needed by individuals with AIDS. In addition,
Medicaid programs frequently will pay for services if they are
provided on an inpatient basis but not if these same services are
provided on an outpatient basis.

The continuum of care model with its emphasis on home care
and community based services appears to be the most effective and
appropriate way to care for individuals with AIDS. If this model
is to be successfully implemented and uniform throughout the
United States, pressure must be brought upon states to provide
Medicaid coverage for optional services, especially home care.

In addition to increasing the reimbursement rates, the
federal government must also strongly urge state Medicaid
programs to apply for waivers to develop alternative, innovative
programs that would not traditionally be considered eligible for

- 8 -

 

 
 

 

federal Medicaid funds. Medicaid waivers can be an effective
mechanism to promote the development of community based services
as well as sub-acute facilities, step-down units and residential
facilities. However, these waivers should not create new layers
of bureaucracy, which make them costly and cumbersome for
providers to implement. While an oversight mechanism on the
quality and comprehensiveness of care for persons with AIDS is
important, this concept is frequently made secondary or lost in
the emphasis on the regulatory process.

It is important to remember that if alternative programs
and community based services are to be developed, hospitals and
other agencies must have increased access to capital. The federal
government should consider creating a program similar to the
Hill-Burton Act to assist hospitals and other facilities in
funding the development of sub-acute facilities. More public
funds should be made available, such as the $6.7 million being
made available through the Health Resources and Services
Administration for the renovation and construction of non-acute
facilities for persons with AIDS. Additionally, the tax-exempt
status of not-for-profit hospitals which facilitates access to
capital and the development of innovative programs should be
preserved. Health supporting foundations must also begin
assisting providers in developing alternative innovative
programs. Most of the large health supporting foundations have
not committed a significant amount of funds to AIDS related
programs and it has been estimated that the Robert Wood Johnson
Foundation has provided almost 90% of the total AIDS related

-9-

 

 
funding provided by foundations. ’

Conclusion

In conclusion, caring for individuals with HIV infection is
a societal obligation and if we are to effectively respond to
this epidemic there must be a commitment from both the public and
private sectors. While my testimony focused primarily on the
Medicaid program, the recommendations are also applicable to the
other third party payors.

The development and implementation of needed programs and
services cost money. If the health and social services systems
are to meet the needs of individuals with HIV infection we need
access to capital and start-up funds. Both public and private
financial institutions as well as foundations must find ways to
make additional capital available. Without their assistance,
there will continue to be a shortage of subacute facilities and
community based programs. Patients will continue to remain
hospitalized longer: than medically appropriate and the health
care costs of caring for individuals with HIV will continue to be

higher than necessary.

 
l.

FOOTNOTES

"Impact of AIDS on the Health Insurance Industry", a speech
by Philip Briggs, Vice-Chairman, Metropolitan Life Insurance
Company, September 30, 1987, to the Institute for
International Research Conference on AIDS.

Leslie Brunetta, "Paying the bills: Medicaid and Hospitals
Cover Much of the Cost," Health Care Forum, February 1988,
p. 7.

Dennis Andrulis, Ph.D., Virginia Beers, MPA, et.al, "The
Provision and Financing of Medical Care for AIDS Patients in
U.S. Public and Private Teaching Hospitals," JAMA, 258:10,
pp. 1343-1346.

CDC AIDS Weekly, State Medicaid Policies and Hospital Care
for AIDS Patients. March 14, 1988, p. 24.

Andrulis, Beers, et.al; JAMA, 258:10, pp. 1343-1346.

AIDS Alert, Hospitals Finding Nursing Homes Refusing to
Accept AIDS Patients. December 1987, p. 192.

William A. Pastor, "AIDS Patient Care: A Social

Responsibility," Health Progress, Vol. 69, No. 2, p. 30.

-i1-
PRESIDENT'S COMMISSION ON AIDS

—— = = ewer es ee ee ee ee

 

TESTIMONY

te

Pamela J. Maraldo, PhD, RN, FAAN

Dr. Conway-Welch and members of the commission: my name jis Pamela
Maraldo. I am the Chief Executive Officer of the National League for Nursing,
a non-profit coalition of nurses, other health professionals and consumers
concerned about quality in health care. I appreciate the opportunity to
testify on behalf of this extremely important matter of financing to
adequately address the problem of AIDS. Estimated projections according to
the Surgeon General's Report on AIDS reveal that 270,000 cases of the disease
are expected by 1990. Currently, as you know, 52,000 cases have been
reported. Ninety-three percent are men, and the majority are Caucasian but,

increasingly, Blacks, Hispanics and children are becoming infected with the

AIDS virus.

In many respects the urgent need for a health care delivery system that
can effectively manage AIDS as the most frustrating and frightening chronic
iltness of our time takes those invalved in shaping public policy down the
same well worn track they have traveled many times before: long and
protracted debates over the inadequacies of our current system -- a system
that is heavily biased and inappropriately biased in favor of hospitalization
-- and Tteaves unresolved the problems associated with long term chronic
illness. As you well know, the benefit structure for most insurance places

neavy emphasis on medical episodes which require hospitalization, but does not
effectively or adequately address the needs of patients to be cared for at
home or in nursing homes -- where a substantial proportion of the catastrophic
costs of an illness like AIDS occurs. Furthermore, not enough of the health
care dollar is spent on prevention which is an especially critical public
health issue in the care of AIDS but affects other chronic diseases as well.
The social and behavioral roots of the disease run deep, and our system and
patterns of care should shift to address the imperatives of chronic illness.
By definition, these diseases have no cure - they have their roots in
behavioral, lifestyle and psychological factors. Most importantly, through
modifications in lifestyle, chronic illnesses are, in large measure,

preventable; but we are not spending enough as a nation on prevention.

Home care coverage often fails to adequately meet the service needs of
patients deing discnarged from nospitals earlier in their course of
treatment. And home care benefits are almost exclusively focused on acute
care oriented medical services which are often different From the chronic or

post nospitalization care needs of many patients.

These coverage problems are generic and not specific to AIDS patients.
The AIDS epidemic, however, dramatizes certain unmet national health needs and
the shortcomings in the benefit design of our public and private insurance
programs, including a lack of support for a continuity of care. Yet, there
are clearly additional problems with the public financing mechanisms that are
specific to AIDS patients. The eligibility rules to qualify for Medicare

benefits on the basis of disability are not an effective way to extend
coverage to certain AIDS patients. Coverage does not begin until 29 months
after diagnosis, and many of these patients have often died before coverage
can begin. In addition, tne Medicare hospice benefit, as currently
structured, may also provide no help to persons with AIDS. Barriers to
nospice care include requirements for a primary care giver, certification of a
termina] illness, a life expectancy of six months or less and a total
expenditure capacity of $7,300. At times these requirements cannot be met by

the AIDS patient - who often does not fall into the usual pattern of terminal

illness.

Fallout from this disease promises to be all pervasive and to have
profound effects on the health care delivery system as well as society at
large. A true understanding of the very far reaching effects of the AIDS
crisis makes the case for immediate and activist solutions. The AIDS problem
is of such a serious and far reaching magnitude that we do not, as a society,
Mave the Tuxury of endiessly discussing the problem in the context of the
Medicare and Medicaid reform debate. More immediate and targeted approaches

are called for.

The AIDS epidemic calls for an approach that is modeled after the
categorical health services projects, prevalent during the 1960's and 1970's,
that were designed to circumvent the problems of the system to deal with
specific populations and/or specific diseases. The criteria that led to the
establishment of the Neighborhood Health Centers program, the Children and
Youth program, or programs to combat heart disease, cancer and strokes, seem

to aptly apply to the current AIDS situation. A marked and increased federal
involvement in the funding and provision of health care to AIDS patients is
assential and programs should be designed specifically to address the needs
associated with the AIDS population. A Federal AIDS initiative should be
appropriately shaped to deal with the three nost pressing problems related to
the development of adequate financing mechanisms: 1) continuity of care
problems, 2) manpower supply problems 3) the high cost of caring for AIDS
patients -- not only because of high costs per case -- but because of the

increasingly larger volume of AIDS cases.

Specifically, Congress could authorize a program of Special Project Grants
for Individuals Living With AIDS to provide funding to private and public
agencies to cover the cost of supplying comprehensive care to AIDS patients.
Tnese services should focus on outpatient ambulatory services and have, as the
centerpiece of the program, home care as the setting of choice. Home care is
clearly the preferred setting to care for the AIDS patient for a variety of
reasons that have been very clearly articulated by AIDS expert, Peter

Ungvarski:

Home care affords the maximum emotional supoort in caring for AIDS
patients who are often ostracized and isolated from society at the time
when the need for attention and emotional support is greatest;

Home care offers the opportunity for maximum independence and dignity
to persons with AIDS who are losing both through this devastating,
debilitating illness;

Home care significantly improves the quality of life for persons with
AIDS and provides the opportunity to maximize use of their remaining

time;
Home care allows the greatest opportunity for family members and
significant others to learn about the disease and how to care for a
person with AIDS;

Home care allows for use of an appropriate continuum of care;

Home care costs suostantially less than institutional care. The
Centers for Disease Control] estimate that the average cost of care per
person with active AIDS is $140,000. Ina study conducted by Peter
Arno of the Institute for Health Policy Studies of the School of
Medicine at the University of California in San Francisco in June 1986,
the average cost of care for a person with AIDS in a municipal hospital
was found to be $800 per day in New York City. Under the home care
program directed by Peter Ungvarski at the VNS in New York, the largest
AIDS home care program in the nation, the average cost per day for care
of a person with AIDS is $81.40. New York City has contracted with the
VNSNY to provide hone care services for Medicaid-eligible persons with
AIDS and AIDS-Related Complex. Under this Medicaid program, 300
persons with AIDS or ARC have seen admitted since January 1936. The
average weexly caseload, including both children and adults, is 275
clients. This program accounts for the majority of the AIDS. caseload
at the VNS and averages 350-400 patients per week, including non-
Medicaid clients. Under this program the average length of stay is 45
days and the average cost per case is $3,663. Clearly a coordinated
plan for care, with home care as its mainstay, would be not only more
compassionate a method of caring for AIDS patients but more cost

effective.
A specially designed Federal AIDS program would go much further than

Medicaid, which leaves many individuals uncovered and many health services not
provided. Services could be provided through projects established by certain
grantee agencies. Unlike the benefits available to individuals under
Medicaid, which simply makes payment for health services, a Federal AIDS
program should provide health services directly, at little or no charge to the
patient. Such a program should consist of multifaceted interventions in the
health services delivery system, including efforts to reduce financial,
geographic, supply, fragmentation and psychosocial barriers to access to
primary care for AIDS patients. An individual's first contact with the
proposed Federal program could be precipitated by a diagnosis of AIDS or
AIDS-Related Complex, but the primary goal of a Federal AIDS program should be

the delivery of continuing and comprehensive care, most in the home setting.

The Private Sector Approach

There is reason to be wary of how much assistanc2 the private sector can
lend to devise the AIDS solution. The high volumes of individuals stricken
with the disease may make it prohibitive for the private sector to devise
comprehensive approaches to the problem. It is noteworthy, however, that
there is a trend among private payor communities, such as Blue Cross which is
the predominant private payor, to use a managed care approach to deal with
individuals infected with AIDS. The Kaiser-Permanente Health Plan on the West
coast has also adopted such an approach. Because of the high numbers of
individuals who must be treated, clearly the usual "a la carte" fee for
service approach to treating AIDS patients is inefficient and financially

untenable.

 

 
Managed care programs conducted by third party payors would likely be a
very cost-effective way to proceed with the provision of care for AIDS
patients. Yere again, in a managed care setting, home care would be the
setting of caoice to be woven into tne managed care network as the centerpiece
of the plan of care. A managed care approach would allow the right packages
of services -- tailored to the patient's needs -- to be delivered at the right

site.

Supply of Providers

 

®

The importance of financial incentives notwithstanding, care of the AIDS
patient entails provider safety issues -- many are concerned about contracting
the disease themselves -- and also involves an emotional and physical drain on
the nursing staff. To attract and retain qualified nursing personnel three
factors would be most furthering: 1) Increase salaries to be competitive with
other worxers -- include benefits for paraprofessionals and increased
recognition for all categories of nursing personnel; 2) Provide financing for
educational programs to nursing personnel to reduce fear and replace it with
accurate information {in home care agencies where :taff is well- educated and
workers are prepared to care for AIDS patients there seems to be a greater
willingness to care for these patients); 3) Arrange support groups to assist

nursing personnel to deal with their own feelings surrounding the disease.

Until recently the nursing shortage has not presented a major problem in
the home care industry. Historically nurses have enjoyed a high degree of

autonomy in practice and often preferred to work in the home care setting. A
shortage exists currently, however, and the major factor required to remedy
the shortage of nurses and nurses' assistants is improvement in the wage
structure of these providers. Clearly a major obstacle to acquiring an
adequate supply of nurses and paraprofessionals is the low pay they receive.

In the case of professional nurses, hospitals have increased nurses’ salaries

since the shortage and have attracted them away from the home care setting.

The financial requirements of a full program to recruit and retain nursing
personnel could be included as a component of an overall Federal categorical

program.
 

 

SUMMARY OF TESTIMONY OF KAISER FOUNDATION HEALTH PLAN
BEFORE THE PRESIDENT’S COMMISSION ON
THE HUMAN IMMUNODEFICIENCY VIRUS EPIDEMIC

April 26, 1988

Kaiser Permanente has had substantial experience in providing
care to members who have developed AIDS. Group practice,
prepayment, and comprehensive benefits have enabled us to do this
in a cost effective manner. We are concerned about the lack of
health benefits coverage for many of those with AIDS.
Consideration needs to be given to approachs to increase such
coverage, including:

1. Establishing state risk pools for the uninsured.
2. Increasing employer-provided health benefits coverage.
3. Expanding Medicare eligibility.

4. Encouraging health benefits plans to cover and underwrite
AIDS under similar rules.

5. Examining the need to provide financial relief for health
benefits plans that are disproportionately impacted by AIDS.

6. Increasing payments to persons with AIDS under Medicaid.

Kaiser Permanente, by providing comprehensive benefits, has
demonstrated that a significant proportion of patient care can be
provided in a cost effective manner in a non-hospital setting. We
recommend the Commission encourage the expansion of such care by:

1. Collecting and distributing information about cost
effective methods of care, emphasizing non-hospital settings.

2. Encouraging health benefits carriers to improve coverage
of outpatient services.

3. Encouraging community action to support AIDS patients,
thereby increasing the opportunity for outpatient and home health
care.

 

 
TESTIMONY OF KAISER FOUNDATION HEALTH PLAN, INC.

BEFORE THE PRESIDENT'S COMMISSION ON THE HUMAN
IMMUNODEFICIEN VIRUS EPIDEMIC

APRIL 26, 1988

Mr. Chairman, members of the Commission, I am Robert M. Crane,
Vice President - Government Relations, Kaiser Foundation Health
Plan, Inc. I am accompanied by Robert Lawrence, M.D., Chief of
Allergy and Immunology and Chief of the Immune Deficiency Clinic

at our Edgar F. Kaiser Health Center in Portland.

Kaiser Foundation Health Plan, Inc., its eleven subsidiaries,
Kaiser Foundation Hospitals and twelve independent Permanente
Medical Groups comprise the Kaiser Permanente Medical Care
Program. Kaiser Permanente, the world's largest private health
care program, provides health services on a prepaid direct service
basis to over 5 million members in sixteen states and the District
of Columbia. Our health plan members receive services through 28
of our own hospitals, more than 150 medical offices, more than

6,000 contracting physicians and over 53,000 employees.

Kaiser Permanente is a prepaid group practice program. As
such, it organizes, finances and provides health care services.
We have extensive experience in treating AIDS patients in the
urban centers where we operate. The majority of our health plan
members reside in areas hard hit by AIDS. In San Francisco, where
a quarter of the population is enrolled in our health plan, we are

second only to the county health care system as a provider of care

 
 

to AIDS patients. We also have substantial AIDS case loads in

Southern California, Portland, Denver, Dallas, and Washington, D.C.

AIDS presents significant challenges for our Program because
of the way we operate. We are a direct service group practice
prepayment plan and we organize covered health care services for
our membership; therefore, it is essential that we plan for the
facilities and staff necessary to provide appropriate care for our
members. Generally, we can estimate these factors within a
reasonable range. AIDS, however, is a very difficult disease for
which to plan. While we know how many AIDS patients we are
treating, we do not know how many of our members are infected or
will be infected with HIV, the AIDS virus, nor do we know the
effect new technologies and drugs will have on the treatment of
AIDS and the cost of treatment. We are working to improve the
information base for forecasting the resources that will be needed

to treat AIDS within our Program.

Many of our Regions have established AIDS committees to better
coordinate planning and clinical care of AIDS, and to improve
physician, employee and member education about the disease. Our
Program also has established an interregional AIDS committee which
brings together ideas from the Kaiser Permanente systems
throughout the nation.

c
In treating AIDS, we have learned that services can be

provided in a cost effective manner. Indeed this is essential if

 
AIDS is not to overwhelm the health care system. Some of the
characteristics of our Program facilitate this. Prepaid group
practice systems like Kaiser Permanente provide members with
comprehensive benefits for ambulatory care in addition to
inpatient care. Patients do not have to be hospitalized to

receive benefits unless hospitalization is medically appropriate.

Also in our system an attending Permanente physician has no
personal financial incentive to hospitalize a patient if a
procedure can be done as effectively and with no greater risk in
an outpatient setting. The Permanente physician's income is the
same in either case, so the physician's decision on whether to
hospitalize or not is based on criteria for medical
appropriateness. Physicians, however, must have a full range of
resources available to enable optimal choices for the site of
care. Such options generally are more readily available in an

organized system.

Most aspects of AIDS can be treated outside the hospital
setting on an ambulatory basis and through home care. For
example, we have set up ambulatory infusion centers in Portland,
San Francisco and Los Angeles as alternatives to higher cost
inpatient treatment. These centers provide outpatient drug
therapy to a large number of AIDS patients who would otherwise
require hospitalization. In San Francisco, in the first 18 months
of operation, the center saved an estimated 3,500 inpatient days.
This not only saves-money and resources, but is a preferred method

of treatment for many AIDS patients. Also to avoid duplication of

 
effort and assure continuity of care, we are successfully
integrating our treatment programs with the broad network of
social services which community and public health agencies have

established in many of the communities in which we operate.

Our experience has taught us that we must be flexible in our
methods of organizing care to meet changing conditions. We have
discovered that specialization can lead to more organized and
effective care for AIDS patients. In our San Francisco Medical
Center, the initial view was to treat AIDS patients throughout the
medical service. When the volume of patients created logistical

problems, a specific unit for AIDS was established.

Dedicated physicians, nurses and other providers concentrated
on caring for AIDS patients. The volume prompted specialization
and specialization has enabled our providers to advance quickly up
the learning curve in caring for AIDS patients in a sensitive,
medically appropriate and cost effective manner. At the same
time, it is important that all physicians understand the disease,
learn about cost effective treatment modalities, and participate

in treatment as appropriate.

In Portland, Oregon, an immune deficiency unit modeled after
an oncology unit was established. The unit takes primary
responsibility for managing AIDS cases and a consultative role in
cases of patients with an AIDS related condition. Dr. Lawrence is
in charge of-this unit and-can respond to questions you might have

about it.
Planning and organizing services and establishing more cost
effective treatment modalities will moderate, to some extent, the
cost of financing AIDS care. However, there remain significant
problems associated with the financing of care of AIDS patients.
These are difficult to consider without looking at the broader
problem of how to increase access to health benefits coverage in

the U.S.

It is estimated that approximately 37 million Americans lack
private or public health benefits coverage. They are either
self-employed, employed by an employer who provides no coverage or
unemployed. While some choose not to purchase coverage, many
cannot afford it or, because of their health status, are
ineligible for individual coverage. Income, resources, or family
status make them ineligible for Medicaid. A growing number of
this uninsured group are AIDS patients. Their plight is all the
greater because their disease is so costly and, of course,

ultimately fatal.

Consideration needs to be given to approaches to increase such

coverage. Let me suggest several.

Establish state risk pools.
Fifteen states have enacted risk pools under which persons

turned down for individual health benefits coverage for medical

reasons are-eligible to receive--subsidized health insurance.
Other states could be encouraged to do the same. Subsidies are
necessary because the cost of providing services to these high

risk individuals exceeds what most can afford to pay. Generally
the subsidies are financed through an assessment on all licensed

health benefit plans which are required to participate in the pool.

Because of the ERISA preemption of state regulation of
self-insured plans, such programs cannot be required to
participate in pools or be taxed to finance subsidies. Because
more than 50 percent of all employees with health insurance are
covered under self-insured plans, ERISA forces other employees to
bear a disproportionate burden. Congress has considered, but not
adopted, legislation that would permit states to require
participation of self-insured plans in risk pools. Such a change
in federal law is necessary if risk pools are to be equitably

financed by all health benefits plans. Risk pools could also be

financed using other broad based revenue sources.

 

Approximately 75 percent of the uncovered are either employed
or dependents of employed uncovered workers. Thus, much public
policy debate has centered on whether government should require or
provide incentives to employers to provide some minimum level of
health benefits coverage to their employees. If such a
requirement were to be enacted, it, in combination with the

Consolidated Omnibus Budget-Reconciliation-Act (COBRA)
health benefits coverage continuation requirement, would be of

substantial help to workers who get AIDS.

Any program to increase health benefits coverage should
provide for the participation of managed care programs such as
prepaid group practice plans and should structure benefits in a
way which will encourage the provision of services in less costly

settings.

Expand Medicare Eligibility.

Legislation has been introduced in Congress to eliminate the
two-year waiting period for Medicare eligibility for AIDS
patients. While action on this legislation appears unlikely,
continued consideration should be given to this concept; perhaps
shortening rather than eliminating the waiting period or
coordinating it with the eighteen-month eligibility for continued

health benefits required under COBRA.

In addition to these three general approaches to financing
coverage, there are several worthy of consideration that relate

more specifically to AIDS. ,

En x health nefi lan cover and un rit ID
under similar rules, .

Concern about the cost of AIDS and adverse selection will

cause many health-benefits carriers to seek to avoid insuring

 
those exposed to the AIDS virus. A few states have sought to
mitigate this by prohibiting health benefits plans from testing
for the presence of the AIDS antibody. If health benefits plans
covered AIDS similarly, used similar underwriting practices, and
were paid using similar methods, the likelihood of adverse
selection from AIDS would be reduced. Health benefits plans can
vary in a number of ways: 1) availability of individual
enrollment; 2) criteria for medical screening; 3) use of AIDS
antibody and other testing, 4) preexisting condition restrictions;
5) deductible and copay limitations; 6) scope and duration of
minimum benefits coverage; and 7) methods of establishing rates.

Government should encourage more uniformity in these practices.

As the impact of AIDS increases, health care costs will rise
and the premiums of all health benefits plans will increase.
However, some plans may feel the effects a good deal more severely
than others. If the impact is sufficiently disproportionate the
viability of some plans serving areas with_a high concentration of
AIDS patients may be at stake with the resulting loss of coverage
for persons with AIDS. The lack of a mechanism to deal with this
problem may lead health benefits plans to develop mechanisms to

avoid insuring AIDS patients.

It may be necessary to set up a system that encourages health

benefits plans to enroll AIDS patients by assuring them that if a

 
plans enrolls a disproportionately large share, it will not bear
the cost alone. This could be accomplished in a number of ways;
for example, by establishing a risk pool for all AIDS patients, or

by establishing stop loss programs for health benefits plans.

Increase Medicaid coverage and payment for persons with AIDS.

The California Medi-Cal program has established a higher per
capita payment for an individual diagnosed as having AIDS and
enrolled in an HMO. This recognizes the increased expenditures
associated with the AIDS diagnosis and helps remove disincentives
associated with coverage of such individuals. Such an approach
also provides Medi-Cal beneficiaries with AIDS with improved
access to managed care programs. This approach could serve as a

model for other states.

In addition, states vary widely in their eligibility
requirements. More uniformity in these requirements for AIDS

patients across states is desirable.

Even if broader health benefits coverage can be achieved,
problems remain in encouraging out-of-hospital care and the
development of community support services to assist AIDS patients

in remaining in a non-hospital setting.

Our Northern California Region recently completed a case study

on the impact of AIDS for the Office of Technology Assessment.
The Region identified 940 AIDS patients through June of 1987.
Thirty of these were selected for a cost study. Mean lifetime
costs were $35,054 for this group. Approximately, $10,500 or 30

percent of these costs related to outpatient services.

As noted, in a prepaid health care system, there is an
incentive to provide care in the most cost effective setting.
This is facilitated by providing coverage in both inpatient and
outpatient settings. Many health benefits plans do not provide
coverage of outpatient care to the same degree as inpatient care.
Since it may not be practical to change incentives and coverage of
health benefit plans at this time, we recommend the Commission

consider the following:

1. Collect and distribute information about cost effective

methods of care.

The Commission or an appropriate federal agency can play an
important role in documenting cost effective AIDS treatment
methods and encouraging their use by those who provide health
benefits coverage and those who treat this disease. For example,
use of infusion centers and the relative cost of different
treatments should be analyzed and distributed broadly by either
the Commission or an appropriate part of the Department of Health

and Human Services.

2. Encourage health benefits carriers to improve outpatient

coverage.

-10-
Experience shows that coverage affects practice patterns. If
hospital care is covered and office or home care is not, hospital
care will be used more frequently. The Commission should urge

health benefits carriers to broaden outpatient service coverage.

3. Encourage community action in support of outpatient and

home care.

San Francisco is a case study in the effective use of
community resources to support AIDS patients. The factors which
lead to such community support and the use of volunteers should be
documented and disseminated. Other communities should be
encouraged and perhaps supported financially in an effort to
develop support systems relating to housing, emotional and social

support and adequate health care services.

Mr. Chairman, Kaiser Permanente is committed to providing
quality, cost effective care to its members with AIDS and doing
our share to contribute to:solving the financing issues related to
the disease. We believe that the burden for financing care for
those with AIDS should be shared: broadly across society. The
Commission is to be commended on its recommendations emphasizing
education, particularly for the hard to reach, research and
additional treatment resources. We hope that the proposals
described above will assist the Commission in reaching
constructive recommendations in the area of financing care for

those with AIDS.

-1l-
Thank you for the opportunity to testify before the
Commission. Dr. Lawrence and I would be happy to answer any

questions.

1172T

-~12-

 
STEVEN ANDERMAN
DIVISION OF HEALTH CARE FINANCING
NYS DEPARTMENT OF HEALTH
ALBANY, NEW YORK

Deputy Director of Health Care Financing for the New York State
Department of Health. My responsibilities include the development and
implementation of the health care financing program for the State of New York.

| have an undergraduate degree in Economics and Computer Science,
Master’s Degree in Public Systems and a Master’s of Busincss Administration in

Health Care Administration.

 
April 22, 1988

New York State has developed a comprehensive approach in the
delivery and financing of services to AIDS patients. For the provision
of acute care hospital services, we have developed AIDS designated
centers. These centers are responsible for the management and care of
AIDS patients for acute care services. We have structured the financing
of these programs as exempt hospital units, paid for on a per-diem basis
under the state's case payment system or on a DRG basis under specific
DRG's for AIDS. As part of the hospital delivery model, we have also
structured an outpatient financing program whose goal is to, where ever
possible, treat the AIDS patients with care and dignity in an outpatient
setting. Rates of payment have been structured from $45 per visit to
$250 per visit, recognizing the types of services AIDS patients receive
in an ambulatory care program. These services, for example, include a
comprehensive medical evaluation, chemotherapy, blood transfusion and

medical follow-up visits.

It is estimated that already 30 percent of all hospitalized
AIDS patients could be more suitably cared for in alternative settings.
Consistent with our approach to a comprehensive delivery model, we have
structured a program to deliver care to AIDS patients in skilled nursing
facilities or extended care facilities. New York State already has an
innovative payment approach for the care of long term care patients.
This system called RUGS (Resource Utilization Groups) pays an
institution for the direct care needs of long term care patients. The

payment to these facilities is based on the 16 different levels of

Page 1
patient care. We have structured the payments to long term care
facilities for AIDS patients utilizing our RUGS patient hierarchy. The
level of care for AIDS patients ranges from those patients who require
a minimal amount of supervision and assistance, to those patients who
may be clinically difficult to maintain and manage. The rates of
payment for these patients will range from $60 per day to over $250 per
day for their care and treatment. If these facilities can be put in
place, they provide a very cost effective, as well as appropriate,
patient setting. The AIDS patients if treated in a hospital would cost
between $600 and $1,000 a day.

We have also not forgotten the patient who, once an acute care
episode has passed, can go home and receive home care services. In
order to continue to provide case management to AIDS patients at home,
we have restructured our home health care payments to reflect the
additional time that home health care nurses must spend to provide this
important service in addition to other medical services to AIDS
patients. On average, this tends to be typically 30 percent higher that

the average clinical patient a home health care nurse will treat.

In terms of all approaches to the financing of AIDS care, we
have approached the problem utilizing pricing concepts for their unique
ability to promote efficiency. Our objectives have been that the needs
for patient care services should be narrowly defined, the price set for
such services should be equal to the cost of providing the care for
these services and that the principals of the state's prospective

payment methods have been preserved.

Page 2
OBSTACLES TO PROGRESS

Continued lack of Medicare participation.
Increasing burden on state and local finances.

Risk aversion of capital markets to invest in the development of
facilities and programs.

RECOMMENDATIONS

The two-year waiting period for eligibility under Medicare must be
eliminated. AIDS has been recognized as a disabling condition and
Medicare participation should be immediate.

Medicare scope of beneficiary coverage should include an enhanced
out-of-hospital service package for AIDS patients, coupled with
above.

Federal matching of Medicaid funds should increase to at least 75
percent which would help to offset the explosive cost growth of AIDS
care on state and local governments.

The Federal government should make available to states funding
which can be used as seed dollars for capital construction for
out-of-hospital services such as_ residential health care
facilities, free standing ambulatory care clinics and home health
providers.

 
 

   

gia oa a
BE
NATIONAL ASSOCIATION FOR HOME CARE MARGARET J.CUSHMAN HONORABLE FRANK E. MOSS Wm
$19 C STREET, N.E., STANTON PARK CHAIRMAN OF THE BOARD SENIOR COUNSEL
WASHINGTON, D.C. 20002 VAL J. HALAMANDARIS
(202) 547-7424 PRESIDENT

STATEMENT OF

PAUL L. RIGER, Executive Director and Chief Operating Officer
Visiting Nurse Association of D.c.

on behalf of

THE NATIONAL ASSOCIATION FOR HOME CARE
before the
Presidential Commission on AIDS

Washington, D.C.
April 26, 1988
 

 

Members of the Commission, my name is Paul Riger. I an
the Executive Director and Chief Executive Officer of the
Visiting Nurse Association of DC and am here representing the
National Association for Home Care, on whose Board of Directors
I serve. The National Association for Home Care is the nation’s
largest professional organization, representing the interests of
nearly 6000 home health care providers, hospices, and
homemaker-home health aide organizations. On behalf of NAHC, I
would like to commend the Commission for holding hearings on the

financing of home care for persons with AIDS.

Home Care for Persons with AIDS

The home care industry has been an important player in
the design of a cost effective and humane system of care for
persons with AIDS from the early days of the epidemic when it
became apparent that hospitalization as the major setting for
care was costly and often unneccessary. At that time the cost
per case was estimated at staggering levels of $150-170,000.
Since home care has become an established part of the continuum
of health care services required for patients with HIV
infections the costs have dropped by more than two-thirds the
original estimates. Home care’s role in the care of persons with
AIDS may have emerged for economic reasons but home care is
particularly appropriate or persons with AIDS for the following

reasons:

 

 
 

o Home care enables persons with AIDS to spend their
remaining days in familiar surroundings, ‘thus’ providing

emotional support for them and their families;

o Home care provides maximum idependence and dignity
to persons with AIDS who are losing both through this

devastating and debilitating illness;

o Home care significantly improves the quality of life
for persons with AIDS and provides the opportunity to maximize

use of their remaining time;

o Home care allows the greatest opportunity for family
members and significant others to become educated about AIDS and

to participate in care of a person with AIDS;

o Home care allows for use of an appropriate continuum

of care based on the least restrictive setting; and, finally,

fe) Home care costs substantially less than

institutional care.

San Francisco and New York Experience

Although we have limited national figures on the cost
of home care and AIDS, data from the AIDS Home Care and Hospice
Program of the Visiting Nurse Association of San Francisco and

the AIDS project of the Visiting Nurse Service of New York
provide a good estimate. San Francisco VNA states that the
average length of stay in their program has been 57 days from
the start of care through discharge. Ninety percent of the
patients have died at home. The average cost per patient day in
the program is $94 or approximately $5,358 per length of stay.
In 1984, the programs average daily caseload was 18. By 1987 the

average daily caseload had increased to 63.

VNS of New York calculates their per diem costs for
1986 is $81.40. Their program supports a Medicaid contract with
New York City. VNSNY has contracted to provide all Medicaid
services, as well as Home Attendant services and continuous
nursing services. In 1985 VNS Home Care was providing services
to an active caseload of 56 persons. By May of 1986 there were
249 patients with AIDS receiving care. Since the initiation of
the Medicaid program VNSNY has received referrals on 1,255
infants, children and adults and an additional 1,250 patients

from other sources.

Both San Francisco and New York programs utilize a
case management approach to the care of AIDS patients. Case
management manages care for the AIDS patient along a continuum
of services based on the individual’s needs. Case managers
select from a wide variety of community resources to meet those
needs rather than focusing on one health care setting or
resource. Although custom-tailored to the patient, case

management enhances cost-effective delivery of services.

The average daily rates of $80-94 make home care an
attractive option in that continuum, particularily when measured
against average daily hospital costs of $773 or $9,024 per
admission for San Francisco and figures of $1,400 and $18,000

respectively for New York City.

Problems

Home care for AIDS patients is not without problems.
Many patients who would be eligible for home care are homeless
and institutionalization is the only option for care. In
addition, the nation is experiencing a nursing personnel
shortage including registered nurses, licensed practical nurses
and homemaker-home health aides in home care and long term care
facilities. It is this shortage factor that contributes to the
higher utilization of institutional care and subsequent higher

costs in New York City.

Inadequate financing of services contributes to the
shortage problem. Homemaker-home health aides can make more
money working for MacDonalds. Yet, Medicaid rates generally do

not allow for adequate reimbursement of their salaries.

As the demographics of the AIDS population shifts from
the male homosexual community to the drug abusing population,
the number of uninsured and underinsured patients has increased.
This has placed a terrible burden on public hospitals, public
health home care agencies and voluntary agencies such as the
Visiting Nurse Associations. These organizations must accept

uncompensated care patients and while the volume of
uncompensated care has increased dramatically throughout’ the
nation, uncompensated care of the AIDS patient has worked a
particular hardship. It is even more discouraging when there is

a paucity of financing options available:

o Very few AIDS patients are eligible for Medicare,
since they die before meeting the two year disability waiting

period.

o Medicaid offers only a partial solution and in many
states does not cover the scope of services required by AIDS
patients. In addition, when considering Medicaid, it must be
kept in mind that 18 percent of Americans have no health
insurance coverage, including Medicaid and that the proportion
of poor Americans covered by Medicaid has declined from 65

percent in 1976 to only 38 percent in 1984.

oO Private insurance, when it exists, is similarly
limited and in some cases will not cover home care which is at

least a mandated service under Medicaid.

In light of these financing problems, NAHC is quite
concerned when pronouncements are made by Federal policy-makers
that home care and/or hospice care is the answer to cost
effective care for AIDS patients. Certainly, home care is part
of the solution but that solution must be predicated on adequate

financing of services regardless of the setting.
Recommendations

Current Medicare eligibility requirements of two years
disability should be waived for individuals who have been
diagnosed as having AIDS. A precedent for this has been set by
the recent changes in the Social Security Act, which now permits
a presumption of disability for a diagnosis of AIDS. Opening
Medicare to persons with AIDS will provide better access to

home care services as well as hospice services.

Medicaid rates must be reexamined, particularly with:
respect to community-based services, such as home care and long-

term care services.

Thank you for the opportunity to present our concerns.

I will be happy to answer any questions you may have.

 
SIR SPEEDY 8557 TEL No.2125647667 Apr 25,88 9:33 No.001 F.02

My name ia Benn Brown. I am the Associate Director of the
AIDS Resource Center of New York, sponsoring agency of Batley
House and the Scattered Site Apartment Programs. Our agency
ia the largest provider of supportive houging for homeless
people vith AIDS in the country. We currently provide
housing and support services to more than 65 people on any
given day and 220 homeless persons with AIDS annually. Thies
number, in fact, ia very small in comparison to the growing

humbers of homeleas persone with AIDS and AIDS related

conditiona.

The AIDS Resource Center housing exists because of private
sector gupport. Without the private dollar, as leverage for
public funding, there would not be programe such ag Bailey
House or the Scattered Site Apartments. Had it not been for
private atart-up funding that provided the first apartments,
the history of this agency would have been very different.
Because the demands for private sector support are greater
then ever, public funding from government agencies is, and
muat continue to be, the major source for maintaining and

developing housing for pergone with AIDS.

Public funding must inolude not only supportive housing but
also expanded home health care, ambulatory care and support
services for people with AIDS living at home. Using New York
State as an example, in 1986 NYS health care costy for AIOS

services (not including medications) totaled $177 million.

Page 2
TrPeEevt 2

qd
q!

Thia total broke out as follows: 94% in-patient care, 5%
out-patient care and 1% long-term oare,. (see Health Care
Resource Requirements for AIDS Patients in New York State,
1986-1991, NYS Department of Health, Nov. 12, 1987,) The 1%
allocation of health care dollars to long-term care
dramatically highlights inadequate public investment in the

care of persona with AIDS outside the hospital.

Total agency percentages from funding sources for the
operational expenses of Bailey House and Scattered Site
Apartment programe include the following: funding from NYC
for Bailey House (38%); a demo grant from USPHS for Bailey
House (13%); a substance abuse grant from DSAS for Bailey
House (2%); residents contribution towarda room and board for
Bailey House (7%); funding from NYG for Scattered Site
Apartment program (124); residents contribution towarda room
and board in the Scattered Site Apartments (14). The balance
of the agency’s funding ite private dollar contributions
(23.5%). Ags you can see, our funding pattern ig a piecemeal
operation. There ere no in-kind donation dollar amounts
figured into these statistics, however, without the in-kind
donations, our costa per resident would increase

eubstantially.

At the present, our operating coste are averaging ap follows:
in the Scattered Site Apartment program it costs $42.50 per
single resident per day and $106.25 per family unit per days
at Bailey House 1t costes 694.44 per resident per day. These

costes clearly demonstrate the efficiency of eupportive

Page 3
housing versus the estimated 8750-61000 per day of extended

hospitalization.

Nev York City requires that each resident of the Bailey House
program pay 6346 of the 6425 SSI benefits toward their room

and board. Thie leaves the resident with approximately $79 to

Gover all personal expenses during a month.

There is at present no SSI Level 2 funding source available
ag no category of licensing, prerequisite for SSI Level 2
entitlements exists to certify supportive housing for people
with AIDS. Thie ie a critical concern for our agency and
others trying to provide assietance to persons with AIDS. It
is imperative that the Social Security Administration review

ite policy in the face of thig national health crisis and

direct atate Iisenaing authorities accordingly.

At present no Medicaid/Medicare funding stream includes the
capital or operating expenses of supportive housing. There
were no accessible funding sources for housing when this
agency began its work. We were the "front runner" in the
race and have pieced together our funding on an ad hoc basis.
Supportive housing for persone with AIDS is generally omitted

from existing government planning.

In order for there to be replicationa of Bailey House and
Scattered Site model housing programs, funding streams must
be created which do not now exist, No one should have to ’re-

invent the wheel", as we have done, to provide services and

Page 4

 
housing for homeless persone with AIDS.

RECOMMENDATIONS:

l. The fireat recommendation that we would make to the
Cammiesion ie that a form of licensing be created enabling a
group residence for persone with AIDS eligible for SSI Level
2 funding. Our recommendation would be to attach licensing

atandards to the support services that are provided to the

residents and not to the physical facility.

2. The second recommendation is to increase the SSI
pereonal allowance grant for residenta to an amount suitsble
for a younger, chronically ill] population, rather than the

current standards established for a more _ immobile,
institutionalized population. A minimum of $120 per month is

recommended where three meale a day are provided. This
amount must thereby be exempt from projected § resident

payments toward room and board costs.

3. The third recommendation ig that the U.S. Department of

Health and Human Services must issue a directive to state
governmenta requesting that states develop a new licensing
category for specialized residences for persons with AIDS and
AIDS related conditions. Existing licensed programs such ae

SNF and ICF must be expended for a email portion (lesa than
10% of homelese persons with AIDS require medically
supervised institutional care). For most, a newly licensed

non-inatitutional housing environment ie the most appropriate

Page 5
and cost efficient residential alternative to extended

hospital stays.

4. The fourth recommendation is that enabling legislation
must be drafted to provide operating and capital funds for
residences for people with AIDS, and/or others with chronic,
disabling conditiong in need of supportive housing. New
legialation, perhaps modeled on statutes creating residences
for the developmentally disabied, must integrate existing
funding atreams, such as SSI, with new authorizationg which
will provide for a public/private partnership in the rapid

expansion of out-of-hospital housing alternatives for people

with AIDS.

Bold stepa are needed in response to these issues and
recommendations. Housing and supportive services for the
increasing number of homeless persone with AIDS is not only
humane, but cost effective. Over the past three years, the
AIDS Resource Center’s two housing programs have proven to be
a life-enhancing alternative to inatitutional fecilities.

Government action ig necessary to create necessary funding
and admintetrative means to develop and operate similar

programe nationwide. We cannot afford to delay action any

longer.

Page 6
POLICY IMPLICATIONS OF THE COSTS OF AIDS

TESTIMONY BEFORE THE

PREIDENTIAL COMMISSION ON THE HUMAN IMMUNODEFICIENCY VIRUS EPIDEMIC

April 26, 1988

Jane E. Sisk, Ph.D.
Senior Associate
Office of Technology Assessment
U.S. Congress
Washington, DC 20510-8025
I am Jane Sisk, Senior Associate in the Health Program at the
Congressional Office of Technology Assessment. My testimony is drawn
primarily from an OTA staff paper "The Costs of AIDS and Other HIV Infections:
Review of the Estimates", which I would like to enter into the record.

AIDS is a newly detected disease that has been expensive to treat and
that has affected primarily men in age groups with historically low rates of
sickness and death. As a result, AIDS has raised long-standing issues of how
to finance catastrophic costs of illness and how much to allocate to
prevention and to treatment, in this case of human immunodeficiency virus
(HIV) infections. AIDS has also raised new issues of how to deal with this
specific disease in matters concerning data collection and payment for medical

care.

Paying the High Costs of Illness

How to pay for the costs of treating AIDS is but a recent example of the
continuing issue of how to pay for illnesses with high treatment costs, high
in absolute terms and high as a percentage of income. AIDS patients for the
most part have been working-age adults. It has been estimated that about 17
percent of people in their prime working years have been uninsured for all or
part of the year (Farley, 1984) and that about 22 percent of the population
under age 65 have been at risk of being unable to afford necessary medical
care because they were uninsured, underinsured, or otherwise medically
disadvantaged (Bazzzoli, 1986). In such cases, not only the patients and
their families, but also the providers who care for them are financially
vulnerable in the face of catastrophic expenses.

On its face the financing of AIDS treatment costs appears similar to
that of other very expensive illnesses. With the survival and treatment

patterns documented in studies through mid 1987, AIDS lifetime hospital costs
1
 

have most likely been under $100,000 (Scitovsky, et al., 1986b), and estimates
of annual treatment costs for patients alive at any time during the year have
been under $40,000. These estimates have generally included inpatient care,
but have excluded nursing home and home care and have varied in their
inclusion of ambulatory drugs and other services. Although such expenses may
be devastating and unexpected for the individuals involved, this level of per
patient costs is in the same range as treatment costs for other severe medical
conditions, about $158,000 per year for patients with end-stage renal disease
who are undergoing dialysis (Eggers, 1984) and about $30,000 (in 1984 prices)
in the terminal year for nonelderly people with certain cancers (Long, et al.,
1984).

What makes this disease a special case is the increasing prevalence of
AIDS and HIV infection and the age groups affected. Based on estimates of
present infection rates, from 1984 to 1991 AIDS cases are expected to rise
from 3.96 to 68.63 per 100,000 U.S. population, and deaths are expected to
rise from 1.49 to 25.74 per 100,000 U.S. population (Scitovsky and Rice,
1987). If direct medical costs for AIDS rise, as projected, to about $7.0
billion by 1991, they will account for 1.4 percent of U.S. personal health
care expenditures, up from 0.2 percent in 1985.

AIDS has affected mostly young men in their prime working years who are
either homosexuals or intravenous (IV) drug abusers. This age-sex group has
historically had low mortality rates and low medical expenditures, a pattern
on which insurance companies have relied in calculating health and life
insurance premiums. AIDS has disrupted that pattern and added a new layer of
medical expenses that was totally unexpected only a few years ago. To the
extent that HIV continues to be transmitted, increasing rates of AIDS and HIV

infection will fuel even higher medical expenses. One would expect health
insurance premiums of private insurers.to rise to the extent that AIDS cause
medical expenditures to rise for age groups that have historically had low
expenses.

The different distribution of payment for AIDS expenditures compared
with payment for total U.S. hospital and physician services is also noteworthy
(US, DHHS, 1986). In 1985, private insurance paid 36 percent of all hospital
care and 45 percent of all physician services, in the same range as estimates
for AIDS payments. Medicaid, however, seems to pay a much higher percentage,
and Medicare clearly pays a lower percentage for AIDS than for overall health
care, In 1985, Medicaid paid 9 percent of general hospital care and 4 percent
of general physician services, compared with HCFA estimates of 23 percent of
AIDS costs (for 40 percent of AIDS patients). In that same year, Medicare
paid 29 percent of general hospital care and 21 percent of general physician
services, compared to estimates of 1 to 3 percent for AIDS. Medicare's lower
share reflects the younger age groups that have contracted AIDS and their
short survival time, which has made it unlikely that AIDS patients live long
enough to qualify for benefits as disabled persons. Medicare’s share will

rise to the extent that AIDS patients survive longer and qualify for coverage.

Allocating Resources Between Prevention and Treatment

Another long-standing policy issue is how much to allot to a particular
disease and, within that total, how to allocate resources between prevention
and treatment, in this case, between preventing the transmission of HIV
infection and treating people who are already infected or who have symptoms of
Gisease. Prevention entails not only medical research to develop vaccines or
drugs, but siso epidemiological research to describe and predict the spead of

the disease and educational efforts to interrupt viral transmission. During
 

 

1986 an estimated $542 million was spent on AIDS activities that relate mostly
to prevention; research received 43 percent of that amount, blood screening 51
percent, and education 6 percent. More than twice as much, $1.1 billion, was
spent in 1986 to treat AIDS (Scitovsky and Rice, 1987). In considering the
appropriate amount to allocate for prevention and the appropriate mix of
preventive activities, one should note that there is no indication nationally
that transmission of HIV infection has peaked.

To the extent that intensified preventive activities could reduce HIV
transmission and future AIDS cases, the allocation of expenditures has
implications not only for future medical costs and their sources of payment,
but also for who bears the burden of the disease. Screening of donated blood
for HIV infection is intended to arrest HIV transmission through the blood
supply, the route by which hemophiliac AIDS patients and other transfusion-
associated cases have contracted the disease. Continuation of the present
pattern of disease would entail a substantial burden for employers of people
who become ill from HIV infection, since so much of the total AIDS costs stems
from illness and premature death among people in their working years. People
with certain risky behaviors, such as certain sexual practices of homosexual
and bisexual men and needle-sharing among IV drug abusers, have been
identified as being at high risk of AIDS. In addition, a disproportionate
percentage of AIDS patients have been black and Hispanic, 39 percent of AIDS
patients vs. only 18 percent of the general U.S. population, and blacks and
Hispanics have accounted for an enormous share of female and pediatric AIDS
patients, 70 percent and 75 percent respectively (Garza, 1988; US DHHS, CDC,

April 11, 1988; Vital Statistics, 1980).
Collecting Data on Costs and Payment

Better data on costs and payment rates could improve public and private
policymaking. The amount and method of payment provide incentives regarding
how and where AIDS cases are treated, such as intensive care units, outpatient
clinics, hospices, or homes, and these decisions in turn may well influence
the total costs associated with the disease and the quality of life of the
people affected. Distributive justice and rational policymaking also require
adequate compensation of medical providers that care for a disproportionate
share of AIDS patients who cannot afford to pay for their own care.

By far the most comprehensive and rigorous study of national costs was
performed by Anne Scitovsky, Dorothy Rice, and their colleagues for the
Centers for Disease Control (CDC) (Scitovsky, et al., 1986a; Scitovsky and
Rice, 1987). According to Scitovsky, et al.'s estimates, in 1986 the average
cost of the personal medical expenses of an AIDS patient alive at any time
during the year was $35,592, and lifetime hospital costs in 1984 prices ranged
from $60,000 to $75,000 (Scitovsky, et al., 1986b; Scitovsky, et al., 1987).
Scitovsky and her colleagues also estimated that in 1986 total costs
associated with AIDS, including direct and indirect costs, were $8.7 billion
and will reach $66.5 billion in 1991 (Scitovsky and Rice, 1987). In these
calculations, indirect costs (productivity losses) of sickness and death dwarf
direct medical costs, a pattern that reflects primarily the premature deaths
of working-age adults. The great increase in total costs by 1991 stems from
projected increases in the prevalence of AIDS cases, 172,800 in 1991 compared
with 31,440 in 1986.

The studies reviewed give far from a complete picture of costs.
Primarily because of data limitations, many studies have excluded the cost of

most services used outside the hospital, such as drugs, long-term care,
hospice or home care, ambulatory physician visits, ambulatory ancillary
services, counseling, and community support services. These nonhospital
services will account for a larger part of direct medical costs if
hospitalizations are avoided or shortened and if medical developments extend
the lives of AIDS patients. Furthermore, estimating the cost of nonhospital
services is necessary to calculate the total medical cost of different
approaches to managing AIDS and to analyze fully the cost implications of
relying less on hospitalization and more on community support services, as
exemplified by the San Francisco model.

In addition, these studies do not give a complete accounting of the
costs of infection with HIV and the spectrum of symptoms that it causes. For
example, with one exception, the studies reviewed pertained only to AIDS, and
none included pediatric cases. In part, this incomplete accounting has
resulted from reliance on incomplete records of public health departments,
hospitals, and insurance companies. The situation also reflects the fact that
HIV, AIDS, and other manifestations of HIV infection have been detected so
recently that classification and recording systems are still evolving as
knowledge of the disease grows. Another reported factor is the reluctance of
people with HIV infection or symptoms to participate in studies, mainly
because they strongly guard confidentiality.

Existing studies also do not indicate how costs and sources of payment
change over the course of AIDS or other symptoms of HIV infection. It has
been theorized that costs peak around the time when AIDS is first diagnosed
and again when the patient is close to death and that as the disease
progresses, patients without insurance spend their own assets and may come to

rely on Medicaid and other government programs. However, the total cost
 

 

burden on different payers--private insurers, government programs, patients,
their families and friends--and how it changes over the course of the disease
are not known.

Great uncertainty surrounds estimates of future AIDS costs because
conditions are constantly changing. Knowledge and management of the disease
are changing rapidly in ways that will almost certainly affect incidence and
transmission of HIV infection, prevention of infection, treatment of symptoms,
and survival of patients. Although all of these factors in turn have
implications for costs, the direction of change is unclear. Preliminary
results from Massachusetts support the general impression that the cost of
treating AIDS patients has declined (Seage, 1987). Other factors, though, may
increase treatment costs. Neurological symptoms such as dementia, which may
require long-term institutional care, have been identified in AIDS patients,
and the drug AZT has been found to improve the condition and prolong survival
of AIDS patients with certain symptoms. Other drugs are being tested in the
hopes that they will arrest the progression of AISS-related comples (ARC) to
AIDS. How these developments on balance will affect treatment, the course of
the disease, and the costs of AIDS is not yet clear. Expenditures associated
with AIDS and HIV infection will rise as viral transmission continues.
Expenditures may also rise if drugs that prolong survival must be continued

throughout life.

Conclusions

In the midst of uncertainty about the HIV epidemic, it is clear that the
costs associated with the prevention and care of HIV infection will be paid by
different payers--private insurers; federal, state, and local governments; and

patients, their families, and friends. How the cost will be distributed among

 

 
 

 

these payers depends a great deal on public policy. Municipal hospitals so
far appear to have been functioning as the providers of last resort, as they
often do. The federal government could relieve local areas of some of the
cost burden through federal payment programs, chiefly Medicare and Medicaid,
and through grants to states. If additional funding does not keep pace with
the HIV epidemic, localities will be faced with reducing spending on other
public health programs and medical conditions. The appropriate allocation of
resources between preventing HIV infection and treating the symptoms is itself
a policy issues It is also clear that the more people have to pay for their
medical care, the fewer services they receive. Thus, people infected with HIV
who have little or no health insurance may forego or delay medical care to the
detriment of their health. The function of health insurance is to reduce the
risk that illness will cause financial ruin and to spread the costs of illness
across a population, including both the well and the sick. As a society, the
United States faces how the costs of this epidemic will be spread across the

well and the sick in our population.

 

 
References

Bazzoli, G. J., "Health Care for the Indigent: Overview of Critical Issues,"
Health Services Research 21(3): 353-375, August 1986.

Eggers, P.W., “Trends in Medicare Reimbursement for End-Stage Renal Disease:
1974-1979," Health Care Financing Review, 6:31-38, 1984, as cited in
Scitovsky, A., Cline, M., and Lee, P., 1986b.

Farley, P.J., "Who Are the Underinsured?" Presented to the American Public
Health Association, Washington, DC, Nov. 13, 1984.

Garza, B., Program Assistant, Centers for Disease Control, Atlanta, GA,
personal communication, April 20, 1988.

Long, S., Gibbs, J., Crozier, J., et al., "Medical Expenditures of Terminal
Cancer Patients During the Last Year of Life," Inquiry, 21:315-327, Winter
1984, as updated by Seage, et al., 1986.

Scitovsky, A., and Rice, D., "Estimates of the Direct and Indirect Costs of
Acquired Immunodeficiency Syndrome in the United States, 1985, 1986, and
1991," Public Health Reports, 102(1):5-17, January-February 1987.

Scitovsky, A., Rice, D., Showstack, J., et al., "Estimating the Direct and
Indirect Economic Costs of Acquired Immune Deficiency Syndrome, 1985, 1986,
and 1990," final report prepared for The Centers for Disease Control (task
order 282-85-0061 #2), March 31, 1986a.

Scitovsky, A, Cline, M., and Lee, P., "Medical Care Costs of Patients With
AIDS in San Francisco," J Am Med Assn, 256(22):3103-6, Dec. 12, 1986b.

Seage, G.R.,III, Epidemiologist, Boston Department of Health and Hospitals,
personal communication, March 11, 1987.

U.S. Department of Health and Human Services, Health Care Financing
Administration, Office of the Actuary, "Revised Estimates of Medicaid Impact
of AIDS," June 23, 1986.

U.S. Department of Health and Human Services, Public Health Service, Centers
for Disease Control, "Acquired Immunodeficiency Syndrome (AIDS) Among Blacks

and Hispanics--United States,“ Morbidity and Mortality Weekly Report,
35(42):655-666, October 24, 1986.

U.S. Department of Health and Human Services, Public Health Service, Centers
for Disease Control, AIDS Weekly Surveillance Report, April 11, 1988.

U.S. Department of Health and Human Services, Public Health Service, Health
United States 1986. Hyattsville, Md., December 1986.

Vital Statistics, 1980 U.S. Census, as cited in U.S. Department of Health and
Human Services, Public Health Service, Centers for Disease Control, "Acquired
Immunodeficiency Syndrome (AIDS) Among Blacks and Hispanics--United States,"
Morbidity and Mortality Weekly Report, 35(42):655-666, October 24, 1986.
THE IMPORTANCE OF TREATMENT COSTS
TESTIMONY ON AIDS

GIVEN IN WASHINGTON ON MAY 26, 1988
John D. Thompson

Professor of Public Health
Yale University School of Medicine

In the search for societal costs, which are important, we must
not forget to track treatment costs. Treatment costs are analogous to
production costs in that they reflect the volume and price of all
resources expended in the care of the patient - the cost of the actual
treatment process itself.

We need to develop monitoring systems for the care and financing
of the treatment of persons with AIDS by merging clinical
epidemiologic, with claims and cost data into a planning and
management information system to permit governmental units to project
future strategies in the treatment of ATDS, and: 1) to identify the
need for new programs; 2) to assist in the fashioning of new waivers
that will be necessary to finance alternative programs; 3) to inform
legislatures of the cost implications of the treatment of AIDS
patients, particularly as it refers to the Medicaid programs; 4) to
inform the official and other involved agencies on the volume of
institutional services given to persons with AIDS and the affect of
that volume on the spectrum of health services offered by the licensed
institutions; 5) to assist in the utilization review function; 6)
through exploration of alternative delivery sites, to encourage other
community agencies, including huspitals to respond to some of the
promising new approaches to the treatment of AIDS patients; and, 7)

add to the generel knowledge of the economic implications of the
treatment of persons with AIDS.

Examples of the kind of information needed to support the
planning of treatment programs are drawn from two preliminary studies
from Connecticut, the first slide reflects treatment costs of Medicaid
clients and shows that 75% of those charges for the treatment of
adults is for hospital care. The hospital share for the care of
children with AIDS is even higher. Average costs are heavily
influenced by relatively few outlier cases primarily in need of
placement in alternative treatment facilities.

Hospital charges in another study averaged $13,806 an admission,
51% of these charges are for room and board i.e. nursing care. The
influence of AZT is beginning to show, 15% of the costs were for
pharmaceuticals. Laboratory charges were the next costly type of
services. There are two important findings in the chart the first is
the relative unimportance of the high tec aspects of hospital costs
such as operating room, CT scan, Cardio vascular laboratory, etc.
This is evidence that many of these individuals could have been
treated in alternative sites.

The second finding is the importance of nursing care. Fifty
percent of the room and board costs are for nursing, nurses administer
the medications and monitor the intravenous infusions and the oxygen.

These patients are in the hospital primarily for nursing care.
DIMS EXPLORATORY STUDY
CHARGES FOR CARE OF PEOPLE WITH AIDS
BY TYPE OF SERVICE
EIGHTEEN MONTHS

TOTAL INPATIENT OUTPATIENT PHYSICIAN DRUG
CHARGES CHARGES CHARGES CHARGES CHARGES

ADULTS

MEAN $ 35,461 $ 27,141 $ 3,059 $ 3,230 $1,683

PERCENT TOTAL * 76.5 8.6 9.1 4.7

SD 23,081 21,958 4,589 2,408 1,949

C/V -651 -809 2.227 JAS 1.409

MEDIAN $ 34,818 $ 25,957 $ 1,491 $2,685 $ 639
RANGE

FROM $ 88- 0 - 0 - 0 - 0 -

T0 $131,538 $123,004 $23,160 $9,684 $8,577
CHILDREN

MEAN $ 53,574 $ 48,287 $ 2,161 $2,627 $ 275

PERCENT TOTAL * 90.) 4.0 4.9 0.5

SD 97,726 98,055 1,905 3,094 280

C/V 1.824 2.031 -882 1.178 1.024

MEDIAN $ 23,3532 $ 18,159 $ 1,860 $1,684 $ 121
RANGE

FROM $664 - 0 - 0 - 0 - ay -

TO $369,473 $365,305 $ 6,154 #11,526 $1,006

*Does noT ADD uP To lO0Z

SOURCE:

COST ANALYSIS OF AIDS PATIENTS UNDER MEDICAID IN CONNECTICUT.

FRANCESCA Cook, YALE UNIVERSITY SCHOOL oF MEDICINE, 1988.

 
HOSPITAL CHARGE PATTERNS

PEOPLE WITH AIDS:
24 ADMISSIONS.

CHARGE CATEGORY

ROOM AND BOARD

PHARMACY

LABORATORY |
PULMONARY, RESPIRATORY THERAPY
DIAG RADIOLOGY

1.V. THERAPY

Mg S SUPPLIES

SUBTOTAL
OTHER ANCILLARY SERVICES

TOTAL

PERCENT

$168,843

50.178
42,387
13,110
9,692
9,616
9,453

 

$303,284
28,060

 

$331,344

AVERAGE PER

 

ADMISSION
50.962 $ 7,035
15.142 2,091
12.78% 1,764

3.95% 546
2.93% 404
2.902 401
2.85% 394
91.512 $12,635
8.497 1,171
100.002 $13,806

 

 

SOURCE: AN OVERVIEW OF THE ACQUIRED IMMUNE DEFICIENCY SYNDROME.
RoperT J. ANTHONY. YALE UNIVERSITY SCHOOL OF PUBLIC

HEALTH. 1988.
NO CHARGES

$ 0 - $9,999
$10,000 - 19,999
$20,000 - 29,999
$30,000 - 39,999
$40,000 - 49,999
$50,000 - 59,999
$60,000 - 69,999

$70,000 - 79,999
$800,000 - 89,999
$90,000 - 99,999
$100,000 & ABovE

DIAS

FREQUENCY OF CHARGES
CARE OF PEOPLE WITH AIDS
PEDIATRIC PATIENTS
18 MONTHS
BY BROAD TYPE OF SERVICE

TOTAL HOSPITAL OPD PHYSICIAN DRUG

0 5 3 1 0
4 0 9 10 12
2 l ]

1 ]

2 3

1

] ]

1 J

12 12 12 12 12

SOURCE: COST ANALYSIS OF AIDS PATIENTS UNDER MEDICAID IN
CONNECTICUT: Francesca Cook. Yate UNIVERSITY SCHOOL OF
Mepicine, 1988.
DIAS

FREQUENCY OF CHARGES
CARE OF PEOPLE WITH AIDS
ADULT PATIENTS
18 MONTHS
BY BROAD TYPE OF SERVICE

TOTAL HOSPITAL OPD PHYSICIAN DRUG

NO CHARGES 0 9 15 ] 13
$ 0 - $9,999 10 9 55 13 61
$10,000 - 19,999 9 12 4
$20,000 - 29,999 14 15
$30,000 - 39,999 14 13
$40,000 - 49,999 10 7 '
$50,000 - 59,999 6 4
$60,000 - 69,999 7 5
$70,000 - 79,999 2 0
$80,000 - 89,999 ] ]
$90,000 - 99,999

$100.000 - aBove ] ]
74 74 74 74 74

SOURCE: COST ANALYSIS OF AIDS PATIENTS UNDER MEDICAID IN CONNECTICUT

FRANCESCA Cook, YALE UNIVERSITY SCHOOL OF MEDICINE. 1988.
Golden Rule

TESTIMONY OF J. PATRICK ROONEY
Chairman and Chief Executive Officer
Golden Rule Insurance Company
Before the

Presidential Commission on the H.LV. Epidemic

Good afternoon. My name is J. Patrick Rooney, and I am Chairman of the Board
and Chief Executive Officer of the Golden Rule Insurance Company.

Golden Rule is the nation's largest writer of individual health insurance policies.
As specialists in coverage for people who don't have group insurance, we have been very
successful, as evidenced by a rapid growth in our policy holders.

Today some 75,000 independent agents and brokers handle our individual health
care plans. Several of America's largest insurance companies offer Golden Rule's
individual major medical insurance through their agents.

In the past our firm has done some HIV testing. When the Washington, D.C. City
Council passed a law prohibiting AIDS testing we joined other insurers in withdrawing
from the local market. Today the insurance industry presents a united front: testing,
they say, should be required of all new applicants.

But, as the agony in our society has grown over the issue of testing, Golden Rule
has come up with a positive alternative: an innovative policy that permits people to get

individual health insurance providing full coverage without any required blood testing.

Golden Rule Insurance Company » 300 Metropolitan Square
655 Fifteenth Street, N.W.
Golden Rule Buildings Washington, D.C. 20005
The Waterfront Telephone (202) 639-4010
Indianapolis, Indiana 46224-4199 Telex 440487

Telephone (317) 297-4123 Telecopy (202) 347-6109
The new policy stems from our recognition that testing poses a barrier to many
Americans who want and need health care. As a Member of the Board of the Civil Liber-
ties Union of Indiana, I knew that many people were concerned about the impact of
forcing individuals to be tested to obtain health insurance.

One of the factors that moved us to develop this alternative was an article in the

Wall Street Journal reporting:

 

"The number of Americans without health insurance has
risen to 37 million, from 29 million in 1979. And break-
throughs in genetic testing may soon make it possible for
insurance companies to deny health insurance coverage to
additional Americans deemed susceptible to serious dis-
eases—much as many carriers of the AIDS virus are denied
insurance today."

Golden Rule's new policy for AIDS coverage is very simple:

1) We won't require HIV blood testing of any applicants

2) We won't cover AIDS during the first twelve months of the policy

3) We will provide full coverage for AIDS treatment if the condition first becomes
manifest after twelve months.

The policy will include all the provisions which have made Golden Rule's insurance
popular: million dollar major medical benefits; coverage for home care, nursing homes
and hospices; and ease of submitting claims. In addition, this policy will be sold on a
unisex basis. Historically, Golden Rule's insurance has been one of the lowest priced. We
expect this policy to continue that tradition.

Our new policy simply treats AIDS like many other pre-existing conditions such as
pregnancy. Thirty years ago insurance companies had the same fear of tonsillectomy

claims because the cost of a tonsillectomy was a year's premiums and doing 5 children in
a family on one Saturday morning was five years’ premiums. The simple solution then
was to impose a waiting period on tonsillectomies.

That's just what we are doing today: finding a way to provide needed coverage
without putting the insurance company at great financial risk.

Golden Rule's plan is not irrational: it has some very practical advantages for us as
well as our policyholders. Instead of spending millions of dollars on testing to find a
miniscule number of people who would be denied insurance, we would rather cover
benefits for those who need medical care. It is not our role to provide welfare for the
testing industry.

The plan clearly has benefits for society as a whole. Every AIDS case we cover is
one the taxpayers don't have to pay for through Medicaid and other social programs.

So far six states have approved this new policy. But we have encountered an un-
expected obstacle to widespread acceptance. It appears that many insurance regulators
will only allow one approach: testing (with automatic denial of all those who are serum
positive) which is then accompanied by full coverage for AIDS from the policy's first
day.

That is the conventional wisdom endorsed by most of the insurance industry. But it
obviously benefits no one—since no insurer pays any medical expenses for those it has
already turned down.

Golden Rule believes consumers deserve an alternative—testing ought not be the
only choice.

The President's Commission on the HIV Epidemie can take the lead by encouraging
other jurisdictions to pave the way for acceptance of policies which provide AIDS

coverage without testing.
Fei BOee

roe

STATEMENT
of the
AMERICAN COLLEGE OF PHYSICIANS
before the
PRESIDENTIAL COMMISSION ON THE HIV EPIDEMIC
April 27, 1988

The American College of Physicians appreciates this opportunity to
present our views on the financing of care for patients with AIDS and other
HIV-associated illnesses. I am Arthur W. Feinberg, MD, FACP, a Regent of the
College and a member of its Clinical Practice Subcommittee. I am also Profes-
sor of Clinical Medicine at Cornell University Medical College and Associate
Director of Medicine at North Shore University Hospital.

The College represents 65,000 physicians of internal medicine. Our
membership includes private practitioners delivering primary health care, many
of whom are caring for AIDS patients; subspecialists in oncology, cardiology,
pulmonary medicine, infectious diseases, and other fields; and medical
educators and researchers.

Last month the College announced two new position papers on the HIV
epidemic: one on the financing of care and one on treatment, ethics, testing,
confidentiality, and related issues. I ask that both of these papers be
included in the record of these hearings. My comments today will summarize
the financing paper only.

The AIDS crisis places in bold relief inadequacies felt throughout our
health system, such as care for uninsured persons, access for the poor,
funding for preventive health measures, and alternatives to institutional

care. Solutions to these general problems would contribute significantly to

 
resolution of the specific challenges of AIDS. We believe that all Americans
should have access to high-quality care in an appropriate and cost-effective
setting, whoever the patient or whatever the disease, and we hesitate to
single out a disease for policy purposes. Nonetheless, because we cannot
assure this kind of care now, and because of the severe dislocative impact
that AIDS is having on the population and on the provision of health care, we
fee] it is necessary to move forward with recommendations on financing care
for AIDS patients.

The College does not believe that a new wheel must be invented to pay
for the treatment costs of AIDS and other HIV illnesses. We believe that the
AIDS crisis demands a spreading of responsibility and financial risk. For this
reason, we recommend that a national policy be developed that uses al]
existing mechanisms for health coverage. New authority and resources must be
added to each component of the system, so that each patient has coverage for
health care provided in the most efficient way possible throughout the course
of his or her illness.

From this general principle, we draw the following recommendations:

1. Financing for the care of AIDS patients should be assured through
employer-provided coverage, individual health policies, Medicare and Medicaid,
and public health and private grant funds.

2. While these existing mechanisms are starting points, there are
inadequacies in all of them which must be corrected through legislative or
regulatory action and private sector steps such as modifications to insurance
policies. New resources will be necessary at all levels. Our position paper
includes many suggestions on how to close these gaps, and I will highlight

some of them later in my statement.
3. Each patient with AIDS should have coverage for appropriate care
from one or more financing sources, and mechanisms such as case management
should be developed to assure that patients take advantage of whatever health
coverage is available to them.

4, Care must be provided in the most efficient manner possible, build-
ing on a network of professional and voluntary organizations, both public and
private, and incorporating the best approaches to community-based care.

5. Strong central direction will be needed to develop and coordinate
the implementation of necessary improvements in each component of the health
system.

I would like to elaborate on this last, critical point. Precisely
because our recommendations depend on the pluralistic, decentralized system of
health financing, strong, centralized planning and direction will be necessary.
To bring all the pieces together--to weave a net which will protect ail AIDS
patients--will require strong national leadership. If the Commission adopts
an approach similar to ours, I urge you to recommend the creation of a
successor body or other entity to provide this direction. This organization
would be charged with identifying weaknesses in each of the health financing
components, developing recommendations to correct these problems, and pro-
moting and overseeing implementation.

I would like to devote the remainder of my statement to highlighting
some of the specific recommendations of the College. The full list appears in
the position paper we have submitted.

For employer-provided group coverage, we recommend an extension of the
coverage period mandated by the Consolidated Omnibus Budget Reconciliation Act
(COBRA). Continuation of the group coverage should extend at least until

Medicare becomes available to disabled individuals after the 24-month waiting
period. Government could subsidize premiums so that a person does not lose
the private coverage extended under COBRA because he or she cannot afford the
premium. | Employers and insurers should structure their policies to be
appropriate for AIDS, including home health care, custodial care, and hospice
services.

To make individual insurance policies more widely available, tax
incentives or other favorable treatment should be used to encourage insurers
to increase the availability of community-rated, open enrollment policies,
which individuals can obtain regardless of medical condition. Risk pools
should also be used for patients who are otherwise medically uninsurable, and
the federal government should promote their development through actions such
as legislation allowing states to include in the pool self-insured employers
(currently exempt) and employers with no health coverage. In both of these
mechanisms, premiums could be subsidized, based on income.

In the Medicaid program, the waiver authority allowing states to provide
a wide range of home and community-based services should be made more easily
available. The federal matching share for services to AIDS patients should be
increased, to relieve the financial burden on states with the highest
incidence. Patients whose income is above the eligibility standard, but below
a specified level, should be allowed to "buy in“ to Medicaid coverage.

For Medicare, the 24-month waiting period before a recipient of Social
Security Disability Insurance can receive Medicare coverage should be short-
ened, especially for persons who do not have private insurance through the
COBRA extension or other means.

Finally, public health grant support and foundation and charitable funds
should be used to provide: incentive payments to facilities initiating or

expanding services, especially in inadequate areas such as community care,
psychiatric support, long-term care, and housing; assistance to public hospi-
tals treating large numbers of AIDS patients; training support for counselors,
care givers, and others providing services; and assistance to volunteer
organizations.

Mr. Chairman, we offer these recommendations not as the final word, but
as a starting point for discussion. After further analysis, they will be
modified, perhaps some dropped and others added. The American College of
Physicians is ready to work with the Commission and other public and private
leaders to explore these and other alternatives in crafting a national

strategy to finance care for patients with AIDS and other HIV illnesses.
THE PRESIDENTIAL COMMISSION ON THE HIV EPIDEMIC
SUMMARY
TESTIMONY ON FINANCING THE MEDICAL COSTS
OF THE HIV EPIDEMIC AND PROVISION OF CARE
TO INFECTED INDIVIDUALS
Harvey J. Makadon, M.D. \
Medical Director, ulatory Services
Beth Israel Hospital, Harvard Medical School

Boston, Massachusetts
617-735-3996

 

Executive Director, The Boston AIDS Consortium
The Harvard School of Public Health
Boston, Massachusetts

April 27, 1988

As we consider financing and reimbursement issues in the context of the
AIDS epidemic, it is crucial that we understand:

1) the urgency of the issues we face,

2) the need for rapid changes that will allow us to pay adequately
for the care of individuals who have HIV infection in ways that
will normalize their care within the mainstream of our primary
care delivery systems, and

3) how financing influences our ability to provide a full continuum
of care which meets the needs of our patients.

We cannot compound the disincentives to provide care related to fear
and prejudice by additional economic disincentives. We must consider
specific efforts to fund care for individuals with AIDS and HIV infection.

o First, we must consider ways to change reimbursement to create systems
to provide comprehensive care cost effectively. We need to recognize
the relationship between financing and both access to and adequacy of
health care services.

° Second, we must consider ways to provide benefits for those who have
neither health insurance nor entitlement to health care benefits.

Many approaches may be used to address the problems that AIDS patients
have obtaining access to care. There may be no single method which is best.
What is clear, however, is the reality of this epidemic and the vast needs
of those affected. We cannot avoid the future. We must meet the challenge
of AIDS with a commitment to assess critically the alternatives and rapidly
implement changes necessary to develop clear initiatives that will insure
access to quality care for all.
THE PRESIDENTIAL COMMISSION ON THE HIV EPIDEMIC
TESTIMONY ON FINANCING THE MEDICAL COSTS
OF THE HIV EPIDEMIC AND PROVISION OF CARE
TO INFECTED INDIVIDUALS
Harvey J. Makadon, M.D.

Medical Director, Ambulatory Services
Beth Israel Hospital, Harvard Medical School
Boston, Massachusetts
617-735-3996
Executive Director, The Boston AIDS Consortium
The Harvard School of Public Health
Boston, Massachusetts

April 27, 1988

As we consider financing and reimbursement issues in the context of the
AIDS epidemic, it is crucial that we understand:
1) the urgency of the issues we face,
2) the need for rapid changes that will allow us to pay adequately
for the care of individuals who have HIV infection in ways that
will normalize their care within the mainstream of our primary
care delivery systems, and
3) how financing influences our ability te provide a full continuum
of care which meets the needs of our patients.
Specifically, we need to examine the adequacy of payments and incentives to
provide cost-effective care in settings outside of hospitals, including home
and hospice settings.
Before considering specific proposals, it is important to ask why we

must address paying tor and providing care for AIDS patients apart from

general issues of health care financing and access to care.
First, we must recognize the magnitude of the problem we face. In
contrast to the 55,000 AIDS cases diagnosed since 1981, in the year 1991 we
need to prepare to care for more than 75,000 new cases of AIDS and 50,000
deaths. At some time during that year more than 120,000 individuals with
AIDS will require care; an even greater number of patients will develop
other HIV-related syndromes.

Consider these numbers in the context of the current strain on our
systems of care:

oO New York City reports long waits in the emergency departs of over-
crowded hospitals where AIDS patients occupy significant proportions of
inpatient beds.

o The hospital that cares for the largest number of AIDS patients in

Boston has had to suspend appointments for new patients in its AIDS

program.

° There is a catastrophic shortage of facilities to care for IV drug
users.

o A recent phone survey of 193 internists in Boston revealed only four

who were willing to care for a hypothetical HIV-infected individual

calling on the phone.

Second, it has become clear that our reimbursement systems are not
designed to incorporate payment rapidly for new therapies and modalities of
care necessary to manage effectively the complex needs of AIDS patients.
Benefits for care out of hospital are often limited. At the end of last
year, six states still did not include payment for AZT in their Medicaid

programs. Patients are often at risk for these costs.
 

Third, individuals with AIDS frequently have few family supports to
provide emotional and financial assistance to ease the burden of illness.
This creates a huge demand on the health care system and a greater need for
community-based support.

Finally, as noted, there is great reluctance on the part of many health
professionals to become involved in the care of individuals with HIV-
related illness. Often, their reluctance is related to fear and outright
discrimination.

We cannot compound the disincentives of fear and prejudice with
additional economic disincentives.

For these reasons, we must consider specific efforts to fund care for
individuals with AIDS and HIV infection. The reimbursement problems raised
by this epidemic fall into two areas where reimbursement policy must be
carefully reconsidered in order to meet the urgent needs that this epidemic
has exposed.

° First, we must consider ways to change reimbursement to create systems
to provide comprehensive care cost effectively. We need to recognize
the relationship between financing and both access to and adequacy of
health care services.

° Second, we must consider ways to provide benefits for those who have
neither health insurance nor entitlement to health care benefits.
Recognizing that the cost effective care of AIDS patients requires a

continuum of care that includes ambulatory, hospital, home, chronic and

hospice care, we need to consider how we can add these benefits, pay for

them, and provide them.
 

Case management programs may provide one mechanism for doing this. By
case management we mean use of a fourth party to analyze the clinical needs
of patients with catastrophic illnesses and determine whether quality care
could be provided at a lower cost if a range of services that exceeds the
standard benefit package could be offered. When this occurs, the wider
scope of benefits is approved and made available. These programs are being
increasingly used by employers as well as state Medicaid programs.
Nevertheless, they are unstudied at this time and need to be evaluated
carefully. Their effectiveness could clearly benefit from clinical research
focused on the appropriateness of various modalities of treatment, so that
protocols for the care of AIDS patients could be developed. Such
investigations would also contribute to improved quality of care.

Systems such as the new New York State plan to establish AIDS treatment
centers, described today, could also be useful to show how payment can be
tied to the delivery of an appropriate range of services. It is an approach
which could be used or modified in other circumstances. For example, in
areas where there is not the same need for hospital-based treatment centers,
financial incentives could be used to encourage ambulatory care programs to
create appropriate networks for comprehensive care out of hospitals.

In developing such programs it is important to consider how financing
will ultimately influence the organization and quality of services provided.
We must evaluate the advantages and disadvantages of developing AIDS
specific segregated approaches to care as opposed to utilizing approaches
which rely on traditional community-based primary care systems. While
specialized facilities could be models for care and research, it is easy to

envision a second class of care developing for AIDS patients if funding for
care does not match clinical need. I also suspect segregated centers would
be as easy to staff or lead to greater staff burnout than would occur if
care of AIDS patients were integrated with the care of other patients.

Finally, I turn to ways to close the gaps in coverage for health care.
Given the similarity of issues regarding financing AIDS care and general
health care financing, a comprehensive national health care financing system
would clearly be the best solution for AIDS and other diseases. Although it
has not been politically popular to speak about broad reform of health care
financing on a national level for fear of the cost, we must look to Canada's
health system as evidence that a universal financing system might help
contain and not inflate health care expenditures.

Short of universal health reform, we need to consider a strong federal
AIDS financing program. A federal effort would allow national debate on the
appropriate components of a model program to demonstrate ways to integrate a
full spectrum of care and cost-effective financing. While such a program
could be part of Medicare, it should be distinctly different from the End
Stage Renal Disease Program which was developed with few attempts to control
costs or develop guidelines for the appropriateness of care.

Given political realities, it is likely that we shall turn to
incremental and patchwork reform of our health care system.

The needs of AIDS patients require that we search for ways to bridge
the gap between the time when individuals lose private insurance and the
time they become eligible for Medicare on the basis of disability. COBRA
‘penefits go 18 months of the way. It will be important to extend this to

the time of Medicare disability, or eliminate the Medicare disability
waiting period. There are proposals for both of these changes before the
Congress.

Second, we must look at a risk pool mechanism for individuals who both
do not have private insurance and whose income and assets make them
ineligible for Medicaid. In proposing a risk pool for AIDS patients, it is
likely not only that claims experience be high, but also that many
individuals would be unable to pay the premiums and cost-sharing
requirements these pools impose. It is essential to establish a fund both
to cover administrative losses and to subsidize costs to patients. Such an
AIDS care fund could be developed on the federal level which would, again,
allow uniform expectations and standards.

Finally, we must examine carefully the ability of the Medicaid program
to meet the needs of the epidemic. Currently, benefits are very variable,
payment levels are often poor, and eligibility requirements with respect to
income and assets are inconsistent. This kind of variability is not well
suited for the crucial care needs of an epidemic. Development of uniform
standards for eligibility, a benefit package that matches the needs of AIDS
patients, and payment levels that provide incentives for physicians and
institutions to provide care are critically important. There must be a new
level of expectation with respect to Medicaid, coupled with increased
federal sharing and support for the AIDS initiatives of state Medicaid
programs.

Il have described some approaches to address the problems that AIDS
patients have obtaining access to care. There may be no single method which
is best. What is clear, however, is the reality of this epidemic and the

vast needs of those affected. We cannot avoid the future. We must meet the
challenge of AIDS with a commitment to assess critically the alternatives
and rapidly implement changes necessary to insure access to quality care for

all.
TESTIMONY TO PRESIDENTIAL COMMISSION

ON THE HIV EPIDEMIC

FINANCE HEARINGS

April 27, 1988

by)

( CARL SCHRAMM ;
PRESIDENT so
sr ee

HEALTH INSURANCE ASSOCIATION OF AMERICA

tee ne eee Beate map sae Lop atten nf fat DFP brie ane ¢ mee fin HERP RN VET re Greed Fr ert Fe tree a ee) oe om on
’ '
INTRODUCTION:

I am Carl Schramm, President of the Health Insurance
Association of America. The HIAA represents 350 commercial
health insurance companies which account for 85% of the
commercial health insurance market. Our members provide 40% of

all private health benefits, and cover about 75 million people.

Many members of the HIAA also sel] life insurance and
belong to our sister association, the ACLI. While AIDS is an
important issue for both life and health insurance, I will

limit my remarks today to health insurance issues.

AIDS is having a significant impact on the health insurance
industry. In fact, the Congressional Research Service
estimates that private health insurance has so far been the
major source of funding for the medical care of AIDS patients.
In 1986, our member companies reported that 0.7% of individual
and 0.3% of group health and disability claims were due to
AIDS. Today I am able to release preliminary figures for the
first six months of 1987. During that period, AIDS accounted
for 1.0% of individual and 0.7% of group health and disability
claims. The rate of increase reflected in these figures is

cause for concern.
Page 2

These figures underestimate the actual impact of AIDS
because not all AIDS claims are identified as such.
Furthermore, the figures for health claims alone are higher
than the combined figures for health and disability. The
figures for medical claims alone were 0.9% for individual and
0.4% for group in 1986. Figures for medical benefits alone are
not yet available for 1987. But the bottom line is that AIDS

has a significant and growing effect on our industry.

Everyone involved with providing or financing care for
HIV-related conditions has received their share of criticism,
and the commercial health insurance companies are no
exception. But rather than simply respond to criticisms of our

industry, I would like to take this opportunity to:

- lay-out for you what we see as the main issues in

financing care for HIV-related conditions,

. identify the information and value judgments required to

resolve those issues,

- indicate where the required information is available and

where it is lacking,

- suggest measures to fill some of the gaps and

information,
Page 3

. and indicate our preliminary views on possible measures

to improve financing of care for HIV-related conditions.

PRINCIPLES :

 

First, let me discuss some basic principles that govern our

approach.

All health care including that for HIV-related conditions
should be paid for by a pluralistic system that includes
individual beneficiaries, employers and taxpayers, with
risk-pooling and subsidies provided by a mix of public and
private third party payers. It is important to recognize the
difference between those who ultimately pay for health care and
organizations that spread risk and redistribute welfare with
taxes and subsidies. Insurance companies do not bear the cost
of care, they spread risk and encourage efficient patterns of
care. Regulation of underwriting and risk classification is
equivalent to taxation and income redistribution among

beneficiaries and purchasers of insurance.

HIV-related conditions should be treated by third party
payers just like any other chronic disabling illness. In their
underwriting practices for HIV-related conditions, insurance
companies are not shifting responsibility to public programs.
We are responding to a new phenomenon in an effort to treat it

just like other diseases.
Page 4

Everyone should be covered by health benefits providing
access to an acceptable level of medical care. Private third
party payers should provide health benefits in a competitive
market to those who can afford to buy them. Government should
provide benefits to the poor and to other groups that society

determines should receive subsidies.

To fulfill these roles, and to cover the 35 million or so
currently without benefits, we believe that private health
benefits should be available to all employees, that government
programs should expand to cover all those who are poor, and
that new risk-pooling mechanisms should be established to cover
those who are uninsurable due to their very high expected

health care costs.

Finally, by dealing with the adversities imposed by the HIV
epidemic, providers and payers alike can learn valuable lessons
in meeting the needs of those with chronic, disabling illness
of all kinds - needs which are growing steadily with the aging

of our population.

ISSUES:

Throughout the following discussion I will frequently

identify critical areas where the information required to make
 

 

Page 5

informed policy decisions is not yet available. I emphasize
these areas because they make insurance companies very
uncomfortable, since the very foundation of our business is the
accurate estimation of future risks. Both the public and
private sectors need much better information to provide a

rational basis for policy.

Four distinctions are fundamental to understanding the

issues:

- group vs. individual coverage
- self-insured benefit plans vs. purchased insurance
- existing vs. new coverage for an individual

- the role of employers vs. the role of payers

By and large, HIV-related costs will be paid for those
currently covered, under either individual or group insurance
policies, so long as they remain eligible (i.e., by paying
premiums or remaining employed). Ina few cases, some
employers may impose caps or exclusions on HIV-related
benefits. Insurance companies will normally provide any
benefit package an employer wishes, within the constraints of
state law. Some states prohibit exclusions, but self-insured
employers are exempt from state regulation due to ERISA, so

they may be more likely to impose HIV-related benefit limits.

 
Page 6

To the extent that caps and exclusions are motivated by an
exaggerated estimate of the cost of HIV-related conditions,
insurance companies can encourage a more realistic view by
informing employers of the effectiveness of case management
techniques in containing costs. HIV-related conditions are no
more costly than other serious conditions such as cancer and

trauma.

Moving from group to group is not normally a problem, so
long as coverage is maintained. Discrimination in hiring
people with AIDS is prohibited in some cases by state or
federal law. Hiring discrimination on the basis of sexual
orientation is also illegal in some jurisdictions. To the
extent that it occurs, it is properly an issue of labor law,

not of health care financing.

When employed, insured people with HIV-related conditions
become unable to work and lose their employee benefits, most
can continue coverage for 18 months by paying their own health
benefit premiums under the provisions of COBRA. This may be a
financial hardship for some, and COBRA coverage ends before
Medicare benefits for the disabled begin. Those who survive 18
months will be unemployed and uninsurable until Medicare

benefits begin.

 

a eas - . of coo eR 8 ane . Sy fee em Wee ree op spe Tos SE ERE os
Page 7

There are several ways to bridge this gap. The HIAA
advocates universal availability of broadly-funded state risk
pools for uninsurables. Subsidies might be required for some
to maintain COBRA benefits for 18 months or to make risk pool
coverage affordable. For COBRA premiums, such subsidies should
be based only on need, without regard to health condition, to
minimize adverse selection. Employers, State and local
government all have incentives to maintain COBRA coverage:
employers to minimize adverse selection in the COBRA pool, and
government to prevent an increased Medicaid or other welfare
burden. The HIAA is currently reviewing its position on the

extension of COBRA benefits.

New applicants for group insurance (e.g., new entrants to
the labor force, or those whose coverage lapsed for a time )
will generally be subject to pre-existing condition
exclusions. These exclusions are of limited duration,
typically between 6 and 12 months, after which even
pre-existing conditions are covered. Such exclusions are
required to protect employers from adverse selection (i.e.,
someone seeking employment or coverage after a lapse, only when
they need care), and have long been standard practice. Such
exclusions may be more common or more extensive in self-insured

plans due to their exemption from state regulation, but we do
Page 8

not know to what extent. Also, with HIV-related conditions,
the definition of pre-existing conditions is unusually
difficult. In fact, this question is currently in litigation

in California.

New applicants for individual coverage who are HIV positive
are uninsurable because, regardless of current symptoms, their
expected health care costs are much greater than for those who
are HIV negative. The same situation exists for people with
other serious health problems such as diabetes, cancer and

serious heart disease.

To summarize coverage issues, there are three problem areas:

1. Those currently employed who lose private coverage due
to HIV-related disability. For those not eligible for

COBRA benefits, or those between the end of COBRA and

the start of Medicare disability, high-risk pools can

provide a solution. For those who cannot afford COBRA
or risk pool premiums, need-based subsidies from

employers or government (or both) may be appropriate.

2. New applicants declined for individual coverage. The

solution for this group is properly funded risk pools,

with premiums subsidized for the poor.
Page 9

3. Those rejected for employment because of health costs.
This is a labor policy issue. Regulation of insurers is

the wrong tool.

INFORMATION NEEDS:

The problem areas I have outlined need to be addressed, but
suggestions for drastic change in our health care system in
response to these problems is a reflection of frustration
rather than a reasoned conclusion. The fact is that we simply
do not know the extent of most of these problems. Let me
review areas where we are missing the basic information needed

to address key issues.

We don’t know the current or forecast coverage status of
those with HIV-related conditions. Some data on the source of
payment distribution for AIDS-related hospital care is
available, but it is incomplete and conflicting. One study
found that in a sample of 59 public hospitals, Medicaid paid
for 62% of AIDS cases (though paying only 40% of their costs),
while private insurance paid for only 7% of cases. On the
other hand, the same study found that for a sample of 68
private teaching hospitals, 35% of cases were paid by Medicaid
while 45% were paid by private insurance. But the Medicaid
share should be above average for both of these groups because

of the demographics of patients served by these hospitals.
Page 10

For 160 non-public hospitals in southern California, the
Hospital Council of Southern California found that Medicaid
accounted for only 11% of AIDS patient days, while private
insurance accounted for 72%. The national average probably
lies between these two examples, but where no one knows. In
the Southern California survey, 75% of AIDS cases were treated
in private-sector hospitals, while 25% were treated in public
hospitals. A nationwide, representative survey of hospitals

would help, but even that would address only inpatient care.

We don’t know the economic history of those with
HIV-related conditions. How many lose employer-based benefits
when they become disabled, and who pays for their care after
that? How is the care they receive influenced by their loss of
employee benefits? Would it be cheaper for government to pay
COBRA or high-risk pool premiums than to increase the Medicaid

roles?

Regarding other coverage issues, does the ERISA exemption
from state regulation lead to a greater prevalence of caps and
exclusions among self-insured firms than among those which
purchase insurance? What is the extent of hiring
discrimination based on the risk of HIV-related health care
costs? How many applicants for individual coverage have been
denied due to HIV-related conditions, and how many have not

applied because they anticipated being denied?
Page 11

Those with HIV-related conditions may fail to receive the
most appropriate care either because of financing (e.g., no
benefits for home or hospice care), or because appropriate
facilities are not available (e.g., nursing home won’t accept
HIV cases, or there is no local home care agency). We don’t

know the relative importance of these two types of impediments.

Case management promises to reduce costs and provide more
humane care, but we don’t know the extent or growth rate of
case management, nor do we have good data on its
effectiveness. One of our member companies reports $12 saved
for every $1 spent on AIDS case management. Another reports
saving $3,000 to $5,000 per month. Case management for AIDS
should be carefully assessed and encouraged if the assessment
is positive. We are working on this, as I will mention in a

moment.
WHAT WE ARE DOING:

The areas of ignorance outlined above are sizeable.
Cooperative efforts by many groups will be required to
eliminate them. Let me outline the initial steps taken by the
HIAA. We have established a high-level Task Force of chief
executives to coordinate our AIDS activities. One group
working under that Task Force conducts a semiannual survey of

member company AIDS claims. We have published the results of
Page 12

this survey for 1986, and today I am releasing preliminary
figures for the first half of 1987. Copies of both reports are

attached for the record.

In June we will bring together AIDS case management experts
from our member companies to review the extent and effectivenes
of that technique. We plan to disseminate the results of that
conference widely in an effort to encourage case management by

public and private sector third party payers.

The case management conference will be the first step to
assess the feasibility of developing an AIDS cost database from
insurance claims files. There are difficult technical
obstacles that impede attainment of that goal. We are willing
to use our resources in cooperative ventures with government or

others to fill gaps in knowledge.

We worked actively with the National Association of
Insurance Commissioners to develop their guidelines prohibiting
the use of sexual orientation in underwriting. We urge the

adoption of these guidelines in all states.

During the past two days, HIAA’s annual Group Forum here in
Washington included two special sessions on AIDS. We will
continue our efforts to develop reliable information to fill
the gaps I’ve identified above, and to disseminate the

information to our members and the public.

 
Page 13

Finally, commercial insurance companies acting both
independently and through the HIAA and ACLI have so far
provided about $9 million in grant support for HIV-related

research, education, prevention and service projects.

POSSIBLE POLICY DIRECTIONS:

Without better information it is difficult at this time to
make very specific recommendations. Nevertheless, certain

steps offer promise;

. Make state risk pools for medically uninsurable
individuals available everywhere. Pool losses should be
funded by general revenue or any other broad-based
mechanism. Amend ERISA so that self-insured plans are

included in pool funding.
. Consider incentives and subsidies to maintain private
insurance for those who become disabled and lose

employee benefits.

. Encourage case management in private and public benefit

programs.

- Enforce laws against discrimination in employment.
Page 14
. Prohibit the use of sexual orientation in underwriting.

. Provide federal subsidies to areas or institutions

disproportionately affected by HIV costs.

Although these measures are aimed at AIDS financing
problems, none but the last would set AIDS apart for special
treatment. Many of these views are consistent with the policy
statement presented today by the American College of
Physicians, which could serve as a starting point for a

national policy on financing HIV-related care.

we
war

FINAL THOUGHTS : x

a“

The HIV epidemic has focused attention on aspects of our
country’s health care systems that need to be revised.
However, rejecting the pluralistic structure of our systen,
with its mix of public and private sector roles, is neither a

necessary nor an advisable approach to these problem areas.

> As with all hospital care, private payers pay a
disproportionate share for their hospitalized beneficiaries
with AIDS, because of a cost shift due to underpayment by

Medicaid.

ERISA is a key problem. The exemption of self-insured
plans from state regulation makes fair funding of risk pools

difficult.
Page 15

To a considerable extent, the problems of financing AIDS
care is the problem of the uninsured, for which the HIAA has
recently proposed a solution. That solution follows the
principles I have stated today. An outline of our proposal for

the uninsured is attached for the record.

Finally, let us remember that many of the problems we face
in providing and financing care for HIV-related conditions are
also experienced by people with other chronic, disabling
illness. The prevalence of these problems will increase with
the aging of our population. What we learn from dealing with
AIDS can help to prepare us for the future - a future in which,

hopefully, the HIV epidemic will be a thing of the past.
 

 

No. 15-88--4/22/88 (3)

ILLINOIS (continued)

HBN. 3909 BY O’CONNELL

CONSUMER’S GUIDE

Would provide that the Department of Insurance would prepare and
publish an annual consumer guide which compares the business premiums
and rates of insurers that issue medicare supplement insurance, home-
owners and tenant insurance, life insurance and automobile insurance.
Would provide for the content and format of the guide and for certain
procedures and penalities.

HBN. 4013 BY GRANBERG

POLICY APPROVAL

Would require insurance companies to submit health insurance policies
to the Director of Insurance for approval. In addition, would re-
quire all insurance policies to disclose their provisions in a clear
and explicit manner.

HBN. 4025 BY GEORGE

MEDICAL EXAMINATIONS

Would prohibit an insurance company from requiring an independent
medical examination unless the examining provider practices in the
same branch of health care as the treating provider and in the same
state as the treating provider, and receives more than 70% of his or
her compensation from active patient care. In addition, the patient
and treating provider would have to be allowed to have a witness at
the examination and receive a copy of all reports.

SBN. 1873 BY JONES

AIDS EXCLUSIONS

Would provide that no policy of accident and health insurance, which
provides benefits for hospital or medical expenses based upon actual
expenses incurred, could contain a provision excluding coverage for
expenses related to AIDS or ARC, except that such policy could con-
tain a provision excluding coverage for AIDS or ARC if objective
manifestations of AIDS or ARC develop during the first twelve months
after the policy is initially issued, provided that certain condi-
tions are met. Such conditions would be that: a) the applicant
would not be’ required to submit to any blood test; b) the AIDS and
ARC exclusionary provision is clearly disclosed to the applicant in
the insured’s point of sale advertising materials and in the policy;
and c) expenses related to AIDS or ARC, the objective manifestations
of which are first exhibited more than twelve months after the policy
was initially issued, will be covered in the same manner as any other
risk.

SBN. 1955 BY DAVIDSON, ET AL

LONG-TERM CARE

Would enact, to a substantial degree, the NAIC Model Long-Term Care
Insurance Act. However, would extend the free look requirement to
include certificate holders as well as policyholders.

SBN. 1961 BY CARROLL AND SCHUNEMAN

CHIP PLAN

Would require the Comprehensive Health Insurance Board to provide,

in March of each year, an estimate of the surplus or deficit for the
upcoming fiscal year.

 

 
 

 

No. 15-88--4/22/88 (4)

ILLINOIS (continued)

SBN. 1980 BY D’ARCO

PREGNANCY

Would prohibit the cancellation of any policy of accident and health
insurance at any time during which an insured is pregnant, except for
failure to pay the premium therefor.

SBN. 2000 BY ZITO

BANKS

Would amend the Illinois Banking Act and the Illinois Insurance Code
to authorize banks to own and operate subsidiaries as registered
firms under the Illinois Insurance Code.

SBN. 2006 BY UNKNOWN

SEX DISCRIMINATION - INSURANCE

Would amend the Illinois Human Rights Act to prohibit discrimination
by insurers. In addition, would amend the Insurance Code to include
discrimination on the basis of sex as a prohibited practice in the
business of insurance.

SBN. 2011 BY DONAHUE, ET AL

ADVERTISING

Would provide that entities not authorized to transact insurance
business in Illinois which disseminate advertisements designed to
result in the solicitation for the purchase of insurance or in the
creation of mailing lists for such a purpose would be subject to
current Insurance Code provisions prohibiting misrepresentation and
defamation.

SBN. 2032 BY CARROLL AND ROCK

CHIP

Would appropriate $20,500,000 from the General Revenue Fund for the
fiscal year 1989 deficit of the Illinois Comprehensive Health Insur-
ance Plan.

SBN. 2073 BY HOLMBERG

LONG-TERM CARE INSURANCE

Would create the Long-Term Care Insurance Act. Largely similar to
the NAIC Medel Long-Term Care Insurance Act as it appeared prior to
the December, 1987 amendments which were made by the NAIC.

SBN. 2074 BY HOLMBERG

ADVERTISING

Would prohibit the use of misleading advertising in the sale of
insurance. Would regulate the use of testimonials, endorsements and
commendations in insurance advertising., Would make violations of
the provisions involved a deceptive practice under the Unfair and
Deceptive Acts and Practices Article of the Insurance Code and a
deceptive business practice under the Deceptive Business Practices
Act.

SBN. 2161 BY MAROVITZ

ANTITRUST

Would eliminate the exemption for insurance companies and their
representatives from thé Illinois Antitrust Act. In addition, would
eliminate the existing Insurance Code authority to act in concert
which currently accrues to two or more such companies.

 
No. 15-88--4/22/88 (5)

ILLINOIS (continued)

SBN. 2167 BY MAROVITZ

PRIVATE CAUSE OF ACTION

Would create a civil cause of action for any violation of Article Ix
of the Illinois Insurance Code - "Provisions Applicable to all Com-
panies", and Article XXVI - "Unfair and Deceptive Acts and Practices".
In addition, would provide for a minimum award of $500 plus costs and
attorney’s fees and for punitive damages for a willful violation.

SBN. 2168 BY MAROVITZ

PUNITIVE DAMAGES

Would provide for a maximum award of $100,000, rather than $25,000,
as punitive damages when an insurance company has been deemed to be
unreasonable and vexatious in refusing to pay a claim.

SBN. 2169 BY MAROVITZ

PUNITIVE DAMAGES

Would eliminate the current limit on punitive damages when it would
appear that an insurance company has been unreasonable and vexatious
in refusing to pay a claim.

MAINE

 

HBN. 1894 BY DIAMOND, ET AL

MENTAL HEALTH STUDY

Would authorize the Department of Mental Health and Mental Retarda-
tion to conduct a study to determine the availability of mental
health professionals and assess methods of increasing access to
mental health professionals, including assessing the cost of expand-
ing the types of mental health professionals eligible for third party
reimbursement.

MICHIGAN

HBN. 5289 BY NIEDERSTADT

CUSTODIAL CARE

Would add Section 500.2267b to require that an application for a
disability insurance policy that provides hospital, medical, surgical
or sick-care benefits, including but not limited to Medicare Supple-
ment, that does not provide coverage for basic custodial nursing care
shall contain the following statement at the top of the first page

in 14 point type: "This policy does not cover custodial care in a
nursing care facility." Passed in House.

HBN. 5290 BY NIEDERSTADT

LONG TERM CARE

Would require that application for long term care certificate contain
the following statement at the top of the first page in not less than
14 point boldface type: "This is an application for a long-term care
certificate." Passed in House.

HBN. 5291 BY NIEDERSTADT

LONG TERM CARE

Same as HBN 5290 reported above, except applies to insurers. Passed
in House.
No. 15-88--4/22/88 (6)

MICHIGAN (continued)

HBN. 5292 BY NIEDERSTADT

MEDICARE SUPPLEMENT

Would require that application for Medicare Supplement policy contain
following statement at top of the first page in not less than 14
point boldface type: "This is an application for a Medicare Supple-
mental insurance policy." Passed in House.

 

HBN. 5293 BY NIEDERSTADT

MEDICARE SUPPLEMENT

Same as HBN 5292 reported above, except applies to nonprofit corpora-
tion certificates. Passed in House.

HBN. 5294 BY NIEDERSTADT

CUSTODIAL CARE

Same as HBN 5289 reported above, except applies to nonprofit corpora-
tion certificates. Passed in House.

 

HBN. 5307 BY MATHIEV, ET AL

MEDICARE SUPPLEMENT

Would prohibit insurers from issuing a Medicare Supplement policy to
a person not eligible for Medicare. Would require insurers, before
offering such a policy, to verify that the person is eligible for
Medicare. Would require insurers to refund all premiums to a person
issued such a policy if that person is not eligible for Medicare.
Would require that applicant be notified of how individual policy
being offered would duplicate or coordinate with existing group
coverage. Passed in House.

ACTION ON BILLS PREVIOUSLY REPORTED

 

ALABAMA

HBN. 182 INSURANCE PREMIUM TAX
Leg. Bul. 8-88, 13-88. Passed in House.

 

HBN. 506 EXAMINATION EXPENSES
Leg. Bul. 12-88. Reported favorably in House.

ALASKA

SBN. 315 NURSE PRACTITIONERS - COVERAGE
Leg. Bul. 5-88, 9-88. Reported favorably in House.

ARIZONA

HBN. 2052

Z

OS
Leg. Bul. 5-88, 6-88, 14-88. Passed in Senate.

 

SBN. 1137 MANDATED BENEFIT - MAMMOGRAPHY
Leg. Bul. 5-88. Reported favorably in Senate.

CALIFORNIA

SBN. 2801 WELLNESS
Leg. Bul. 10-88. Reported favorably in Senate.
 

No. 15-88--4/22/88 (7)

HBN.

SBN.

HBN.

HBN.

HBN.

SBN.

SBN.

SBN.

HBN.

HBN.

HBN.

HBN.

HBN.

HBN.

1012

96

5750

5809

5887

165

348

508

406

254

507

1160

1281

1490

COLORADO

LONG-TERM CARE INSURANCE
Leg. Bul. 3-88, 4-88, 11-88, 12-88. To Governor.

MANDATED BENEFITS-MENTAL ILLNESS
Leg. Bul. 5-88, 8-88, 9-88, 11-88, 13-88. To Governor.

CONNECTICUT

GUARANTY ASSOCIATION
Leg. Bul. 11-88, 14-88. Passed in Senate.

CERTIFICATE OF NEED

Leg. Bul. 11-88. Substitute bill would increase dollar
amount triggering CON requirements in the acquisition of
major medical equipment from $400,000 to $700,000.

AIDS EDUCATION
Leg. Bul. 11-88, 12-88, 14-88. Passed in Senate.
“\

FIRST CONNECTICUT LIFE INSURANCE COMPANY
Leg. Bul. 7-88, 10-88, 12-88. Approved 4-6-88.

/
EXTRATERRITORIALITY
Leg. Bul. 11-88, 13-88, 14-88. Substitute bill would
require employer-offered accident and health policies
delivered, issued for delivery or renewed in any other
state to include certain mandated benefits when 51% or
more of the employees are employed in Connecticut.

TORT REFORM
Leg. Bul. 12-88. Reported favorably in Senate.

DELAWARE

CAPTIVE INSURANCE COMPANIES
Leg. Bul. 5-88, 14-88. Approved 4-8-88.

GEORGIA

HEALTH CARE DATA
Leg. Bul. 4-87, 8-88, 10-88. Approved 4-7-88.

PREFERRED PROVIDER ARRANGEMENTS
Leg. Bul. 4-87, 8-87, 6-88, 7-88. Approved 4-11-88.

PREMIUM TAX
Leg. Bul. 24-87, 7-88, 10-88. Approved 4-12-88.

AIDS
Leg. Bul. 6-88, 10-88. Approved 4-12-88.

AGENT LICENSING
Leg. Bul. 6-88, 7-88, 9-88. Approved 4-11-88.

 
No.

15-88--4/22/88 (8)

GEORGIA (continued)

HBN.

HBN.

SBN.

HBN.

HBN.

HBN.

HBN.

HBN.

HBN.

SBN.

SBN.

SBN.

SBN.

HBN.

HEN.

1527

1748

601

842

2268

2783

3151

3291

3304

2405

2778

2871

3088

2294

1503

ADOPTED CHILDREN
Leg. Bul. 10-88. Approved 4-11-88.

LONG TERM CARE INSURANCE
Leg. Bul. 10-88. Approved 4-11-88.

COVERAGE WITH INSURERS
Leg. Bul. 10-88. Approved 4-12-88.

HAWAIT

PREMIUM TAXES AND CREDITS
Leg. Bul. 7-87, 10-87. Passed in Senate.

INFORMED CONSENT - HIV TESTING
Leg. Bul. 7-88, 9-88, 11-88. Passed in Senate.

HEALTH INSURANCE RATES
Leg. Bul. 8-88, 11-88. Passed in Senate.

HIV_ANTIBODY TESTING
Leg. Bul. 7-88, 9-88, 11-88. Passed in Senate.

UNFAIR TRADE PRACTICES
Leg. Bul. 8-88, 11-88. Passed in Senate.

CONTRACT FILINGS
Leg. Bul. 12-88. Passed in Senate.

PREVENTIVE CHILD HEALTH CARE
Leg. Bul. 8-88, 11-88. Reported favorably in House.

DENTAL SERVICE ORGANIZATIONS
Leg. Bul. 13-88. Passed in House.

HEALTH CARE RECORDS - CONFIDENTIALITY
Leg. Bul. 7-88, 12-88, 13-88, 14-88. Passed in House.

LOW INCOME MEDICAL CARE
Leg. Bul. 8-88, 12-88. Passed in House.

IOWA

AIDS TESTING
Leg. Bul. 9-88, 11-88, 12-88. Passed in Senate.

MAINE

CERTIFICATE OF NEED WAIVER

Leg. Bul. 3-88. As amended, would limit waiver of CON
provisions to projects other than those related acute
care or which could affect the financial requirements of
a hospital. Passed both Houses.
No. 15-88-~-4/22/88 (9)

MAINE (continued

SBN.

SBN.

SBN.

HBN.

HBN.

HBN.

HBN.

SJR.

SBN.

SBN.

SBN.

SBN.

HBN.

HBN.

HBN.

711

759

802

625

941

960

1278

21

379

389

401

658

421

1914

2130

PRELITIGATION SCREENING PANELS

Leg. Bul. 3-88. As amended, would among other pro-
visions permit waiver of filing fees in certain circun-
stances and permit the panel to require prior resolution
of dispositive affirmative defenses in court.

MEDICAID RECIPIENTS - THIRD PARTY REIMBURSEMENT
Leg. Bul. 3-88, 12-88, 13-88. Would establish claim

notification requirements for Medicaid recipients or
attorneys representing Medicaid recipients.

HANDICAPPED CHILDREN ~- MEDICAID
Leg. Bul. 4-88. Passed both Houses.

YLAND

UNDERWRITING DECISIONS
Leg. Bul. 5-88, 13-88. Passed in Senate.

MANDATED BENEFITS: ALCOHOLISM
Leg. Bul. 6-88, 13-88. Passed in Senate.

UTILIZATION REVIEW-PRIVATE REVIEW AGENTS
Leg. Bul. 8-88, 13-88. Passed in Senate.

MANDATED BENEFIT: CERTAIN BONES/JOINTS
Leg. Bul. 6-88, 13-88. Passed in Senate.

STUDY: HEALTH BENEFITS
Leg. Bul. 7-88, 14-88. Reported unfavorably in House.

DENTAL PLANS
Leg. Bul. 5-88, 11-88, 12-88. Reported unfavorably in
House.

MANDATED BENEFITS: PSYCHIATRIC HALFWAY HOUSES
Leg. Bul. 5-88; 13-88. Passed in House.

MEDICAL MALPRACTICE RATES
Leg. Bul. 8-88, 13-88. Reported unfavorably in House.

UTILIZATION REVIEW - PRIVATE REVIEW AGENTS
Leg. Bul. 8-88, 13-88. Passed in House.

MINNESOTA

COMMISSIONER OF HEALTH
Leg. Bul. 6-87. Passed in Senate.

OMNIBUS BILL
Leg. Bul. 9-88. Withdrawn from House.

MENTAL HEALTH BENEFITS
Leg. Bul. 10-88. Indefinitely postponed in House.

 
No. 15-88--4/22/88 (10)

MINNESOTA, (continued)

HBN. 2269 CHIROPRACTORS
Leg.:Bul. 11-88. Passed in House.

SBN. 1388 MEDICARE
Leg. Bul. 14+87, 13-88. Passed in House.

SBN. 1646 CLEFT PALATE; VENTILATOR DEPENDENCY
Leg. Bul. 8-88, 12-88, 14-88. As amended, would also

provide for the following: a) Would specifically pro-
hibit companies from excluding payments for covered
services paid by state hospitals, including correctional
facilities; b) would require that the payment mandated in
the bill as introduced be provided by any existing dental
plan as a primary carrier with the accident and health
policy carrier being secondary; c) would apply Minneosta’s
existing adopted children’s law extraterritorially; and

d) would mandate coverage for services provided to ven-
tilator dependent individuals.

SBN. 1681 CHILD HEALTH SERVICES
Leg. Bul. 9-88, 13-88. Passed in House.

SBN. 1838 MAMMOGRAPHIES; RETURN OF PREMIUM
Leg. Bul.- 9-88, 13-88, 14-88. As amended, would also
specifically provide for a return of premium under acci«
dent and health insurance policies should certain condi-~
tions exist.

MISSISSIPPI

HBN. 266 STATE MEDICAID EXPANSION
Leg. Bul. 14-88. Passed in Senate.

SBN. 2323 NURSE PRACTITIONERS
Leg. Bul. 8-88, 11-88, 14-88. Passed in House.

SBN. 2494 INSURANCE COMMISSIONER
Leg. Bul. 8-88, 11-88. Passed in- House.

SBN. 2657 STATE EMPLOYEE CAFETERIA PLANS
Leg. Bul. 11-88. Passed in House.

MISSOURI

HBN. 1282 HEALTH INSURANCE ~- AVAILABILITY
Leg. Bul. 4-88. Passed in House.

NEBRASKA

LBN. 88 RIGHTS OF THE TERMINALLY ILL
Leg. Bul. 3-87, 12-87. Died in Legislature.

LBN. 998 MEDICARE SUPPLEMENT POLICIES
. Leg. Bul. 5-88. To Governor.
No. 15+88--4/22/88 (11)

SBN.

SEN.

SBN.

HBN.

HBN.

HBN.

HBN.

HBN.

HBN.

HBN.

SBN.

SBN.

SBN.

HBN.

HBN.

HBN.

291

306

173

8107

8226

8286

8710

9013

$022

9092

2857

2976

2998

1325

1792

1897

NEW_ HAMPSHIRE

PREMIUM REFUND
Leg. Bul. 2-88, 6-88. Passed in House.

 

MANDATED BENEFITS
Leg. Bul. 2-88, 6-88. Passed in House.

OKLAHOMA

DISCONTINUANCE AND REPLACEMENT
Leg. Bul. 8-87, 9-87, 10-88, 12-88. Approved 4-8-88.

RHODE ISLAND

SUBSTANCE ABUSE
Leg. Bul. 11-88. Passed in House.

INSURANCE ADJUSTERS
Leg. Bul. 12-88. Reported favorably in House.

MEDICARE CATASTROPHIC ACT
Leg. Bul. 12-88, 14-88. Reported favorably in Senate.

HEALTH COUNCIL
Leg. Bul. 12-88. Reported favorably in House.

FOREIGN INSURERS
Leg. Bul. 12-88. Reported favorably in House.

ANNUAL REPORTS
Leg. Bul. 12-88. Reported favorably in House.

CONTINUATION/RETIREES
Leg. Bul. 12-88. Reported favorably in House.

FILINGS
Leg. Bul. 12-88. Reported favorably in Senate.

CHIP
Leg. Bul. 12-88, 14-88. Passed in Senate.

AIDS EXPOSURE
Leg. Bul. 12-88. Reported favorably in Senate.

TENNESSEE

CONSUMER INFORMATION
Leg. Bul. 4-88, 6-88, 10-88, 11-88. Approved 4-11-88.

CREDIT INSURANCE
Leg. Bul. 6-88, 11-88, 12-88, 13+88, 14-88. Approved
4-8-88.

COMPREHENSIVE HEALTH INSURANCE POOL
Leg. Bul. 7-88, 8-88, 10-88. Passed in Senate.
No. 15-88--4/22/88 (12)

TENNESSEE (continued)

SBN.

SBN.

SBN.

SBN.

HBN.

HBN.

HBN.

339

1900

2342

2400

4035

4493

4511

INSURANCE

Leg. Bul. 6-87. Passed in Senate.

ASSIGNED BENEFITS
Leg. Bul. 5-88. Passed in Senate.

INSOLVENT INSURERS
Leg. Bul. 6-88, 13-88, 14-88. Approved 4-11-88.

REGULATORY BOARDS
Leg. Bul. 8-88, 12-88. Approved 4-8-88.

WEST VIRGINIA

PREADMISSION CERTIFICATION
Leg. Bul. 4-88, 10-88, 11-88. Vetoed 3-31-88.

 

AIDS
Leg. Bul. 7-88, 11-88. Vetoed 3-31-88.

FRANCHISE TAX
Leg. Bul. 8-88, 10-88, 11-88. Approved 3-29-88.

- END -
TESTIMONY

OF

BLUE CROSS AND BLUE SHIELD ASSOCIATION

ON

AIDS

BEFORE THE PRESIDENTIAL COMMISSION ON THE
HUMAN IMMUNODEFICIENCY VIRUS EPIDEMIC

   
   
 

MARY NELL LEHNHARD
VICE PRESIDENT
APRIL 27, 1988
Mr. Chairman and Members of the Commission, I am Mary Nell
Lehnhard, Vice President of the Blue Cross and Blue Shield
Association. The Association is the coordinating organization
for the 77 Blue Cross and Blue Shield Plans throughout the

nation.

We appreciate the opportunity to testify again on the issue of
AIDS. As our previous testimony focused on Blue Cross and Blue
Shield Plan practices with respect to AIDS I will focus today

more on cost and financing issues.

The Blue Cross and Blue Shield organization is directly
concerned with many of the problems associated with AIDS.
Because our Plans have long been known as providers of
comprehensive health insurance benefits, and because many of
our Plans provide coverage to individuals who are otherwise
considered uninsurable, our enrollees include a number of AIDS
patients. Further, our Plans are actively involved in
community education efforts to increase the level of public
awareness and knowledge about AIDS and to help control the

spread of this disease.

Because of its importance to society, we will continue to do

our best to develop mechanisms for dealing with the problems

associated with AIDS. However, we believe that the nature of
this disease necessitates that both the private and public

sectors work together to resolve this problem adequately.
In support of this, we would like to offer the following
recommendations: 1) assure access to health insurance coverage
for high. risk individuals through voluntary state risk pools;
2) enhance state Medicaid programs for those unable to pay for
any coverage; and 3) reduce AIDS related costs and enhance
quality of care by incorporating case management techniques

into state and federal AIDS programs.

We regret that we are not able to offer information on possible
costs of the recommendations we suggest. Plans have only
recently started collecting data on the costs of current AIDS
patients and cost estimates of any proposal will depend on the

projection of the number of AIDS cases in the future.

1) Pools f High Ri

Voluntary state risk pools provide an effective mechanism for
providing insurance coverage to high risk individuals who have
been deemed uninsurable by private insurers, yet are not

eligible. for Medicaid.

The financial viability of most insurance carriers, as well as
their ability to provide affordable coverage to the vast
majority of individuals, would be threatened if they accepted
all high risk individuals. An insurer that attracts a greater
than average number of high risk individuals is faced with what

we in the industry call "adverse selection."
The consequence of adverse selection is that a group of insured
individuals has a higher than average concentration of poor
risks. Because of the higher than average probability of high
cost claims being filed, an insurance group that suffers from
adverse selection must charge higher than average premiums. In
response to higher premiums, healthier individuals may seek
less expensive coverage, thus further increasing the
concentration of poor risks in the original group. This cycle
of adverse selection, if not controlled, can leave an insurer
with such high premiums that it is no longer able to attract a
sufficient number of good risks. Taken to an extreme, adverse
selection can compromise the financial solvency of the

insurance carrier.

To avoid this situation and to continue providing affordable
coverage to most individuals, many insurers screen applicants
for those pre-existing medical conditions which result in
expensive treatment costs. While this “underwriting” is not
practiced to the same degree by all insurers -- some Blue Cross
and Blue Shield Plans, for example, offer comprehensive
benefits with liberal or no underwriting standards --
underwriting has, unfortunately, reduced the availability of
coverage for high risk applicants in some states. An
individual with AIDS is considered high risk and therefore may

have difficulty purchasing private insurance coverage.
Clearly, more needs to be done to asSure access for these
individuals. The Blue Cross and Blue Shield Association
believes that voluntary state risk pools are one means of
making coverage available. A high risk pool generally provides
coverage to people who have been turned down by at least one
private insurer. The individual must pay a premium for
coverage, although the price is generally subsidized and does

not reflect the full cost of providing coverage.

Although we believe risk pools are an attractive means of
increasing access to care, we recognize that the need for such
pools varies on a state-by-state basis. In states where Blue
Cross and Blue Shield Plans offer open enrollment with no
medical underwriting, there is no need for a high risk pool.
The premiums in the Blue Cross and Blue Shield Plans are much
more affordable than even a subsidized high risk pool could
offer because of the very large mix of both high and low risk

subscribers.

In states where pools are needed, we believe the federal
government should provide states with flexibility to design and
finance these pools on an equitable basis. Because the pool
covers high risk individuals, the premiums for such coverage
are extremely expensive. If the premiums were based on the
expected cost of providing coverage, very few individuals would

be able to afford coverage. All of the 15 states that have
enacted risk pool legislation have recognized this problem.
The general solution has been to cap the total premium and

include an additional source of financing.

We believe that general state revenues are the most appropriate
mechanism for financing pool losses. This is the most
broad-based equitable mechanism for dealing with a problem

which affects many different sectors of society.

Unfortunately, only one state is financing its pool's losses

through general revenues.

The rest of the states consider this an insurance problem and .
therefore assess insurers for the shortfall. Insurers
incorporate the cost of the subsidy into the cost of providing
coverage, thereby sharing it with employers who buy group
coverage. Because of the federal Employee Retirement Income
Security Act (ERISA), only employers who buy coverage through
insurers are affected by the additional cost. ERISA prohibits
States from regulating self-funded employee benefit plans. As
a consequence, employers who self-fund their benefits avoid the
costs of subsidizing the pools. Because it is primarily large
employers who self-fund their employee benefits, the major part
of the burden for subsidizing the pools falls on small and

mid-size employers.
oad

We believe that states need the flexibility to include
employers who self-fund their benefits, as well as those who

purchase insurance, in the financing of their risk pools.

2) Expand Medicaid Coverage

While State risk pools address one portion of the high risk
population, we recognize that because it is an expensive form
of coverage its price will be out of reach of many people with
AIDS. Some who are unable to afford coverage will qualify for
Medicaid. However, many individuals, while unable to afford
private coverage, are financially and/or categorically
ineligible for Medicaid. To help fill this void, we believe

Medicaid coverage should be enhanced.

The Blue Cross and Blue Shield Association recommends a

two-part Medicaid strategy to address this problem:

o Institute Minimum Income Eligibility Levels.
First, the federal government should require states
to adopt minimum income eligibility levels for
Medicaid. In 1987, 22 states had Medicaid income
eligibility levels helow 50 percent of the federal
poverty level, with some states as low as 15
percent. We recommend that states increase these
eligibility levels, beginning with a minimum of 60
percent of the federal poverty level and phasing up

to 100 percent over time.
 

 

0 Break the Welfare Link,
Second, Medicaid eligibility should eat be Limkeed to
the welfare categories of the aged. blind, disabled
and members of families with dependemt children.
Anyone, including working individuals amd their
families, should be eligible for Medicaid 17 their
income is below the income eliasldJity threshold.
This is particularly appropriate becaume se nany
individuals with AIDS are categoracatiy imeligqihie

for Medicaid.

These Medicaid eligibility changes could jngrevre acres is
health care among low-income working indiviweais wudbstantuadicy..
3) Expan Man men

Finally, we recommend that any future firamrincd: nechanisma
utilize case management to keep the costs of grovidiag cave to
AIDS patients as low as possible and to entiaeoes the scuglsky of
care. Our experience with case managemert re Sake arcwt des
positive evidence that it can accomplis: notm «1 these seals.
Public sector programs should take advantage o¢ the tremendous
amount of effort the private sector has invested ia fevelotimg

innovative, cost-effective case managemert proq7emns.

Current Blue Cross and Blue Shield Plan eatimarces af ADT.
related costs are proving to be considerahiy Lowes titan tmptial

predictions -- in large part due to the incvessed wee of

 
ambulatory and home health care. Plan data on AIDS patient
health care costs varies by state but typically ranges from
$25,000 to $70,000 per lifetime. Blue Shield of California
found that implementing a managed care program for its AIDS
patients saved a total of $183,000 in the treatment of 20 AIDS
patients over an 18-month period. This is an average savings

of $8,000 per case.

Equally important is the fact that case management programs
significantly enhance the quality of care provided to the AIDS
patient. By emphasizing outpatient sites of treatment like
home health and hospice care, case management offers a more

humane alternative to extended hospitalization for AIDS

patients.

Conclusion

The Blue Cross and Blue Shield Association will continue to
explore case management programs to enhance coverage and reduce
costs attributable to AIDS. Our Plans will also maintain their
community education efforts. However, despite our efforts in
this area, the private sector cannot meet all the health
coverage needs of those high risk individuals who are currently
without health insurance. We are optimistic, however, about
resolving this problem under a cooperative effort between the

private and public sector.
We appreciate this opportunity to present our view, and look
forward to working with the Committee to develop additional

financing options for AIDS patients.

1661C

-~10-
TESTIMONY OF

ee

we
- ree o,,
“OS Te

Co R. WILENSKY, PH.D. ‘
. _

DIVISION OF HEALTH AFFAIRS

PROJECT HOPE

BEFORE THE

PRESIDENTIAL COMMISSION ON
THE HUMAN IMMUNODEFICIENCY VIRUS EPIDEMIC
ON

APRIL 27, 1988

"OPTIONS FOR CARE AND SOURCES OF FINANCING"
Dear Mr. Chairman:

It is a pleasure to be able to testify before this commission.
I am the Vice President of Health Affairs at Project HOPE and am
here today as an economist who has spent many years analyzing the
problems of the uninsured as well as more recently, some of the
financing problems presented by AIDS. My discussion will include
a brief description of how we finance health care in the U.S. in
general and how this relates to the financing of care for AIDS.
As has been noted by others before me, AIDS is exacerbating all
of the weaknesses which are inherent in our system of health
care. Most of the suggestions which I will make for reforming
the financing of health care will be directed towards ameliorating
these existing weaknesses and not be limited to people with AIDS.
Both on ethical as well as political grounds, it seems undesirable
and unlikely to single out one particular group while ignoring

many others who are equally in need.

The Problem

Health care in the United States is primarily financed by a
combination of public and private insurance in addition to a
limited amount of publicly financed direct service delivery.
Most of the under 65 population receive their insurance from
their employer as part of their compensation package. This has

occurred in large part because of the favorable tax treatment
 

2
accorded to employer provided health insurance although providing
insurance through large groups is attractive because it allows
the spreading of risk across a large number of people. Public
insurance is provided for all of the elderly through Medicare and
for some of the poor through the federal/state program, Medicaid.
In addition to their Medicare insurance, about two thirds of the
elderly have supplementary private insurance and about 13 percent
have Medicaid. A relatively small number of individuals, about
15 million of the under 65, purchase their private insurance

directly from insurance companies.

There are several implications of this uniquely American
mixture of public and private insurance for people with AIDS. The
first is that while most Americans have health insurance, there
are at least 30 million Americans who do not, and some think the
number may be as high as 37 million. Second, since most of the
insurance for the nonaged population is related to employment,
any event that disrupts employment places the person's insurance
coverage in jeopardy as well. Third, the United States has
developed a system of public hospitals and other direct service
programs that provide services to individuals who would otherwise
not have direct access to care, but this access is not uniformly
available throughout the country nor does it cover all types of
health services. As a result, some individuals may not have
insurance when they become infected with the HIV virus or when

they display symptoms of AIDS, and others may begin the illness
3
with employment-related insurance but lose it sometime during the
course of their illness. Whether or not these individuals will
have access to basic health services and the type of services
they will have access to, will vary substantially according to

where they live.

Current Options

The current options for financing the treatment of AIDS vary
according to the economic and demographic characteristics of the

individual as well as with the place where the individual lives.

As indicated, most of the nonaged population receive their
insurance through their place of employment or as a dependent of
another worker. Private health insurance therefore potentially
represents an important source of financing, at least as long as
the individual is working. Because of the lack of nationally
representative data, it is not at all clear how much of the
financing is being currently carried by private insurance. The
Andrulis study, which covered AIDS cases in public hospitals and
teaching hospitals, indicated that only 17 percent of AIDS
patients were covered by private insurance whereas a study of
AIDS patients at Deaconess Hospital in Massachusetts indicated
that almost half of the patients had Blue Cross/Blue Shield

coverage.
4

There are several difficulties raised by our reliance on the
employer as the primary provider of insurance for the nonaged
population. Some employers, particularly many small firms, do
not offer health insurance as one of their benefits. Individuals
working for such firms can try to obtain insurance coverage
directly or by joining a social or civic organization that offers
health insurance, but insurance obtained in this manner is likely
to be more expensive and also may present serious underwriting
provisions, including the testing for HIV infection. In addition,
if the individual changes his place of employment, his new
insurance may contain a pre-existing condition clause that limits
or excludes coverage for illnesses that existed when the new job
was obtained. Finally, there is the obvious problem that people
with AIDS will only be able to continue working during a portion
of their illness. Legislation that was passed as part of the 1986
Consolidated OMNIBUS Budget Reconciliation Act (COBRA), provides
some relief from the direct relationship between employment and
insurance coverage. As part of this legislation, most employers
are required to offer their employees the right to purchase
insurance at the group rate for a period of at least 18 months
following the loss of a job. While this is substantially better
than the situation that existed before COBRA, the fact that the
individual must pay the entire premium himself, using after tax

dollars, makes the benefit of limited value.
5

Uninsurable or high-risk pools represent another potential
source of funding for some individuals. These risk-pools currently
exist in 15 states and provide a mechanism for purchasing insurance
by people who have been turned down by insurance companies
because of medical illness. As presently constructed, however,
these pools cover only a small fraction of the people at risk
even in the states in which they exist because they have tended
to have very high premiums and limited coverage, or at least
coverage that exists only after a very substantial deductible is
passed. A few states also have a catastrophic insurance program
which has also been subjected to similar criticisms--that is,

limited coverage with very high premiums.

A third current source of financing for AIDS is Medicaid,
although the estimate of financing provided by Medicaid has also
been under dispute. In fact, the estimates associated with
Medicaid have ranged from 20 percent to 70 percent. The potential
for Medicaid as a source of financing of AIDS varies substantially
according to where the individual lives. This is because the basic
eligibility levels and the "spend down" provisions associated
with Medicaid (that is, the ability to spend down into poverty)
are established by the individual states and vary enormously.

The presence of substantial federal matching for Medicaid
encourages states to spend more than they might otherwise but the
eligibility level still varies, from 25 and 35 percent of the

poverty line in Texas and Tennessee, to 90 and 100 percent of the
6
poverty line in California and New York. The types of services
that are covered by Medicaid also vary substantially from state
to state since many of the services are covered at the state's

option.

Care that is not financed by private insurance or Medicaid
is generally financed either by the public hospitals, which
receive public appropriations for that purpose, or by
"uncompensated" care. This latter is a residual category
frequently used when there is no specific sponsor for the financing
of the care. The funder in this case is usually individuals with
private insurance who have the costs of otherwise uninsured

people shifted into their bills.
Alternative Sources of Financing

In considering alternative forms of financing or in modifying
existing strategies, it is useful to distinguish between
individuals with at least some income and assets at the beginning
of their illness and individuals who are near or in poverty from

the beginning.

For individuals who either have insurance or who could pay
for at least a portion of an insurance policy, there are two
strategies that should be explored. These should be regarded as

potentially complimentary strategies rather than competing ones.
7
The. first builds on the COBRA provision which requires employers
to offer group insurance to employees but allows the employer to
charge up to 102 percent of the cost of the premium. Unlike the
employed population, individuals who are no longer working must
use after-tax dollars rather than pre-tax dollars to pay for
their health insurance. In.order to both make it more likely
that they continue their health insurance coverage as well as to
rectify an existing inequity between those who receive employment-
related insurance and those who do not, a refundable tax credit
should be instituted for all individuals who do not receive
employer-financed insurance with the credit to be used toward the
purchase of a health insurance plan. .-This tax credit would
approximate the tax subsidy on average which workers receive from
excluding the employer paid portion of insurance from their
taxable income. It should be made refundable so that individuals
with little or no taxable income can obtain the benefit of the
subsidy. The refundable tax credit should not only be available
to people with AIDS but should be available to any individual who
is not receiving employer financed insurance. This provision is
similar to one that, was introduced by Senator Durenberger two
years ago as one of several pieces of legislation introduced to
address the problems of access to care for the uninsured. The
attractiveness of this strategy is that it would permit individuals
with some income and assets to receive a limited subsidy without

devastating themselves financially.
8

A second strategy which would assist people with AIDS who
are able to make some financial contributions toward their own
care is the use of subsidized insurance pools for the medically
uninsurable. Although 15 states already have such pools and 13
others are considering them, most of the states have not been
willing to recognize that a medically uninsurable pool will need
substantial subsidies if it is limited to only high-risk
individuals and if it is also going to approximate an "affordable
level" of insurance, however defined. To date, most of the risk
pools have had very limited subsidies and thus have not provided
protection to the majority of people who would otherwise be
eligible to participate. The provisions associated with ERISA
(Employment Retirement Income Security Act) mean that the pool
cannot be financed by a tax on the insurance premiums of ERISA
covered firms, but there are a variety of other broad based taxes
such as a wage tax, an income tax or an excise tax on employers
that could be used to finance this subsidy. If participation in
the high-risk pool is limited to those who are medically
uninsurable (as opposed to all those without insurance), it would
also be possible to vary the premium charged individuals
participating in the pool according to their income levels. This
has not been done in the past and has meant that lower income
individuals are less likely to participate in such pools than mid

and higher income individuals.
 

 

9

The refundable tax credit for use in purchasing insurance
and the subsidized risk pool for the medically uninsurable are
primarily concepts designed to assist individuals above the
poverty line. While they represent important strategies for some
people with AIDS, there are others who will need more complete
public support. Many of these individuals would be picked up by
Medicaid if it were not for the varying income levels used by the
states in determining their eligibility for Medicaid. It is my
belief that the Federal Government should institute a floor below
which it will not allow states to go in certifying eligibility
for Medicaid. This provision would not only assist some people
with AIDS who currently are not eligible for Medicaid, but would

also assist many other very poor people as well.

Bringing more people with AIDS onto the Medicaid program would
alleviate some of the financial problems for people with AIDS,
but it would exacerbate the financial problems which some states
are already feeling from their expanded Medicaid programs. There
is already substantial concern that Medicaid has become principally
a program that finances long-term care for elderly people. Were
it to also be responsible for financing the care of substantial
numbers of people with AIDS, it is likely that many of the people
for whom the program was originally designed--that is, mothers
and young children--would be unable to receive assistance. To
prevent this from happening and to assist states that are having

a disproportionate amount of their Medicaid dollars absorbed by the

 

 
 

 

10
AIDS epidemic, the Federal Government should consider instituting
a form of "stop-loss" provision regarding the amount of Medicaid
that is spent on AIDS. Under such a program, a block grant from
the Health Resources and Services Administration (HRSA) of the
Department of Health and Human Services (DHHS) would be initiated
whenever the share of Medicaid spending on AIDS exceeded a
certain pre-specified limit. This block grant would function with
a trigger mechanism similar to the one used by the Supplemental
Unemployment Benefit Program which extends unemployment benefits
whenever the unemployment level in a state exceeds a certain

level.

These four strategies, a refundable tax credit to be used
for the purchase of insurance, a subsidized risk pool for the
medically uninsurable, the establishment of a floor under Medicaid
and a block grant stop-loss provision for Medicaid would
substantially alleviate some of the financial problems currently
being experienced because of the AIDS epidemic. Further work
needs to be done in order to estimate the costs of instituting
these four programs although estimating these costs will be
extremely difficult because of the lack of nationally
representative data for people with AIDS. It should be noted that
much of the costs would be associated with improving access to
care for the uninsured, only some of whom would also be people
with AIDS. For all of those who wish to continue our pluralistic

system of health care that relies on both public and private

 

 
11
insurance, addressing these problems of the uninsured is a matter

of utmost urgency.
NATIONAL GAY RIGHTS ADVOCATES
PUBLIC INTEREST LAW FIRM
S40 CASTRO STREET
SAN FRANCISCO. CALIFORNIA 94114

 

(415) 863-3624

SUMMARY OF TESTIMONY BEFORE THE PRESIDENTIAL COMMISSION
ON THE HIV EPIDEMIC

 

Benjamin Schatz, Esq.
Director, AIDS Civil Rights Project
April 27, 198

Good morning. My name is Benjamin Schatz. I am the
Director of the AIDS Civil Rights Project of National Gay
Rights Advocates. I would like to thank you for inviting
me to testify for a second time before the Commission.

As you can see, I have submitted nine recommendations
to the Commission, most, but not all, involving the crisis
in AIDS and insurance. It is on this issue which I will
focus my testimony.

The insurance industry has targeted HIV-infected individuals
because of economic fears. To be sure, such targeting does
not necessarily constitute "discrimination" in the ordinary
sense of the word; the health and life ansurance industries,
after all, are in the very business of "discriminating" between
individuals of differing risks for a variety of ailments.

Nonetheless, there is evidence that both health and
life insurance companies have taken extraordinary measures
to avoid paying for AIDS-related costs. One researcher,
for example, found that the percentage of health costs paid
by insurers for people with AIDS in the San Francisco Bay
Area plummeted from 56 percent between 1982 and 1984 to 34
percent by the third quarter of 1986. In addition, a 1987
national study of public and private teaching hospitals reveals
that private insurance was the source of payment for only
17 percent of patients admitted with AIDS in these institutions.2
Of course, people with AIDS who are un~ or underinsured are
generally forced to pay for their medical expenses by exhausting
their own resources until they are poor enough to qualify
for Medicaid. Thus, to the extent that insurance companies
do not pay for AIDS-related medical expenses, these costs
are passed on to the taxpayers through increased Medicaid,
Medicare, and public hospital expenses.

Insurance companies have attempted to limit their AIDS-
related losses in two ways. The first major method employed
is underwriting--that is, the process of determining whether
it is "worth the risk" to insure a particular applicant,

and if so, what rates to charge him or her. Unfortunately,
some insurance companies have attempted to deny coverage

to all gay and bisexual men by screening out certain
applicants: unmarried males, men who work in stereotypically
"gay occupations” or live in reputedly gay neighborhoods,

men who name "unrelated" males as life insurance beneficiaries
or live with other men, or men revealed to be gay through
their medical records or hired private investigators.
Although such discrimination has been officially opposed

in a model regulatory bulletin promulgated by the National
Association of Insurance Commissioners,’ problems of this
kind persist. Indeed, a recent study by the Congressional
Office of Technology Assessment revealed that 30 percent

of insurers openly admit that they discriminate against gay
applicants.

Another underwriting mechanism in increasing use by
health, life, and disability insurers is testing for HIV
antibodies. Insurers argue that such testing 1s economically
necessary, and claim that it is inconsistent with accepted
underwriting practices to prohibit insurers from testing
for a particular medical condition.® In fact, however, industry
cost estimates have been grossly exaggerated, and insurers
are prohibited from using other medical tests in many states./
Furthermore, there 1s evidence that testing is discriminatorily
applied against gay men,® and 1s likely, in today's volatile
climate, to lead to discrimination in employment, medical
care, child custody, and other areas. Perhaps the most damning
argument against industry use of the test, however, 15S a
medical one: the failure of insurance companies to provide
counseling for tested applicants ignores the repeated assertions
of health officials that pre- and post-test counseling 15
essential for all testing programs. Moreover, at least two
Studies show that fear of insurance discrimination has directly
discouraged gay men from taking the test voluntarily as part
of an AIDS-prevention program.9

In addition to screening out "undesirable" applicants,
many insurance companies are attempting to limit their costs
through unscrupulous "post-claim underwriting," by denying
financial responsibility after a person already insured 1s
diagnosed with AIDS. Thus some insurers have relied upon
contractual language that disclaims liability for "experimental
treatments" to avoid paying for promising AIDS therapies.1l
Others have expanded the reasonable meaning of clauses that
exclude payment for "preexisting conditions" to justify
withholding life or health benefits to policyholders who
exhibited any medical ailments prior to being diagnosed.!1
A few insurance companies have simply declared in their
"exclusions and limitations" provisions that they will not
pay for any AIDS-related expenses at all. Finally, some
insurers have made it difficult for people with AIDS who
have employer-provided group life or health insurance to
convert to an individual plan upon leaving their jobs.13

To debate about AIDS and insurance highlights the fundamental
irony of an insurance system run exclusively for profit:
those who most need insurance to pay for medical care or
to protect their dependents are the least able to obtain
it. Thus, the problems of sexual-orientation discrimination,
HIV testing, and “post~claim underwriting" suggest broader
problems inherent in a privately underwritten insurance
system and point to the need for some form of national health
insurance. Attached on the following pages is a set of
recommendations which, if adopted, will significantly reduce
the problems addressed in these remarks.
 

Footnotes

1. American Medical News, May 8, 1987, p. 2, quoting Peter
Arno, Ph.D.

 

2. Andrulis, Beers, Bentley, and Gage, "The Provision and
Financing of Medical Care for AIDS Patients in U.S. Public
and Private Teaching Hospitals,” 258 JAMA, p. 1343 (1987).

3. Schatz, "The AIDS Insurance Crisis: Underwriting or
Overreaching?” 100 Harvard Law Review 1782 at 1787.

 

4, National Association of Insurance Commissioners, Advisory
Committee on AIDS, "Medical/Lifestyle Questions on Applications
and Underwriting Guidelines Affecting AIDS and ARC," proposed
bulletin, Dec. 11, 1986. This Dulletin has been endorsed

by both the Health Insurance Association of America and the
American Council of Life Insurance, the industry's two leading
trade organizations.

5. "AIDS and Health Insurance: An OTA Study,” Congressional
Office of Technology Assessment, February, 1986 at 15.

6. See, generally, Clifford and Iucalano, "AIDS and Insurance:
the Rationale for AIDS-Related Testing," 100 Harvard Law
Review 1806 (1987).

7. Schatz, "The AIDS Insurance Crisis," p. 1798, lists state
laws that forbid insurers to test for exposure to DES, or

for the presence of genetic traits for sickle cell anemia,
Tay-Sachs, and hemoglobin C.

8. Ibid, p. 1799.

9. See L. McKusick, T. Coates, and S. Morin, "Follow-up

Study on Gay and Bisexual Men" (showing fear of discrimination
by insurers, employers, and the government as the most commonly
cited reason for not taking the test). In addition, a
Colorado study of gay and bisexual men showed that fear of
losing insurance coverage was the most commonly listed reason
for not taking the test. See J. Schultz, "Reasons for Choosing
Not to be Tested for the HTLV-III Antibody: A Study of Gay

and Bisexual Men" (1986).

10. See Bay Area Reporter, Jan. 22, 1987 at l, col. l.

 

11. See Bay Area Reporter, March 13, 1986 at 2, col. 4.
Some insurers have argued that positive HIV antibody test
results, swollen glands, and even diarrhea are pre-existing

 
Notes - 2

conditions for AIDS.

12. “Who Will Pay the AIDS Bill?", Newsweek, April 11, 1988
at 71.

13. 1 AIDS Policy and Law 2 (BNA) July 16, 1986.
NATIONAL GAY RIGHTS ADVOCATES
PUBLIC INTEREST LAW FIRM
540 CASTRO STREET
SAN FRANC!SCO, CALIFORNIA 04114

 

(415) 863-3624

RECOMMENDATIONS TO THE PRESIDENTIAL COMMISSION ON
THE HIV EPIDEMIC REGARDING INSURANCE AND OTHER FINANCING ISSUES

 

 

Benjamin Schatz, Esq.
Director, AIDS Civil Rights Project
April 27, 1988

4

I urge the Presidential Commission on the HIV Epidemic
to endorse the following recommendations:

1) The passage of a federal bill mandating health insurance
coverage for all employees. The AIDS crisis raises broader
questions about a system of health insurance which has left
37 million American citizens uninsured. Making the purchase
of employer sponsored group health insurance mandatory would
remove the argument that employers need to remain competitive
with other employers by avoiding the expense of insurance.

A federal bill could offer subsidies to small employers,

and should also make health insurance available to the unemployed.
The goal should be universal coverage.

 

 

2) The development of nationally standardized minimum benefits
for AIDS-related benefits under Medicaid. Although most state
Medicaid programs have agreed to pay for AZT, a few have

not. The same problem exists with regard to a variety of
other benefits. The development of guidelines mandating
minimum AIDS-related benefits under Medicaid would, of course,
allow states to experiment by offering more generous benefits
while at the same time guaranteeing a basic level of care

and increased equity among the states. Such guidelines would
also effectively establish standards for minimum benefits

by private insurance companies.

 

3) The distribution of block grants to those cities and

states which have shouldered a disproportionate burden in
financing AIDS-related health care costs. Cities such as

New York and San Francisco will not be able to bear indefinitely
the lionshare of the costs of a national problem.

 

 

4) All state insurance departments should prohibit anti-
gay discrimination by insurance companies as recommended
by the National Association of Insurance Commissioners in
December, 1986. Unfortunately, the NAIC model bulletin
on underwriting for AIDS has been distributed by only a

 

 

 
few states. State insurance departments should be urged
to pass and vigorously enforce these guidelines.

5) Health ansurers should be prohibited from using the HIV
antibody test. HIV antibody (or viral) testing by insurers
is socially harmful in at least six ways: 1) it is certain
to be applied discriminatorily against gay men; 2) insurers
have refused to accompany testing with counseling, although
leading medical authorities insist that such counseling is
vitally necessary; 3) a disturbing rate of false positive
test results continues to be released; 4) testing will lead
to discrimination in other areas; confidentiality cannot

be guaranteed; 5) 1f health insurers escape their responsibility
to pay for AIDS, these costs will be forced on to taxpayer-
financed programs such as Medicaid, Medicare and public
hospitals; 6) testing, especially questions by insurers about
prior test results, is dangerous to the public health because
it frightens people away from voluntary testing.

 

6) All state insurance departments should prohibit insurance
companies from categorically excluding or limiting coverage

for AIDS. A majority of departments have already done so,
having recognized that it is unfair and discriminatory for
insurers to pay for expenses arising from other life-threatening
ilinesses such as cancer or heart disease, but to refuse

to cover AIDS.

7) Self-insured employers should also be barred from excluding
or limiting coverage for AIDS. Unfortunately, the Employee
Retirement Income Security Act (ERISA) forbids state insurance
laws or regulatory agencies from regulating "self-insured"
employee benefit plans (See 29 U.S.C. Section 1144(b)(2)(B)).
Thus, in order to require self-insured employers to treat

AIDS in a manner consistent with other life-threatening illnesses,
Congress must a) amend ERISA to include a specific provision
barring the exclusion or limitation of coverage for AIDS,

or b) adopt a broader approach by subjecting self-insured
benefit plans to state insurance regulation.

 

8) The Consolidated Omnibus Budget Reconciliation Act of

1985 (COBRA) should be amended to allow disabled employees

to purchase continued group insurance for 29 months. At
present, disabled persons are able to “continue” their group
coverage for an additional 18 months after losing their jobs.
Unfortunately, such persons become eligible for Medicare
benefits only- after they are disabled for 29 months. Extending
COBRA eligibility for 29 months will close this gap, which
forces disabled persons to spend down to poverty before they
become otherwise eligible for Medicare.
9) State insurance departments should be urged vigorously

to enforce laws which prohibit insurance companies from
unfairly denying benefits to persons wi with AIDS and should
develop advisory guidelines defining “pre-existing conditions"
for AIDS. Such guidelines should stress that HIV infection
alone, or vague symptoms such as diarrhea or exhaustion,

do not by themselves constitute pre-existing conditions for
AIDS. In some states, insurance departments may need to
designate specific personnel to serve as specialists in AIDS-
related enforcement issues.
NAIC - Advisory Committee on AIDS |
Medical/Lifestyle Questions and Underwriting Guidelines

PROPOSED BULLETIN
(Effective Date)

SUBJECT: Medical/Lifestyle Questions on Applications and Underwriting
Guidelines Affecting AIDS and ARC

(Recital of applicable authority if needed and purpose of bulletin.
Issuance of bulletin is to assist insurers to formulate and design
medical/lifestyle questions in applications for and underwriting
standards affecting health and/or life insurance coverage in conformity
with the fair standards adopted by the NAIC at its December 1986 meeting. )
I. General Propositions
A. No inquiry in an application for health or life insurance
coverage, or in an investigation conducted by an insurer or an
insurance support organization on its behalf in connection
with an application for such coverage, shall be directed
toward determining the applicant's sexual orientation,
B. Sexual orientation may not be used in the underwriting process
or in the determination of insurability.
C. Insurance support organizations shall be directed by insurers

not to investigate, directly or indirectly, the sexual

orientation of an applicant or a beneficiary.

Il. Medical/Lifestyle Applications Questions and Underwriting Standards
A. No question shall be used which is designed to establish the

sexual orientation of the applicant.
Questions relating to the applicant having or having been
diagnosed as having AIDS or ARC are permissible if they are
factual and designed to establish the existence of the
condition.

For Example: Insurers should not ask "do you believe you may

have . ..7?"', but rather "do you know or have reasons to know

Questions relating. to medical and other factual matters
intending to reveal the possible existence of a medical
condition are permissible if they are not used as a proxy to
establish the sexual orientation of the applicant, and the
applicant has been given an opportunity to provide an
explanation for any affirmative answers given in the
application.

For example: "Have you had chronic cough, significant weight
loss, chronic fatigue, diarrhea, enlarged glands, . . .7".
These type of questions should be related to a finite period
of time preceding completion of the application and should be
specific. All of the questions above should provide the
applicant the opportunity to give a detailed explanation.
Questions relating to the applicant's having or having been
diagnosed as having or having been advised to seek treatment
for a sexually transmitted disease are permissible.

Neither the marital status, the "living arrangements", the

occupation, the gender, the medical history, the beneficiary
designation, nor the zip code or other territorial
classification of an applicant may be used to establish, or
aid in establishing, the applicant's sexual orientation.

F. For purposes of rating an applicant tor health and life
insurance, an insurer may impose territorial rates, but only
if the rates are based on sound actuarial principles or are
related to actual or reasonably anticipated experience.

G. No adverse underwriting decision shall be made because medica)
records or a report from an insurance support organization
shows that the applicant has demonstrated ‘AIDS-related
concerns by seeking counselling from health care
professionals. This sub-section does not apply to an

applicant seeking treatment and/or diagnosis.

(Provision for States permitting testing)

H. Whenever an applicant is requested to take an AIDS-related
test in connection with an application tor insurance, the use
of such a test mist be revealed to the applicant and his or
her written consent obtained. No adverse underwriting
decision shall be made on the basis of such a positive
AIDS-related test unless an established test protocol* has

been tollowed.

®Note: "Established test protocol" means the protocol adopted in a
particular State. At a minimum, it requires two positive
ELISA tests. In some States, it also includes one positive
Western blot. It is anticipated that new and more
effective AlDS-related tests will be developed which might
Teplace those currently in use.

= 3-
Approved with the addition of the following under Section II.:
I. Optional language to be considered by each State:

Alternative A: Insurers should not be permitted to ask an applicant if he or
she has tested positive on an AIDS-related blood test.

Alternative B: Insurers should be permitted to ask an applicant if he or she
has tested positive on an AIDS-related blood test.
STATEMENT
BY

DAVID N. SUNDWALL, M.D.
ADMINISTRATOR
HEALTH RESOURCES AND SERVICES ADMINISTRATION

BEFORE THE
PRESIDENTIAL COMMISSION ON THE
HUMAN IMMUNODEFICIENCY VIRUS EPIDEMIC

APRIL 27, 1988
Summary of the
Statement of David N. Sundwall, M.D.
Administrator
Health Resources and Services Administration
Before the Presidential Commission on the HIV Epidemic
April 27, 1988

The AIDS programs of HRSA, which are tangential in many ways to the
financing and reimbursement issues which concern HCFA, are designed to
promote cost-efficient practices in the delivery of AIDS patient services.

Qur service demonstration grants are serving as an important catalyst in
establishing service delivery systems in 13 cities with an emphasis on
out-patient settings. Often the HRSA grant funds provide important
financial leverage to enable programs to attract other funds. The HRSA
grants for 11 regional Education and Training Centers are intended to
train primary care providers in the diagnosis and treatment of AIDS
patients. The section 1610(b) grants provide "seed money" in FY 1988 for
renovation of intermediate and long term care facilities for AIDS
patients. The goals of HRSA are to continue to provide grants as an
incentive in the development of cost-effective service delivery, and to
promote service delivery in out-patient and community-based settings to
reduce the cost of care.

The Intragovernmental Task Force on AIDS Health Care Delivery, which I
chaired, made two important recommendations in the Task Force Report
(January 1988) in the area of health care finance.

One of the greatest problems is the shortage of intermediate and long
term care facilities. Many homeless and drug users with AIDS must remain
in the hospital longer than necessary because they have no place to go.
And, the structure of the health care system is not well suited to care
for patients with episodic illness because the reimbursement and
licensure requirements of health facilities are linked to the health
status of the facility residents. Thus, when an AIDS patient's health
improves, he must move to a residential facility, and frequently none may
be available.

A second Task Force recommendation that must be addressed is the
expansion of insurance coverage for AIDS patients using risk pools and
other innovative means. The Federal Government must continue dialogue
with the private sector to see how best to meet these needs.
I am David Sundwall, Administrator of the Health Resources and Services
Administration. I am pleased to be here with you again today and to have
the opportunity to address some of the important financing issues of

concern to this Commission.

As I indicated to you in previous appearances before this Commission, I
had the opportunity to chair, at Dr. Windom's request, the
Intragovernmental Task Force on AIDS Health Care Delivery. One of the
principal issues Dr. Windom asked the Task Force to address was the
financing of care to AIDS patients. I am pleased to tell you that the
Final Report of the Task Force included a number of recommendations
related to the financing of care and I would like to review the status of

some of those recommendations.

Let me say at the outset that the Health Care Financing Administration
(HCFA) was well represented on the Task Force and that HCFA staff played
a major role in the actual writing of the Task Force Report. We are
grateful for that cooperation. We at HRSA concur with the position taken
by HOFA at the present time that, for reasons of equity and cost, there
should be no changes to the Medicare and Medicaid programs. Moreover, we
strongly endorse the notion that AIDS patients should not be treated any
differently under these programs than patients with any other life-

threatening illness .
Although the Task Force Report was issued as recently as January 1988,
considerable progress has been made on a number of the recommendations.
Let me share with you some of our activities to date. One of the
recommendations of the Task Force concerned the need for intermediate and
long term care facilities for AIDS patients. In an effort to learn more
about this particular need, HRSA held a meeting of outside consultants on
March 2, 1988 which focused on the problems of finding adequate subacute
care facilities for AIDS patients. Several concerns emerged from that

meeting:

(1) Even with subsidies or grants from the Federal Government, such
as the HRSA 1610 (b) grants totalling $6.7 million in FY 1988, to support
the construction or renovation of facilities for AIDS patients, there is
a real problem meeting the high operating revenue requirements due to the

intensity of services required by persons with AIDS (PWAs).

(2) The traditional nursing home, as we know it today, may not be
the ideal type of subacute care facility for an AIDS patient. Moreover,
even if the nursing home were the appropriate type of facility, there is
a general shortage of beds in many of the cities with a high incidence of

AIDS.

(3) Many homeless and Intravenous Drug Abusers (IVDAs) are forced to
Stay in hospitals, some for as long as 3-5 months, because there are no
facilities willing or able to accept them, This of course is extremely

costly to the Medicaid program.
Related to the need for subacute care facilities is another issue which I
would like to bring to your attention. As our knowledge of the AIDS
epidemic has grown, we have learned that our existing health care
reimbursement system is not well suited to an illness such as AIDS where
a patient's health status and functional status may fluctuate widely.
Such fluctuation frequently results in patients having to terminate their
employment, causing them to become impoverished and making it difficult
or impossible to maintain their own domicile. While Medicaid will pay
for in-patient and skilled nursing care, if the patient has no home, and
his health status improves, he must be transferred from a skilled nursing
facility to a residential facility, not reimbursed by Medicaid, only to
return to an acute or subacute care facility when his health status
deteriorates. The AIDS epidemic illustrates a problem inherent with
episodic illness, that of linking the reimbursement and licensure
requirements of a facility to the general health status of the residents
of a facility. What is needed are more facilities like Bailey House in
New York City where patients can live when they are i1] but do not
require hospitalization, and where they can also live when they are

feeling well.

For some patients, their health improves to a point where they are able
to work part time. In cases where patients are able to work, they can
contribute to the cost of their own board and shelter and provide partial
support for their living expenses. This situation has positive
implications, both in the patient's mental attitude and physiological
well being. A problem which currently exists in this situation is that
patients who are earning money may not meet the income requirements and

thus become ineligible for subsidized insurance programs or Federal and
State health coverage programs. There is a need to provide insurance

coverage for such individuals based upon ability to pay.

The Task Force Report also addressed the need to learn more about the
viability of risk pools for the uninsured, and recommended that a
national conference on insurance for AIDS patients be held. The
Institute of Medicine, in conjunction with the HCFA, held such a
conference, There are two recommendations that were discussed at that

meeting which I think are worthy of your consideration.

They are as follows:

(1) Risk pools operated at the State level should be further
explored, and the experience of the existing risk pools should be
carefully studied. Testimony provided to the Task Force indicated that,
although this may provide an attractive alternative to the uninsured

infected patient, there may be economic barriers to participation.

(2) Where possible, private insurance coverage ought to be
maintained for as many PWAs as possible. One way of doing this would be
to have the Federal Government pay the premiums when the individual is no
longer eligible for private insurance or to consider extending from the
current 18 months, the period of time an individual would be eligible to

participate in the group insurance plan of his previous employer.

Finally, I would like to briefly discuss some financing activities
related to the HRSA service demonstration grants, In a previous

appearance before the Commission, I described the HRSA AIDS service

demonstration grants. One lesson we have learned to date is that while

4
HRSA grant funds in many cases provide but a small fraction of the total
budget of the AIDS service delivery organizations, they have been a
valuable catalyst in the establishment of service delivery networks in
communities. They have provided the needed financial leverage to attract
private contributions as well as State, local, or private foundation
grants. We support the Federal Government continuing to make this "seed

money" available.

HRSA is currently conducting a case study descriptive evaluation of the
four initial grantees (New York, San Francisco, Los Angeles, and Miami),
and while the study is not focussing specifically on financing, it wil!
provide us with additional insight into the financing issues associated
with the care of AIDS patients. HRSA will be awarding a second contract
in June 1988 to tabulate data on service utilization and costs in these
four community-based service delivery systems. This will be one of the
few studies on the costs of out-patient and clinic services and perhaps
the only cost study to date of patient support services. We will, of
course, be glad to share the results of these research efforts when we
receive the interim and final reports, although these will not be
completed until after the Commission has completed its final report.
These reports will provide a basis for making some projections of
outpatient care costs over the next several years, provided that there
are no major changes in the character of the disease or therapeutic

interventions.

Any new developments in the management and care of AIDS patients may
render current models for projecting health care costs obsolete. Given

the fact that patients are living longer with improved therapeutic

5
 

interventions, appropriate models for developing economic projections may
be more closely aligned with those developed for chronic illnesses as

opposed to those based on the provision of terminal care.

In closing, I would like to emphasize that the AIDS activities of the
Health Resources and Services Administration, while tangential in many
ways to the key financing questions which HCFA must address, are designed
to be able to provide services for AIDS patients in the most cost
effective manner possible. Our Service Demonstration Grants focus on
delivery of services in outpatient settings and our Education and
Training Centers have as their primary mission the training of primary
care providers in the diagnosis and treatment of HIV infected patients in
order to minimize the need for highly trained medical specialists. The
financing issues which this epidemic poses are probably the most
difficult issues we will have to address collectively. I applaud your
efforts and offer you the services and resources of my agency as you

search for appropriate solutions.
Summary of Testimony
Louis D. Enoff
Social Security Administration

April 27, 1988

The Social Security Administration serves the disabled
through two programs: the Social Security disability
insurance (title II) and Supplemental Security Income
(title XVI) programs.

Social Security disability insurance is funded from a
separate disability trust fund built up through employee
and employer contributions, while SSI is funded out of
general revenues.

The SSI program was created to address needy individuals
whose work history is such that they do not qualify to
receive a Social Security insurance benefit or qualify for
only a small Social Security benefit.

Disabled individuals covered by Social Security disability
insurance are eligible for Medicare covérage after 2 years
of entitlement, while those qualified for SSI are usually
covered by Medicaid immediately.

The definition of disability is the same for both the
Social Security and the SSI programs.

Claimants with a documented diagnosis of AIDS, who are not
working, automatically meet this definition.

If a person does not have a definitely diagnosed case of
CDC-defined AIDS (such as a person with ARC), SSA evaluates
disability through the full sequential evaluation process.

SSA awards benefits in over 97 percent of the AIDS cases
filed and in 65 percent of the ARC cases -- an overall
award rate of 93 percent.

The number of new disability awards on the basis of AIDS or
ARC has steadily increased each year since 1982. We
estimate that this rapid growth will continue.

Approximately $45 million in Social Security disability
insurance benefits was paid to AIDS/ARC beneficiaries (and
their dependents) last year.

Projections over the next 4 years indicate that the number
of disabled workers receiving Social Security disability
benefits due to AIDS/ARC will increase to 4 to 5 times the
current level.

We are currently engaged in extensive study and analysis
aimed at further developing our long-range projections of
the effects of AIDS on both the Social Security and SSI
disability programs.
0

Presentation on AIDS
Presidential Commission on the
Human Immunodeficiency Virus Epidemic
April 27, 1988
10:00 a.m.
I am pleased to be here today to discuss the Social

Security Administration's (SSA) involvement in assisting

persons with acquired immunodeficiency syndrome (AIDS).

As David Rust, SSA's Associate Commissioner for Disability,
explained when he met with you in January, SSA shares your
concern about the needs of AIDS patients and we are

committed to providing prompt, efficient, and compassionate

service.

I would like to recapitulate the information Dave shared
with you, and perhaps address some of the questions raised

during his testimony in January.

General Entitlement Information

oO

The Social Security Administration serves the disabled
through two programs. These are the Social Security
disability insurance (title II) and Supplemental Security

Income (title XVI) programs.

- 2.8 million disabled workers receive Social Security

disability insurance benefits each month.
2

- The average monthly payment for a disabled worker is

$508.

- Another 2.9 million disabled/blind Supplemental

Security Income (SSI) recipients are paid each month.

- The average SSI monthly payment is $287.00 a month.

Under Social Security, workers earn their disability
protection by working in Social Security covered employment
or self-employment and payments are made effective with the
completion of a waiting period of five full months after

the month the disability began.

On the other hand, SSI is a welfare program in which
eligibility is determined by a "needs" test based on income
and assets; once disability is established, there is no

waiting period requirement before payments can Start,

Social Security disability insurance is funded from the
disability trust fund (built up through employee and
employer contributions), while SSI is funded out of general

revenues.

Under Social Security, benefits are generally paid without
regard to the person's income from other sources, such as

private insurance, savings or investments.
 

 

Under SSI, a pergon's income and assets must be within

certain specified limits.

The maximum monthly payment to an individual under SST is

$354.00.

Disabled individuals covered by Social. Security disability
insurance are eligible for Medicare coverage after 2 years
of entitlement, while those qualified for SSI are usually

covered by Medicaid immediately.

It is important to keep in mind, that an individual, who
meets the eligibility requirements, can qualify for both

Social Security and SSI for the same months.

Often, an individual files claims for both programs at the
same time and is entitled to SSI payments during the
S5-month waiting period before his/her eligibility for

Social Security begins.

Subsequently, since SSI payments are offset for any Social
Security disability insurance payments, the amount of the
monthly Social Security payment may then preclude any
continuing entitlement to SSI. As a result, Medicaid
entitlement also may end upon entitlement to the Social

Security payment.

 

 
 

 

4

SSA receives over 2 million disability claims a year for
payments under these two programs; approximately 35 percent

of these claims are approved.

In comparison, we have awarded benefits in over 97 percent
of the AIDS cases and in 65 percent of the ARC cases -- an

overall award rate of 93 percent.

Definition of Disability

 

Oo

The definition of disability is the same for both the

Social Security and the SSI programs.

Disability, for Social Security and SSI is defined as the
inability to engage in any substantial gainful activity by
reason of any medically determinable physical or mental
impairment which can be expected to result in death or
which has lasted or can be expected to last for at least
12 months. Claimants with a documented diagnosis of AIDS,

who are not working, automatically meet this definition.

If a person does not have a definitely diagnosed case of
CDC-defined AIDS (such as a person with ARC), SSA evaluates
disability considering the effects of the person's

impairments on his or her ability to work.

 

 
5

Background on AIDS in Relation to Social Security/SSI Disability

Q The Centers for Disease Control (CDC) identified AIDS and
published criteria for identifying AIDS cases in the summer

of 1981.

0 In 1983, SSA issued instructions to disability adjudicators
that a person with a documented diagnosis of AIDS, as
defined by CDC, should be found disabled, as long as the

person is not working.

Oo Also, in 1983, SSA reminded the State agencies (who make
disability determinations for SSA) that individuals with
confirmed AIDS should be considered for presumptive

disability payments under SSI.

- A person can be found "presumptively disabled," based
on an allegation of disability or blindness when
his/her medical condition is such that it presents a
strong likelihood that the person will be found

disabled or blind under SSA's rules.
- A presumptive disability decision allows SSA to pay a
person, who meets all the nonmedical eligibility
criteria, SSI payments for up to 3 months pending a

Formal determination of disability or blindness.

In 1985, SSA issued regulations authorizing local field
offices to make a finding of presumptive disability in SSI
AIDS cases after a confirming contact is made with a
physician or other treating source that AIDS has been

diagnosed and the individual is not working.

This allows SSA to certify payment of SSI benefits
immediately. Again, these payments can be made for up to

3 months pending a formal determination of disability.

CDC revised its definition of AIDS effective
September 1, 1987, to reflect medical advances made since
the virus causing AIDS was identified and the human

immunodeficiency virus (HIV) test was available.

SSA has since incorporated the revised, more inclusive CDC

criteria for AIDS into our disability evaluation guides.
Impact on Social Security and SSI Disability Programs

0
e

Through the end of calendar year 1987, approximately 25,700
persons have been awarded Social Security or SSI benefits

as a result of a diagnosis of AIDS or ARC.

The breakout of the type(s) of benefits these 25,700

persons have received is as follows:

~ 28 percent have received an SSI benefit but have never

received a Social Security benefit;

- 29 percent have received a Social Security benefit but

have never received an SSI benefit; and
- 43 percent have received both Social Security and SSI
at some time (although not necessarily for the same

months. )

At the end of 1987, 11,200 persons with AIDS/ARC were alive

and receiving benefits from these two disability programs.
The breakout for these 11,200 beneficiaries is as follows:
- 28 percent were receiving an SSI payment only;

- 55 percent were receiving a Social Security payment

only; and
 

8

- 18 percent were receiving both Social Security and SSI

benefits concurrently.

These differences demonstrate how the number of persons
receiving benefits from the two programs can vary and may
give you some indication of why it is difficult to make any
generalizations about how AIDS impacts on these two

programs,

Many AIDS/ARC beneficiaries receive SSI benefits while
completing the S-month waiting period for Social Security

benefits.

Upon completing that waiting period, they become entitled
to a Social Security payment large enough to completely
offset their SSI payment which, as you recall, is a payment

based on income and assets.

The number of new disability awards on the basis of AIDS or
ARC has steadily increased each year since 1982. We

estimate that this rapid growth will continue.

However, the number of persons currently receiving Social
Security or SSI based on AIDS/ARC is less than one percent

of the total Social Security/SSI disabled population.
Over $20 billion was paid to disabled workers and their
dependents from the Social Security disability trust fund
last year. Approximately $45 million of these payments

were to AIDS/ARC beneficiaries.

Thus far, a person eligible for SSI due to AIDS/ARC
receives benefits for an average of 10 months after onset
of disability. At an average of $225 (for AIDS/ARC
recipients) in SSI benefits per month, this results ina

lifetime cost to the program of $2250.00 per case.

Out of $7.6 billion paid in Federal SSI benefits last year,

$10 million was paid to AIDS/ARC recipients.

High mortality rates and changes in the income of the
SSI/AIDS caseload impact significantly on our efforts to

project the costs of AIDS to the SSI program.

Long-range projections of the effects of AIDS on the Social
Security programs were prepared for the 1988 Annual Report

of the Board of Trustees.

These projections reflect the effect of AIDS on general
death rates in the United States, on the number of deaths
each year, on the size of the living population, on the
size of the working population, as well as on the size of

the Social Security beneficiary population.
10

Projections for the 1988 Report are based on available
estimates of the numbers of HIV infections, AIDS cases, and

AIDS deaths by the CDC for years through 1991.

While these projections are very difficult to make, we
believe that over the next 4 years, the number of disabled
workers receiving Social Security disability benefits due

to AIDS/ARC will increase to 4 to 5 times the current level.

We are currently engaged in extensive study and analysis
aimed at further developing our long-range projections of
the effects of AIDS on both the Social Security and SSI

disability programs.

We have been consulting with the CDC concerning possible
alternative projections, These projections will be
revised and updated as additional information becomes

available.
SUMMARY STATEMENT OF WILLIAM L. ROPER, M.D., ADMINISTRATOR
HEALTH CARE FINANCING ADMINISTRATION

BEFORE THE PRESIDENT'S COMMISSION ON THE HIV EPIDEMIC
Summary Statement of William L. Roper, M.D., Administrator
Health Care Financing Administration

Before the President's Commission on the HIV Epidemic

The Medicare and Medicaid programs are together making an important
contribution to the financing of health care services for persons with AIDS and,
HIV related illnesses. These broad-scale financing programs are accomplishing this
principally within the same eligibility criteria and coverage provisions that apply to
others in similar circumstances who can qualify for these programs, regardless of

their disease or medical condition.

The Medicare program is estimated to serve about one percent of all persons with
AIDS in the country and it meets a similar proportion of the total direct medical
eare costs of AIDS. In fiscal year 1988, these expenditures are estimated to be $15
million. With the introduction of such drugs as AZT it is expected that lives of
persons with AIDS may be lengthened and that many more will survive the current
24 month waiting period necessary to qualify for Medicare on the basis of

disability.

The State-Federal Medicaid program plays a much larger role because of the
demographie and economic characteristics of those with HIV infection, ARC and
AIDS. An average 40 percent of all persons with AIDS nationally are estimated to
be served by the Medicaid program. In some areas, especially those with large
numbers of IV drug abusers, the percentage served by Medicaid rises as high as 65-
75 percent. Medicaid meets about 25 percent of all direct medical care
expenditures for persons with AIDS nationally. Medicaid State and Federal

expenditures for this purpose are estimated to be $750 million in fiscal year 1988,
 

including the costs of AZT, rising to an estimated $3.2 billion in fiscal year 1992.
These costs are shared roughly 50-50 by State governments and the Federal

government.

Most persons with AIDS may qualify for both Medicare and Medicaid as disabled

persons and the medical definition of disability is the same for both programs.

Others may also receive Medicaid, including children and their caretaker relatives
with low incomes, pregnant women and infants, and those with incomes too high to
qualify for Supplemental Security Income (SSI) and Aid to Families With Dependent
Children (AFDC) cash payments.

The estimated future expenditures under the Medicaid and Medicare programs are
considerable, vet a healthy perspective is important in assessing the financial
impact of AIDS care. There is no evidence that the costs of AIDS will overwhelm
our health care system or our economy. Using current "best estimate" projections,
AIDS spending will still be only 4 percent of the Medicaid budget by fiscal year

1992.

The contribution of the Health Care Financing Administration should be assessed
within a broader context of how our society deals with the AIDS epidemic as well

as how it deals with health care generally.

First, AIDS-related patient care services are only part of a broad continuum of
activities ranging from prevention and education to the development of vaccines

and therapeutic agents. Some of these activities are conducted by the Department

deere, summaries
of Defense, the Veterans' Administration, and the Department of State. In
particular, President Reagan has requested $1.3 billion in fiseal year 1989 for a
wide range of activities in the Public Health Service, the highest expenditure level

ever made available for these purposes.

Second, the challenge of responding to the human, financial and health care
delivery needs of persons with AIDS is a great task which must continue to be
addressed by all sectors of our society. It is appropriate and necessary that support
continue to come from State and local governments, voluntary agencies, private

insurers and employers, and persons with AIDS themselves.

Patients themselves and their private health insurers still pay for about 60 percent
of all health care costs in the Nation, indicating that the private sector is a major
pillar of the American health-care system. Volunteer-service agencies also provide
a broad range of key services, including client advocacy and home and personal

support services.

The question is, therefore, not just one of whether the Federal government will pay
for health care for those with AIDS but rather how overall responsibilities can be
appropriately shared through our pluralistic system with its current resources. This
sharing should be responsive to the needs of those with AIDS and be fair to them

but also to others in our society with chronic terminal diseases.

We would like to propose four principles to assist the Commission and the Nation in

assuring that those goals are met.
Principle One - While supporting some special initiatives, we should cenerally
seek to treat patient care and financing for persons with AIDS. as we wauild

care for persons with any other disease.

Medicare and Medicaid broadly address health care needs ol larze segments of tte
total population, and have shown their ability to make fundamental contributions: to
financing care for AIDS patients. Medicaid, in particular, his demonstrated that
by its program design it can serve those, like IV drug abusers, and low income
pregnant women and children, who are least likely to have access to other financial

resources.

Similarly, we believe that private insurers and self-insured ecampaniés should treat
persons with AIDS in the same manner as they do others with pre-existing
conditions and/or severe chronic or terminal illnesses. Likewise, sel?-insured
employer plans and other group health plans should not deny enrollment of

employees who may be HIV positive.

In the public sector, the provision of health care services must be aeutely attuned
to questions of equity among groups and individuals. Decisiens sheuld be based. we
believe, on the general nature of illness or disability prevalent im our society rather
than on given diseases. Disease specific initiatives in researc, training, arnt
demonstrations have historically been administered by the Pubite Realitir Services
through limited and specific authorities rather than by HCFA through: entittiement

programs.
We therefore have opposed, and continue to oppose, any legislative change in the
24 month waiting period for Medicare disability specifically for persons with AIDS.
Valid proposals like this could also be made for those with terminal cancers and
Alzheimer's disease. Furthermore, a substantial shift in costs would be involved.
HCFA estimates that the Medicare program would bear an additional $2.1 to $8.3
billion over the next five years if the waiting period were eliminated only for
persons with AIDS, and between $35 to $42 billion if it was eliminated for all

disabled persons.

Careful consideration would have to be given to whether or not this is the best way

to spend these additional trust fund revenues.

Principle Two - AIDS Care and Treatment Costs Should Continue to be a

Shared Responsibility of All Sectors of Our Society.

Rather than establishing separate payment mechanisms to fund broad-scale AIDS
treatment and health services, we should bring AIDS care into the mainstream of
the diverse health care financing mechanisms used in this country. Accepting this
Principle in conjunction with Principle One means that appropriate financing for
health care for persons with AIDS must be a shared responsibility of the private
and publie sectors. All parties who normally pay for health care should also be

expected to respond to the health care problems associated with the HIV epidemic.

In the private sector this responsibility should be shouldered not only by group
insurers but also by those offering individual policies. Important contributions
should be expected from churches, charities, foundations, self-insured employers

and volunteer service agencies.
One avenue of particular value that should be actively pursued is the availability of
insurance to all persons with high risk health conditions, including AIDS, who
cannot obtain health insurance or who cannot do so at affordable rates. Several
States have already explored the development of high risk pools that are supported
through a combination of private and public sector funds. Existing pools are not
without their problems but we should learn from these pioneer examples so that

better models can be developed to insure broader segments of the ponulation.

Another recent step in extending private health insurance to employees and familv
members who lose group health coverage is found in the Consolidated Budget
Reconciliation Act of 1985. Individual employees can be offered coverage at rates
not far above group rates for 18 months following the loss of employment or up to
36 months for their dependents. This is an important expression of public policy by
Congress that the private sector should continue to play an important role in

sustaining private insurance coverage as an alternative to public support.

Principle Three - Flexible and Innovative Approaches are Necessary by all

Sectors of Society to Meet the Demands of the HIV Epidemic.

Although a great deai of support is available through traditional financing
mechanisms for health care through the public and private sectors, innovative
approaches are still needed within these broad programs to meet the full challenge

of the HIV epidemic. Such approaches seek to provide the full range of needed

eare of appropriate quality delivered in a cost effective manner.

Even within the Medicaid program, there is considerable opportunity for innovative

approaches by States. States can:
0 Amend their Medicaid plans to provide for ease management services

targetted to certain groups such as persons with AIDS.

Oo Adopt hospice benefits which can be particularly useful to persons with AIDS.

Recent amendments provide a special incentive to serve AIDS patients.

° Apply for home and community-based services waivers (Section 2176 waivers)
which can give eligibility to some people in their home or in a community

setting who would otherwise be eligible only in an institution.

° Apply for "freedom of choice" waivers which would permit case management
service mechanisms and innovative reimbursement methods to be used for

services to persons with AIDS.

° Develop special incentive payment rates for persons with AIDS and other
patients with high care requirements to act as an incentive to providers to

serve such persons.

In the private sector, group and individual health insurance policy benefits should
be re-examined to assure that persons with AIDS and others with chronic terminal
illnesses receive cost-effective care that can be provided in hospices and in other
community settings. Some commercial insurers have already found the
underwriting of case management services to be both valuable to the patient and

efficient from the viewpoint of the insurer.

State and local governments playing an important role in providing public health

and patient care services are especially challenged by the HIV epidemic. Localities
should be innovative in approaching the delivery and financing of care for persons
with AIDS. The geographic distribution of AIDS cases and the distribution of risk
groups are not uniform, and thus local needs require unique local responses.
Demonstration grants from the Robert Wood Johnson Foundation and the Public
Health Service can provide useful information and a variety of models to States

and localities to guide their efforts.

Principle Four - Health Professionals, health care providers, and State
licensing authorities have an obligation to provide ready access to care to

those with AIDS and HIV infection.

Examples of health professionals refusing to care for persons with AIDS or HIV
infection, the lack of of physicians to serve AIDS patients in many communities,
and low admissions rates of AIDS patients to long-term care facilities all raise
questions which challenge traditionally held concepts of medical ethics and our

Nation's social conscience.

A variety of steps have been taken to assure access to needed health care by

persons with AIDS, but more must be done.

Leaders in the health professions must speak to their constituents and reaffirm
long-standing ethical principles about the provision of care to persons with AIDS or
HIV infection as Surgeon General Koop, the American Medical Association, the

American College of Physicians, and others have done.

Training is needed for paramedics and emergency personnel, laboratory workers,

nurses, physicians, dentists and other health, mental health and social work
 

personnel about appropriate care and treatment of those, with AIDS or HIV

infection. Some of this is being done through Public Health Service funded
Education and Training Centers and other programs and through the publication of

guidelines for the use of health care workers and providers.

State infectious and contagious disease guidelines and statutes need to be re-
examined in light of what is known about transmission of HIV virus to assure that
they do not inadvertently provide obstacles to admitting those with AIDS and HIV

infection to health care facilities, especially long-term care facilities.

These then are the four principles that HCFA believes are important in formulating
an equitable policy for financing the care and treatment of those with AIDS or

Z
illnesses related to the HIV virus.

1. Treat AIDS like any other disease under broad scale private and public

financing mechanisms.

2. Recognize that financing for health care for AIDS should continue to be the
responsibility of all sectors of society not just the Federal government or the

publie sector.

3. Exploit to the fullest extent possible current and potential flexibilities
available to serve persons with AIDS and other chronic, terminal diseases

under public and private programs.
10

4. Encourage the leadership of various health professions and provider groups

and State licensing authorities to assure that persons with AIDS have access

to the health services and facilities they need,

From such general principles can come more specifie approaches within both the
private and public sectors which build on the strengths of our current health care

system.

These principles are offered to meet the pressing public health problem of AIDS.
Their application would do so in a way that fairly recognizes the many competing
priorities in health care and the host of public and private resources that can be
mobilized to meet the challenge that lies ahead. We in HCFA look forward to

meeting our share of these responsibilities.
national council
of

health facilities finance authorities

Testimony of

THE NATIONAL COUNCIL OF HEALTH FACILITIES FINANCE AUTHORITIES

ON

THE FINANCING OF TREATMENT FACILITIES FOR PERSONS WITH AIDS

on the panel discussing

STATE APPROACHES TO FINANCING CARE PROGRAMS

before the

PRESIDENTIAL COMMISSION ON
THE HUMAN IMMUNODEFICIENCY VIRUS EPIDEMIC

April 27, 1988

 
 

SUMMARY OF TESTIMONY OF
THE NATIONAL COUNCIL OF HEALTH FACILITIES FINANCE AUTHORITIES
ON
THE FINANCING OF TREATMENT FACILITIES FOR PERSONS WITH AIDS
April 27, 1988

Not-for-profit organizations sponsor three-quarters of
U.S. health care facilities and we expect that most sponsors of
AIDS treatment facilities also will be not-for-profit. These
organizations can raise capital to finance AIDS facilities only
through accumulated operating surpluses, the receipt of
charitable contributions, or by borrowing. Most of the capital
for U.S. health care facilities has been raised through
authorities created by State statute to issue tax-exempt bonds
and loan the bond proceeds to the facility, secured by a mortgage
on the property financed. The authorities provide capital
through a bond issued for that provider or through a pool which
loans the proceeds of one bond issue to many facilities.

Tax-exempt bond financing is used to meet most capital
needs of not-for-profit health care providers and will be an
important method of financing AIDS treatment facilities.
Tax-exempt bond financing provides capital at the lowest cost and
provides access to the capital markets that would otherwise be
denied new and financially weaker AIDS facilities sponsors.
Tax-exempt financing can maximize the benefits of government
funds allocated for AIDS facilities by using those funds only for
the equity contribution of the sponsor, with tax-exempt bond
proceeds providing the rest of the needed capital.

AIDS treatment facilities will generally provide
sub-acute levels of care. Many will be smaller, scattered site
facilities sponsored by small community not-for-profit
organizations, but some will be sponsored by large hospitals, and
hospitals affiliated with universities. Certain tax-exempt bond
rules and Federal Housing Administration mortgage insurance rules
will present obstacles to financing such AIDS facilities.

Recommended changes in the tax-exempt bond rules would
facilitate the financing of smaller, sub-acute care facilities
by: exempting such facilities from a limitation on the amount of
outstanding bonds; modifying the bond pool rules to consider an
entire state health care program rather than each individual
project; and modifying rules applicable to small projects to
require less equity from the sponsors, facilitate lower-cost
private placements, and reduce administrative costs, and
modifying rules regarding pledged endowments and reserve funds.

Recommended changes in FHA mortgage insurance would:
speed approvals by approving prototype projects or state approval
processes; account for the use of new AIDS reimbursement streams
in determining the ability to insure; and allow the insurance of
partial facilities and at all sub-acute levels of care.

 
I. Introduction

A. Tax-Exempt Bond Issuing Authorities

I am Matthew Scanlon, Deputy Director of the New York
State Medical Care Facilities Finance Agency. The Agency was
created by New York's legislature to issue tax-exempt bonds for
not-for-profit health care facilities. Last year, the agency
issued more tax-exempt bonds than any other issuer of tax-exempt
bonds in the country.

I am also a Director of the National Council of Health
Facilities Finance Authorities, which is the national association
of the agencies, or authorities as they are known in most states,
that issue tax-exempt bonds for not-for-profit health care
facilities. I am speaking today on behalf of both the New York
Agency and the National Council and will address the issue of the
source of capital to construct or renovate treatment facilities
for AIDS patients.

My Agency has been asked by the Health Commissioner of
New York State to assist in implementing New York's program to
create 600 to 800 new sub-acute care level beds for AIDS patients
in the next year. The Agency's role is to provide the capital
financing for these facilities in the most cost-effective and
expeditious manner possible.

Other health care facilities finance authorities are
engaged in similar activities. Several members of the National
Council from states with the largest numbers of AIDS patients
have formed a working group to develop methods of providing
capital financing for AIDS patient treatment facilities. We are
now working with the Administration and Members of Congress to
find ways to finance such facilities. This involves several
changes in certain rules regarding the issuance of tax-exempt
bonds and the insurance of mortgages securing the funds borrowed
by health care facilities from the proceeds of these bonds.

B. Tax-Exempt Financing of Health Care Facilities

Not-for-profit health care organizations cannot issue
equities to raise capital for facilities needs. They must raise
capital through operating surpluses (which are declining and
often negative), contributions (which have declined to a very low
level for most health care organizations), and debt. Most
capital needs of not-for-profit health care organizations are met
through tax-exempt bond financing.

Because the interest on tax-exempt bonds is not subject
to Federal income tax, such bonds can be sold at lower interest
rates than taxable bonds. At the present time, a typical taxable
bond would sell for an interest rate of 12 percent and a typical
tax-exempt health care bond would sell for an interest rate of 8
percent.
The lower interest rate of tax-exempt financing
substantially reduces the debt service costs of the health care
organization. In many cases, the organization could not issue
taxable bonds because it would not be able to meet the debt
service payments at the higher interest rate. Financially
distressed health care organizations would not have access to the
taxable debt markets. New orgnanizations, which it appears will
include many sponsors of AIDS treatment facilities, also would
generally be denied access to the taxable market.

The authorities provide financing for not-for-profit
health care facilities by issuing tax-exempt revenue bonds and
then loaning the proceeds to the health care organization.
Revenue bonds are debt obligations of the authority that are
backed by the ability of the borrower to make payments of
principal and interest when they become due. The borrower is the
health care organization that borrows the bond proceeds from the
authority, not the authority that issues the bonds.

Revenue bonds are not "general obligation" bonds (which
are backed by the full faith and credit of the State in the case
of a default) and usually are not "moral obligation" bonds (which
are backed by the State's representation that it will ask the
legislature for funds to make payment on the bonds in the case of
a default). They are marketable solely on the basis of the
borrower's ability to make payments for principal and interest
when they come due. Therefore, to sell these bonds it is
essential that bond holders be reasonably assured of the ability
of the borrower to make the required payments, or that "credit
enhancement" such as mortgage insurance exist.

. The health care facilities financing authorities provide
financing in three ways:

1. We issue tax-exempt bonds for a particular facility or
set of facilities owned by a single not-for-profit
organization. We then loan the proceeds to the
organization, secured by a mortgage, for the purposes stated
when the bonds are offered. Where the financial condition
of the organization is weak, the organization may need to
get a guaranty or insurance to be able to access the capital
markets. In the absense of a favorable bond rating, the
bonds will be sold at a higher interest rate (about equal to
the rate for so-called "junk bonds") or may not be
marketable at all.

2. We issue "composite" tax-exempt bonds for a few
organizations identified on the bonds. The proceeds are
then loaned to these organizations for the stated purposes.
Composite issues are used for a few smaller projects, such
as renovations, to spread the costs of bond issuance over a
larger total bond amount. We also issued bonds to create
"pools" from which proceeds can be loaned to many
institutions. The proceeds are usually used for equipment
loans, but are also used for very small facilities
projects.

II. Use of Tax-Exempt Financing for AIDS Facilities
A. Benefits of Tax-Exempt Financing for AIDS Facilities

Tax-exempt bonds should play an important part in the
financing of AIDS facilities for the following reasons.

1. The mainstay of the health care system in the U.S. is the
not-for-profit health care provider, with about
three-quarters of the hospital beds in the U.S. Although
the public hospitals should also play an important role in
treating AIDS patients, this sector is limited in many
cities. In New York City, we expect that most AIDS
treatment facilities will be sponsored by not-for-profit
organizations.

2. The vast majority of the capital needs of not-for-profit
health care organizations is provided through tax-exempt
bond financing because it provides capital at the lowest
cost and provides the only access to capital for many
financially weaker health care organizations. The ability
to provide low cost capital for financially weak
organizations appears to be particularly important in
financing AIDS treatment facilities.

3. Tax-exempt financing of AIDS treatment facilities can be
used to magnify the benefits of government funds allocated
for AIDS. Government funds can be used to provide a mininum
amount of equity and tax-exempt bond financing can then
provide the rest of the capital needed. Tax-exempt bonds
can reduce the immediate need for government funds for
capital and make more AIDS funds available for operating
costs and research.

B. AIDS Treatment Systems and Facilities

Based on our review of the literature regarding AIDS
treatment facilities and discussions with leading AIDS facilities
experts, we have reached the following working conclusions about
AIDS treatment facilities and the problems of financing then.

1. AIDS facilities requirements must be analyzed separately
for each metropolitan area. The number, size, and type of
facilities for AIDS patients will depend on the number of
the AIDS patients and the makeup of the patient population.

2. The most intensive demand for AIDS facilities appears to
be in areas with many intravenous drug abusers (IVDAs)
because they have the least access to non-institutional
treatment locations, such as home or support group
facilities. The least intensive demand appears to be for
blood transfusion and hemophiliac patients, who have homes,
strong family support, and more family financial resources.

3. The circumstances of the local health care system, such
as the size of the public hospital system and local hospital
occupancy rates, and the local housing situation also will
determine the need for new AIDS treatment facilities.

4. Most AIDS treatment facilities will not be acute care,
but rather will provide one or more lesser levels of care,
such as that now provided by skilled nursing facilities
(SNF), intermediate care facilities (ICF), and facilities
with even more limited amounts of medical supervision.
Multi-care level facilities appear to be most advantageous
because the unpredictable change in treatment level required
by persons with AIDS can be accommodated without
transferring the patient to other locations.

5. AIDS treatment facilities will sometimes be located in
wings of hospitals, sometimes in separate facilities in
close proximity to hospitals, sometimes in a larger separate
facilities, and sometimes in smaller scattered sites. In
many cases, renovation rather than new construction will be
the appropriate way to provide AIDS facilities.

C. Problems of Financing AIDS Treatment Facilities

We have examined these various facilities models in the
metropolitan areas with the largest populations of AIDS patients
and have found that there are several common problems involved in
financing these types of facilities. These problems result from
one or more of the following factors:

1. Virtually all of the treatment facilities that we expect
will be created for AIDS patients will be sub-acute care
facilities. These facilities will be subject to limitations
on the total amount of outstanding that could prevent larger
hospitals and hospitals affiliated with universities from
sponsoring AIDS facilities.

2. Many AIDS facilities will be smaller, making access to
low cost financing mechanisms (such as private placements
and pool financings) more important than for larger
projects. Smaller projects are disproportionately adversely
affected by certain rules governing the issuance of
tax-exempt bonds.

3. Many of the organizations that will sponsor these
facilities are small and have very limited resources and
accordingly will need mortgage insurance or other forms of
guaranty in order to gain access the capital markets. Thus,
the availability of FHA mortgage insurance will be crucial
in many cases.
4. The reimbursement streams for these patients will be less
certain than for other patients in lower-care level
facilities, most of whom are now reimbursed under Medicare.
Mortgage insurers must understand these new revenue streams
and be willing to insure based on them.

III. Summary of Problems and Recommendations

In New York City, we expect to use a bond pool to finance
about 25 AIDS treatment facilities of 16 to 40 beds each at
scattered locations. Some of these facilities may be sponsored
by not-for-profit organizations that have a large amount of
nonhospital bonds outstanding and which therefore cannot issue
more bonds for AIDS facilities. Most will be sponsored by drug
rehabilitation groups with no significant experience in operating
health care facilities and very limited financial resources. The
State is creating a new Medicaid reimbursement rate for AIDS
patients. This new rate will be available to the types of
facilities we plan to build. We plan to issue bonds to create a
pool to finance the renovation of many of these facilities.

We have identified two areas of Federal law and policy
that are presenting obstacles to the financing of AIDS treatment
facilities such as those we plan to provide in New York.

1. Certain rules governing the issuance of tax-exempt
bonds will delay or increase the cost of financing facilities
because of their generally smaller size and "nonhospital" nature.

2. Under its "Section 232" Mortgage Insurance Progran,
the Federal Housing Administration (FHA) of the Department of
Housing and Urban Development should provide an excellent source
of insurance for these facilities. However, certain rules
governing the provision of insurance under this program may delay
or preclude the insurance of these facilities.

The following is a summary of the recommendations for
changes we believe are necessary.

A. Changes in Tax-Exempt Bond Rules

1. $150 Million Limit: Outstanding Nonhospital Health Care Bonds.

Problem: Larger not-for-profit hospitals, and hospitals
affiliated with universities, may be precluded from building or
renovating AIDS treatment facilities because of a limitation on
the amount of outstanding bonds for facilities other than acute
care hospitals, which will include most AIDS facilties.

Solution: The exception from the limit for bonds issued for
thospitals" should be expanded to include bonds issued for all
health care facilities.
2. Bond Pools For Health Care Programs.

Problem: The provision of low cost and expeditious financing for
multiple, small facilities under an AIDS treatment program will
be hindered by certain restrictions on tax-exempt bond pools.

Solution: The demand survey and public hearing requirements
should be modified for pools for state health care programs to
require only the identification of the number and type of
facilities in the program instead of each specific facility. The
requirement to expend all pool funds in one year should be
modified for health care facilities to require that any unspent
funds must be yield restricted after 18 months instead of
redeemed.

3. Cost of Issuance Limits For Small Issues.

Problem: Sponsors of AIDS facilities, especially small
facilities, will be required to use their equity (which they may
not have) to pay the excess of issuance costs over the 2 percent
cost of issuance limit. For smaller issues, the fixed costs of
financing frequently exceed the limit.

Solution: The limit on the costs of issuance which may be
financed through the sale of tax-exempt bonds for issues under
$20 million should be increased to 3.5 percent from the present 2
percent.

4. Bank Deductibility For Small Issues.

Problem: Small not-for-profit health care organizations are
effectively precluded from inexpensive private placements by the
bank deductibility rules.

Solution: The small issue exemption limit for purchase of
tax-exempt bonds by banks should be increased from $5 to $25
million and should be applied to borrowers, rather than issuers,
in the case of 501(c)(3) bonds.

5. Arbitrage Rebate For Small Issues.

Problem: Sponsors of small projects may be required to spend more
money on legal and accounting fees to calculate the arbitrage
rebate than the amount of the rebate, or would be forced to have
negative arbitrage (lose money) to eliminate the costs of the
rebate calculation.

Solution: The small issue exemption limit should be increased

from $5 to $25 million and the exemption should be extended to
501(c)(3) bonds rather than be limited to governmental bonds.

6. Debt Service Reserve Fund Limitation.
Problem: Sponsors will be required to use their equity (if any)
for additional reserve fund capitalization when interest rates
are over 9 percent.

Solution: The debt service reserve fund limitation should be one
year's maximum annual principal and interest payments, rather
than 10 percent of proceeds.

7. Rebate Of Pledged Endowment Income.

Problem: Unjustified costs are imposed on organizations that
pledge part of their endowment to secure letters of credit, which
are often required in health care financings, including those
that need FHA mortgage insurance (as will many AIDS facilities).

Solution: Income of endowment funds pledged to back letters of
credit for health care issues should be exempt from the arbitrage
rebate rules.

The problems and suggested solutions regarding the
tax-exempt bond rules are discussed in detail in Exhibit A,
attached.

B. Changes in FHA Mortgage Insurance Rules

We have begun discussions with HUD about the following
proposals. Some of these problems may be solved by applying
existing HUD policies to the new situation of AIDS facilities
while others may require a change in policy, regulations, or
legislation.

1. Automatic HUD Approval Where Private Co-Insurance.

Problem: The process for approving HUD mortgage insurance for
AIDS facilities needs to operate quickly to enable some cities
(such as New York) to get AIDS facilities in place as soon as
possible. Processing substantial numbers of AIDS facilities
requests may overburden some HUD offices.

Solution: HUD should use co-insurers as consultants to prepare
the approval package.

2. HUD Approval of Prototype AIDS Projects and CON Processes.

Problem: Some AIDS facilities programs will have a large number
of virtually identical projects. These could be approved more
quickly if the entire program, or the state certificate of need
(CON) process that approves the program, would serve as approval
for each project in the progran.

Solution: HUD would approve a State's CON process or AIDS
facilities program and all the AIDS projects approved under the
process or program, rather than approving them on a
project-by-project basis.
3. HUD Equity Requirement.

Problem: Sponsors will have to provide equity they may not have
because of the requirement that the entire cost of a project can
not be financed.

Solution: HUD should accept appraisals of value based on the
highest and best use of the property, which in some cases could
reduce the amount of equity required.

4. HUD Insurance Shortfall.

Problem: There is a shortfall between what HUD pays on a default
and the amount needed to pay off the bonds. This is a problem
for smaller sponsors.

Solution: HUD should agree to pay a default with a debenture,
which would minimize this shortfall in some cases.

. HUD 232 Criteria Flexibility.

Problem: There will be new, innovative, and untried payment
mechanisms for AIDS patients, which may not correspond exactly to
current revenue streams relied on by HUD in providing mortgage
insurance.

Solution: HUD's lending criteria should be sufficiently flexible
to account for new reimbursement streams dedicated to AIDS
patients.

6. HUD Insurance of Partial Facilities.

Problem: Some hospitals that do not have FHA insurance may want
to add a wing for AIDS patient treatment facilities, but FHA
rules may preclude the financing of only part of the facility.

Solution: HUD should insure AIDS additions to existing facilities
not insured by HUD.

7. HUD 232 Insurance For All Sub-Acute Care Levels.

Problem: HUD has different programs for insuring different types
of facilities. The differences in approval mechanisms may delay
project approvals.

Solution: HUD should facilitate the approval of one project with
separate health care and housing structures under separate HUD
programs.

- HUD Housing Subsidies for AIDS Patients.
 

Problem: The Housing Act's "section 8" program is currently
unfunded, but this may be the least expensive way of providing
the lowest level of treatment for AIDS patients.

Solution: A subsidized housing program (such as the section 8
program) should be reauthorized for AIDS patients.

The problems and suggested solutions regarding the HUD
FHA 232 Mortgage Insurance Program are discussed in detail in
Exhibit B, attached.
COMMENTS TO THE
PRESIDENTIAL COMMISSION ON THE
HUMAN IMMUNODEFICIENCY Virus EPIDEMIC

KENNETH W. KIZER, M.D.,M.P.H.
DirRecToR, CALIFORNIA DEPARTMENT OF HEALTH SERVICES

Aprit 27, 1988
GoopD AFTERNOON ADMIRAL WATKINS AND MEMBERS OF THE COMMISSION,
[ AM DR. KENNETH W. Kizer, DIRECTOR OF THE CALIFORNIA DEPARTMENT
OF HEALTH SERVICES. THANK YOU FOR THE OPPORTUNITY TO BE HERE TODAY
TO COMMENT TO THE COMMISSION ABOUT HEALTH CARE FINANCING ISSUES
RELATING TO THE HIV EpiIpemic IN CALIFORNIA,

SINCE AIDS WAS FIRST REPORTED IN 1981, ABOUT ONE FOURTH OF ALL
KNOWN CASES IN THE U.S. HAVE OCCURRED IN CALIFORNIA. As oF MARCH
31, 1988, 12,785 cases of AIDS HAD BEEN REPORTED TO THE CALIFORNIA
DEPARTMENT OF HEALTH Services. OF THESE PERSONS, 7.211 (56%) HAVE
DIED,

THE DEPARTMENT PROJECTS THAT ANOTHER 35,000 cases oF AIDS wite
OCCUR IN CALIFORNIA BY THE END OF 1991, WE ALSO ESTIMATE THAT ABOUT
900,000 CALIFORNIAN'S ARE NOW INFECTED WITH THE HUMAN IMMUNODEFICIENCY
VIRUS,
 

BASED ON OUR CURRENT UNDERSTANDING OF THE NATURAL HISTORY OF
HIV INFECTION, AND IN THE ABSENCE OF AN IMMINENT CURE OR DISEASE
ARRESTING IMMUNOTHERAPY, WE BELIEVE THAT WE HAVE TO ASSUME, FOR
PLANNING PURPOSES, THAT ALL PERSONS INFECTED WITH HIV WILL ULTIMATELY
GO ON TO DEVELOP ILLNESS, WITH ABOUT HALF OF THESE PERSONS DEVELOPING
FULMINANT AIDS.

AT PRESENT, IT IS BELIEVED THAT AT LEAST ONE QUARTER OF
CALIFORNIANS WITH AIDS WILL BECOME DEPENDENT ON MepiI-CaL (CALIFORNIA’S
MEDICAID PROGRAM) OR SOME OTHER PUBLICLY FINANCED HEALTH CARE PROGRAM,

CLEARLY, GIVEN THE RESOURCES CURRENTLY BEING UTILIZED IN PROVIDING
CARE FOR PERSONS WITH HIV INFECTION, COMBINED WITH THE MARKED STRESSES
CURRENTLY CONFRONTING PUBLICLY FINANCED HEALTH CARE IN GENERAL, WE
ARE VERY CONCERNED ABOUT FUTURE FINANCING AND ACCESS TO HEALTH CARE
FoR HIV INFECTED PERSONS.

IN CALIFORNIA, WE HAVE BEEN CONCERNED ABOUT THESE ISSUES FOR
SOME TIME AND HAVE UNDERTAKEN VARIOUS ACTIONS TO ADDRESS THEM. THESE
ACTIONS HAVE INCLUDED INITIATING A NUMBER OF HOME HEALTH AND ATTENDANT
CARE PILOT PROJECTS; INCLUDING HOSPICE CARE AS A MEDICAID BENEFIT;
APPLYING TO HCFA For a Mepicaip Home AND Community Care WAIVER;
CONDUCTING STUDIES ON THE cost OF AIDS CARE; AND, PRESENTLY, PURSUING
LEGISLATION TO AUTHORIZE A NEW CATEGORY OF LICENSED HEALTH CARE
FACILITY, WHICH WE CALL THE AIDS CONGREGATE LIVING FACILITY.
[ HAVE PREVIOUSLY PROVIDED TO THE COMMISSION STAFF COPIES OF
TWO REPORTS ON OUR ONGOING INVESTIGATION ABOUT THE IMPACT oF AIDS
ON THE MEDI-CAL _PROGRAM. A THIRD REPORT COVERING MEDI-CAL EXPENDITURES
THROUGH LATE 1987 SHOULD BE FINALIZED THIS SUMMER,

ALTHOUGH NOT AS COSTLY, IN THE AGGREGATE, AS HEART DISEASE,
CANCER, AND SOME OF THE OTHER TOP TEN CAUSES OF DEATH IN THE U.S.,
AIDS IS AN EXPENSIVE DISEASE TO TREAT. IN CALIFORNIA, THE AVERAGE
LIFETIME COST OF CARE FOR AN AIDS patient ts apout $70,000 For
COMMERCIAL INSURANCE AND $44,000 For Mepi-CaL. Nearty 90% oF THOSE
COSTS ARE DUE TO HOSPITALIZATION,

For THe AIDS anp ARC CASES REPORTED TO DATE IN CALIFORNIA, WE
BELIEVE THE COMBINED PUBLIC AND PRIVATE EXPENDITURES FOR PERSONAL
HEALTH CARE WILL EXCEED $1 BILLION, LIKEWISE, USING CURRENT AIDS
CASELOAD PROJECTIONS AND LIFETIME TREATMENT COSTS, WE ESTIMATE THAT
AN ADDITIONAL $2.2 BILLION WILL BE SPENT FOR PERSONAL HEALTH CARE
FOR PERSONS DIAGNOSED WITH AIDS FROM Now THROUGH 1991,

FURTHER, BASED ON CURRENT DATA AND ASSUMPTIONS, WE EXPECT AN
ADDITIONAL $15 BILLION TO BE SPENT IN CALIFORNIA ON HEALTH CARE FOR
TREATMENT OF PERSONS WHO HAVE ALREADY BEEN INFECTED WITH HIV,

I SHOULD POINT OUT, THOUGH, AS [| SUSPECT YOU UNDERSTAND, THAT
THESE PROJECTED HIV-RELATED HEALTH CARE COSTS MAY SIGNIFICANTLY CHANGE,
DEPENDING ON FURTHER SUBSTITUTION OF OUTPATIENT AND HOME CARE FOR
INPATIENT CARE}; DEVELOPMENT OF NEW TREATMENT REGIMENS FOR PERSONS
wiTH AIDS anp ARC, AS WELL AS FOR ASYMPTOMATIC HIV SEROPOSITIVE
INDIVIDUALS; REVISION OF CASELOAD PROJECTIONS; CHANGES IN THE
PROPORTION OF SEROPOSITIVE PERSONS PROGRESSING TO ARC anp AIDS; AND
OTHER FACTORS.

Even THOUGH AIDS WILL CERTAINLY CONTINUE TO BE AN EXPENSIVE
DISEASE, OUR EXPERIENCE IN CALIFORNIA HAS SHOWN THAT WE CAN REDUCE
THE COST OF PROVIDING HEALTH CARE FOR PERSONS WITH HIV INFECTIONS.
WE BELIEVE THE GREATEST IMPACT CAN BE MADE IN THIS REGARD, WHILE
AT THE SAME TIME PROVIDING COMPETENT AND COMPASSIONATE TREATMENT,
BY INCREASING OUR ABILITY TO PROVIDE HEALTH CARE IN SETTINGS OTHER
THAN TRADITIONAL GENERAL ACUTE CARE HOSPITALS. IN SO FAR AS CURRENT
FEDERAL REIMBURSEMENT RULES AND REGULATIONS MAKE IT DIFFICULT TO
REIMBURSE FOR SERVICES THAT MAY BE VIABLE ALTERNATIVES TO EXPENSIVE
INPATIENT CARE, THEY PROMOTE UNNECESSARILY LONG LENGTHS OF STAY IN
HOSPITALS AND, THEREFORE, HIGHER TREATMENT COSTS. LIKEWISE, TO THE
EXTENT THAT REIMBURSEMENT IS RESTRICTED ONLY TO TRADITIONAL HEALTH
CARE FACILITY LICENSURE CATEGORIES THAT DO NOT FIT THE ALTERNATIVE
AND INNOVATIVE MODES OF TREATMENT BEING TRIED IN CALIFORNIA, THIS
ALSO IS AN OBSTACLE TO FINANCING AIDS care,

To COUNTER THESE OBSTACLES, WE RECOMMEND THAT THE MEDICAID WAIVER
REVIEW PROCESS BE STREAMLINED AND THAT MEDICAID RULES AND REGULATIONS
PROVIDE ADDITIONAL FLEXIBILITY TO PROVIDE FOR THE TESTING OF INNOVATIVE
TREATMENT ALTERNATIVES, REALIZING THAT IF WE ARE TRULY GOING TO
INNOVATE THEN A DEGREE OF RISK HAS TO BE ACCEPTED - THAT IS, BY THEIR
VERY NATURE OF BEING INNOVATIVE, NOT EVERY NEW MODE OF SERVICE DELIVERY
CAN GUARANTEE IN ADVANCE THAT IT WILL PROVIDE COST SAVINGS,

LasTLy, [ WOULD LIKE TO EXPRESS OUR BELIEF THAT THE MODELS OF
CARE BEING DEVELOPED FOR AIDS ARE LIKELY TO BE APPLICABLE TO OTHER
DISEASE STATES, AND THAT WE SHOULD NOT OVERLOOK OR UNDERESTIMATE
THE POTENTIAL OF THE ACTIVITIES BEING DIRECTED TOWARD THE HIV EPIDEMIC
TO ASSIST IN THE OVERALL EFFORT TO MAXIMIZE THE SERVICES RECEIVED
FOR THE LIMITED PUBLIC DOLLARS AVAILABLE FOR HEALTH CARE.

THANK YOU,
 

(x)

 
 
 

| STATE OF FLORIDA
4| DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES

Testimony of Gary Clarke
Deputy Assistant Secretary for Florida Medicaid*
Before the Presidential Commission
On the Human immunodeficiency Virus Epidemic
April 27, 1988
Washington, D.C.

First, I would like to thank the committee for inviting me
here to testify this afternoon.

What I plan to talk about this afternoon is first, the
lessons we have learned in dealing with AIDS, and second, the
implementation of these principles nationwide.

Before I begin, however, I would like to point out that
something we should bear in mind is that although today we are
talking about AIDS, there ara many other diseases which also are
devastating to peoples' lives, both financially and socially.

Our system for providing care to persons who have limited or non-
existent third party health insurance was strained long before
the AIDS crisis hit. AIDS merely brings into sharper focus the
problems inherent in our public health care systems and places
even greater burdens on these systems.

Florida-hasa consistently ranked third in the nation in the
cumulative number of reported cases of AIDS. We in Florida,
along with California, New York, and New Jersey have thus far
dealt with the bulk of the AIDS patients in this country. I
think it is obvicous to all of us in the field and from the
testimony before this committee that the numbers of patients we
have so far experienced are in reality the first wave of the
disease and probably represent only the beginning of the
epidemic. Our prevention and education efforts will probably not
pay off imereduced numbers of cases until into the 99's, as most
of the cases.we will see through 1991 are already infected.
Obviously we do not know the exact number of persons infected,
but if the estimates of 1.5 million are accurate, our public

health care system, which is already seriously strained, will be
in chaos.

*Formerly Florida's Deputy State Health Officer

1317 WINEWOOD BLVD. * TALLAHASSEE, FL 32399-0700
BOB MARTINEZ, GOVERNOR

 
 

(x3

Make no mistake, the public health care system will bear
the largest portion of the cost of care, particularly the public
hospitals and teaching medical centers which have traditionally
served as hospitals of last resort and have provided the largest
share of care to those patients with few resources and whom other
facilities are unwilling to serve.

Many atates, including Florida, are debating insurance
regulations which will prevent third party health carriers from
discriminating against AIDS patients. As the demographics of the
disease change, however, from the upper and middle class white
male population which has had third-party resources, toward
minorities, particularly poor women, children, and IV drug users,
those who traditionally are less likely to have health care
coverage, public resources will be increasingly called upon.

What do we know about AIDS, particularly as it relates to
public financing?

Pirst, the needs are far greater than available resources.
If one assumes an average diagnosis to death cost of $30,000,
divided by an average life expectancy of 18 months, the cost of
care on a monthly basis is approximately $1,700 per patient. At
this conservative rate, our live Florida AIDS population this
year (average 1,306 persons) will have a service cost of over 26
million dollars. The service need for our AIDS population far
outstrips our 8.1 million dollar state-only appropriation for
patient care in fiscal year 1987-88. I might add that our
patient care appropriation is more than the state only
appropriations for all other states combined.

Who is.paying the cost of care? In Dade county, where we
are most heavily impacted by AIDS, preliminary data (Health
Council of South Florida) indicates that 23% of hospital days are
being paid by commercial carriers, and that Medicaid is fundihg
an additional 16% of the inpatient care, Nearly 50% of the care
is being provided through state only appropriations, while close
to 20% of the care is written off as bad debt. Interestingly,
private hospitals are providing little or no free, Medicaid or

bad debt care, placing an increased strain on public medical
resource=

What do we know about the Medicaid/AIDS population?
Statewide in Florida, 35% of our living AIDS population appears
to be Medicaid eligible. We are, along with many other states,
currently attempting to identify Medicaid costs associated with
services to AIDS recipients. Since Medicaid has in the past been
"disease neutral” it is difficult to isolate AIDS costs from
other catastrophic illnesses, particularly since AIDS costs are
associated with a variety of opportunistic illnesses.
)

We have developed a screen of diagnosis indicators which we
have applied to our claims history back to 1979. We are
currently in the process of fine tuning the screen to eliminate
false positives, and expect that we will use this data to
generate a historical picture of the Medicaid costs associated
with the disease even prior to the disease being named. We have
so far identified over 196,048 claims for fiseal years 85 and 86
which appear to be AIDS related, and over 83,000 for the first
six months of fiscal year 1987,

We have a good picture of the demographics of our
Medicaid/AIDS population. This group differs significantly in
some respects from the general AIDS population. Most striking is
that 16% of the Medicaid AIDS population are children as compared
to 4% in the general AIDS population. In fact it appears that
hearly 7@% of the living AIDS children are Medicaid eligible. In
the general AIDS population the largest age grouping is persons
36-39 years (43%), while in the Medicaid/AIDS population the
largest grouping is persons under 3@ year (43%). This
undoubtedly reflects the fact that Medicaid eligibility is more
often a result of qualification for AFDC than it is qualification
for disability, leading to the inevitable conclusion that
although Medicaid is a major player in the AIDS service funding
scenario, it currently does not meet the needs of the group most
impacted - single males who are disabled by the disease.

In Florida it appears that a major portion of the cost is
being born by state funding, while the rest of it is being paid
by the property tax payers who fund hospitals of last resort in
Major metropolitan areas.

One of the most important things we need to realize as a
society is that though the AIDS epidemic first appeared in more
populated areas of a few states, it ia spreading in ways which
suggest that no segment of the population will be safe from its
impact. Though the epidemic began in our metropolitan areas, it
is not a local or state problem but a problem which is national
in scope which has to be addressed nationally and with leadership
from the Federal government. As I said earlier, Florida and
three other states have shared the: bulk of the cases, and the
lessons Weehave learned about treatment should be adopted as
national -_pelicy as case counts in other states begin to increase.

What have we learned?

First, public hospitals, in particular teaching hospitals,
are likely to be most heavily impacted by the AIDS epidemic.

Second, the Federal government needs to share more fully in
the cost of care, preferably through expansion of the Medicaid
program. State and local governments cannot bear the full cost
of providing care in their larger public hospitals,
(x)

Third, aggressive, responsive medical treatment such as
AZT, pentamidine and infusion therapy both prolong life and are

cost effective in that they prevent and decrease length of
inpatient stays,

Fourth, managed home and community based care provided to
AIDS patients enables them to remain in their homes both due to
the supportive nature of the services provided and the ability to
respond more rapidly to opportunistic illnesses.

Fifth, housing for AIDS patients is a major problem, both
in terms of finances and due to prejudices of the general
population.

Based on these lessons we recommend:

1, That the Federal government expand Medicaid eligibility
to allow_more AIDS patients to participate. Particularly we
recommended that the SSI income standard be increased to 100% of
Federal poverty level, and that other categorical and financial
requirements be removed for AIDS patients.

2, That the Federal government not tie the current

definition of AIDS for SSI eligibility to the AIDS definition
promulgated by the Centers for Disease Control for the purpose of
epidemiologic surveillance. We suggest that the Federal
Government immediately convene a panel of experts to determine a
new and less restrictive criteria for determining whether or not
a person is disabled due to HIV infection.

3. That states be required to provide treatment which is
effective and efficient to Medicald recipients. This includes
approved drug therapies such as AZT and other drugs which will
be developed, as well as home and community based services.

 

4. That the Federal government expedite the approval
process for Medicaid waiver programs serving AIDS recipients.
This includes working with the etates to develop minimum AIDS
waiver program standards.

 

5», that the Federal government immediately begin to
provide t8chnical assistance and funding to communities and
hospitals to establish local and reqional "centers of excellence"
in the care and treatment of persons with AIDS.

6. That HUD housing funds be immediately increased so that
state and local governments, in concert with foundations and
private enterprise establish programs to provide supportive
housing for persons with AIDS.
In conclusion I would like to reiterate that the most
important issue is that we begin to think and act nationally in
regards to health care. Financing health care for patients with
AIDS is a national, not just a regional or state problem. I
think that this commission can play a pivotal and unifying role
in this crisis, and I urge you to incorporate our recommendations
in your final report.

Again, thank you for inviting me here today.
TESTIMONY OF
LEIGHTON E. CLUFF, MD
PRESIDENT
THE ROBERT WOOD JOHNSON FOUNDATION
BEFORE
THE PRESIDENT’S COMMISSION ON THE HIV EPIDEMIC
FINANCING HEARINGS
WASHINGION, DC
APRIL 27, 1988

Since Novenber 1986, the Robert Wood Johnson Foundation has awarded
$22.1 million in grants related to AIDS. That total includes $17.2 million
in grants for our AIDS Health Services Program, a four-year national effort
to provide comprehensive and coordinated care to people with AIDS in 11
U.S. cities. With the remaining $4.9 million, we have funded policy
research, technical assistance to commnity efforts, and organized private
sector and professional responses to the epidemic. Additionally, we are
currently giving serious consideration to several AIDS-related proposals
that total more than $4 million.

We have also recently announced an unprecedented grants initiative
that will fund AIDS prevention and services projects at. the community level
nationwide. That program currently comes without a price tag because we
have set no predetermined limit on the total mmber of grants, the length
or size of individual grants, or the total funds we ultimately will award

under this new effort.

We took that unusual step for several reasons, chief among them the
knowledge that we do not have the solutions to the mst pressing problems
AIDS poses -- preventing the further spread of HIV and caring for those
people already affected by AIDS and AIDS-Related Complex.

But we do know that those solutions are developing at the comunity
level, in the new approaches being taken by both new and established com-
mnity agencies. ‘To encourage those creative solutions to emerge, we
developed an initiative that is flexible and non-prescriptive. It urges
those at the front lines of the epidemic to report to us the problems they
face and the solutions they propose, and asks the applicants to choose the
length of time and level of funding they need to accomplish their vital

work.

Because we have observed a significant unmet need for prevention and
services at the comunity level, we anticipate an enommus response to this
initiative -- and if that response occurs, we are prepared to make a
multi-million dollar commitment in order to fund the most promising propo-
Bals we expect to receive.

The AIDS Prevention and Services Projects were authorized by the
trustees with a charge for us to be "bold, courageous -- and fast!" So we
decided to simplify the application process, and to help novice applicants
develop their proposals via a special telephone hotline. Our brief and
direct call for proposals was issued in both English and Spanish and sent
directly to thousands of comunity agencies who could benefit from such

funding.
We made these extra efforts to simplify our grantmaking process

because we knew that in many community agencies, AIDS educators and care
providers were spending more time filling our canplex grant applications
~3-

f

than delivering services or educating their clients about AIDS prevention.

In addition, we knew that many of the organizations most in need of
funding were not likely to approach a large national foundation for that
money -- due to their untraditional work, their smaller size, their lack of
a track record, or any number of reasons. It is ons of the tragedies of
the epidemic that a hardworking comunity group hesitates to ask a $2 bil-
lion foundation for a $2,000 grant that might otherwise make an imaginative
response to AIDS possible -—- and we hope to bridge that gap between founda-
tions and the front Lines of AIDS with this new effort.

We are frustrated, however, because that gap is still a wide one for
many reasons. At our foundation, people with AIDS are among the many bene-
ficiaries of our grants, along with the elderly, the homeless, infants,
children, adolescents, the uninsured, and the chronically mentally ill.

But taken as a whole, private foundations in the U.S. committed only 3
percent of their available funds for AIDS last year, amd the majority feel
that AIDS is too risky a problem to address.

In addition, many foundations fall back on the most common proviso of
philanthropy, the “specific disease rule." When the Robert Wood Johnson
Foundation made its first grants in AIDS in 1986, we too had on our books
guidelines that discouraged applications for funding projects related to
specific diseases or broad public health problems, and AIDS certainly fits
both those definitions.

At the sare tine, howaver, we realized that avoiding AIDS would nean a
failure to fulfill our mission to improve the nation’s health care. We
made grants in AIDS despite those rules. In fact, we have recently rewrit-
ten our guidelines so that AIDS is one of several areas of focus and
specific diseases of national importance are included in our overall mis-

sion.

Other private foundations -- notably, the Aaron Diamond Foundation in
New York City ~- have made exceptions to their rules in response to AIDS,
usually by funding projects beyond thair geographic limits. But they them
selves are exceptions in the private sector.

In addition, some national foundations have begun to put AIDS on their
agendas as well. The Ford Foundation this week announced a $4.5 million
commitment to AIDS projects in U.S. commnities as well as efforts in other
countries. And our colleaques in corporate philanthropies have been
leaders in early and frequent funding related to the epidemic.

Still, we see a reluctance to move beyond the discussion stage at many
philanthropies, and this disturbs us because we know that no one foundation

can meet the needs created by AIDS. That is painfully clear in several
cities around the nation where we have invested in ‘AIDS projects. In New

Orleans and Dallas, where economic recessions limit or rule out state and
city funds for AIDS, philanthropies have not filled the funding gap. In

those cities, AIDS care and services hang on a shoestring budget largely

provided by the Robert Wood Johnson Foundation -- and daspite the generous
size of those grants, they are not adequate to provide the services that

the growing caseload requires.
 

 

Curiously, we’ve heard that some funders believe that our projects are
comfortably funded. We've heard some funders wonder whether we'd mind if
they added a small -- but in our eyes, crucial -- grant to our investment
in a particular AIDS project. We've heard that our $20 million commitment
is seen as an easy step for a health care foundation to make, but that
other foundations anticipate too many risks in funding such a complex and

controversial issue.

Our reply — and the reason behind it -- is simple: We have been able
to make a strong and continuing commitment to AIDS only because we have
never hesitated within our foundation to confront the risks inherent in
AIDS-related grantmaking. All such risks are identified and acknowledged
by our staff and trustees before any grants are awarded.

What makes cur foundation unusual in AIDS funding is our willingness
to act despite those risks we've identified. We urge other foundations to
confront. them squarely and to wove beyond them with speed and confidence.
Those risks include the following:

> An AIDS initiative’s goals may be rendered obsolete before it has
ended, due to the rapidly changing knowledge base on the nature of
the virus.

> AIDS education requires explicit messages about sexual transmission
and drug use in order to change behavior.

> The risk behaviors that require change to prevent AIDS are difficult
to alter, so not every prevention effart will be successful.

 

 
 

 

> Funding such controversial efforts may result in high visibility for
foundations, particularly those involved in projects related to
prevention, education, and HIV testing.

> Applicants may lack the secure "track record" that foundations
prefer, since so many AIDS agencies are fledgling organizations.

> With no cure or vaccine in sight, AIDS is a long-term problem — and
few foundations currently provide long-term funding.

> Those at greatest risk for AIDS -- and those most seriously affected
by it -- engage in behaviers that many foundations are unwilling to

accept.

Underlying all those risks is this one: Foundations cannot expect the
"success rate" with AIDS grants that they expect in other areas. We cannot
hope to solve every problem AIDS poses, nor to fund every need it creates.

However, we at the Robert Wood Johnson Foundation know from our
experience that foundations can accomplish a great deal despite those limi~
tations. Foundations can act as leaders and catalysts within communities,
helping to shape a rational and sensitive response to AIDS. They can help
fledgling community oxganizations to better manage their efforts to fight
this epidemic with technical assistance, organizational help, and staffing.
They can ensure that those dying of AIDS have access to adequate health
care, support services, and legal and financial advice. And because foun-
dation funds can be granted with more flexibility than public funds, foun~

dations can complement the government’s funding efforts by filling funding

 

 
gaps and supporting experimental approaches to prevention and services.

Ultimately, all those recommendations can be summed up in the charge
our trustees gave us: Foundations should be bold, courageous and fast in
funding AIDS efforts. ‘The epidemic requires nothing less from us.

 
Presidential Commission on the Human
Immunodeficiency Virus Epidemic

Financing the Costs of the HIV Epidemic

Statement of

_—

( Sibyl Jacobson, Ph.D. >~President,
i ‘eundation

Vice-President, Metropolitan Life Insurance Company
April 27, 1988

Panel: Private Sector Funding Initiatives

I wish to thank the Commission for the opportunity to talk
about AIDS from the perspective of a grantmaker. AIDS is a
public health crisis that raises economic, social, and
political issues in its wake of human tragedy. It tests our
preparedness to meet crisis. It tests our various delivery
systems. And it tests our will to take collective action.

We need broad participation in the AIDS battle. Yet, there
are different roles for the public, private, and voluntary
sectors. The massive resources needed for coordination,
research, capital expenditures, care, and prevention warrant
strong public sector leadership and involvement. The
magnitude of AIDS as a public health problem makes it a
societal issue and, therefore, the primary role in addressing
it should fall to government and the public sector. The
private sector’s role, although important, is necessarily
subordinate.

In terms of identifying possible roles for the private sector
in funding AIDS-related efforts, it may be useful to consider
the two-step process a potential funder generally goes
through: (1) developing the will to become involved; and (2)
developing ways to become involved. I will comment on both
and identify potential obstacles to involvement and suggest
ways they might be overcome. Finally, I will outline some of
the things that Metropolitan Life Insurance Company and
Metropolitan Life Foundation have done to help educate the
public about how to prevent AIDS.

The first step to private sector funding is developing the
will. As potential funders consider whether they should
become involved with AIDS, several questions are often
raised:
 

Why should we become involved?
How does this fit our program?
What can we do that could make a difference?

Often underlying these questions is the conviction that such
efforts should be funded by the public sector, and the
perception that the problem is too large and complex to be
tackled by the small amounts of funding available in the
private sector.

Common obstacles to funding are:

-~ guidelines and priorities, including particular
exclusions of disease-specific grants

- budgeting and approval cycles

- existing commitments

- competing needs

- insufficient knowledge of the subject

- discomfort with ambiguity and the unknown
- controversy over approaches

- wait, see and study attitude

Any one of these obstacles can deter taking action. It takes
will to overcome inertia and the comfort of the status quo.
Concerted efforts among the public, private, and voluntary
sectors are needed to see that the case for involvement
reaches top management, boards of directors, and organiza-
tions’ constituencies so important in building the climate
and clout for action. We need to sensitize leadership, at
all levels, to the nature and extent of the AIDS epidemic and
to what can be done about it. Although there is a great deal
of information available, the case can best be made directly
to a group of decision-makers. The eloquence of immediacy
and the urgency of passion can do much to spark .the will
toward action.

In New York City, for example, Dr. James Joseph, the City’s
Commissioner of Health, has spoken to groups of grantmakers
at their invitation or the invitation of a host such as the
New York Community Trust. He provided grantmakers with a
foundation of fact and analysis and a menu of needs. This
information could be used to help develop a rationale for
action that could help overcome institutional objections to
funding.
 

 

There is still a need, I think, to reach beyond middle
management with the case for involvement. Often high level
support is needed to put the issue on an organization’s
agenda, develop the will for action, and leverage coopera-
tion. This needs to be done at the national, state, and
local levels and, ideally, would include all sectors.

Once there is the will to act, the challenge is to determine
how to act. This, then, is the second step in the readiness
process of the funder -- developing ways of involvement. At
this point, the funder is likely to ask:

What is our emphasis?

Who do we wish to reach?

Where is our geographical focus?

How can we have an impact?

When can we begin?
No matter where one starts building a program of support --
whether it be with topic, population, geography, mechanisn,
or time-line -- ways to fit one’s program and philosophy can
be found.
Initiatives are needed in:

- education, to reduce risk behavior

- research, medical and behaviorial (including
special populations)

_7 care programs

- support and social services

- coordination of planning and programming
- volunteer development and recruitment

- delivery system efficacy

Populations, from the general public to groups at risk, to
people with AIDS, to professionals and volunteers, can be the
target of initiatives. So, too, projects can be directed
nationally, to communities of interest, to specific locales,
to grass-roots groups, or to organizations reaching special
groups or providing special services. The mechanisms can
be many: seed grants, testing new models, incentives to
address the problem or for cooperative efforts, special
projects, to name but a few approaches. There are activities
that can begin right away and those which are more complex or

 

 
 

 

involve model building, research, or systemic change. There
are projects one can do alone and there are cooperative
projects that pool funding.

Private sector funding can have the advantage of moving
quickly into an area, taking risks, supporting models and
experiments, demonstrating what works, and contributing to
the formation of public policy. However, this may also mean
that private sector funding may not be there for operating
costs over the long haul. For this reason, it becomes
especially important to develop ways to sustain and institu-
tionalize activities and programs that work. This, in turn,
requires an eye toward cooperation and careful cost/benefit
analysis. So, too, the institutional will of non-profit
organizations to enter into AIDS education and prevention or
service provision, as befits their particular mission, needs
to be encouraged. Funders can play a role in this effort by
using seed grants to encourage organizations to implement
various kinds of AIDS-related programs.

We at Metropolitan Life have had significant experience in
this area, and I would like to describe some of the initia-
tives which we have taken (See Attachment A). Our emphasis is
on AIDS education to help reduce risk-taking behavior. To
date, the Company has spent over $5 million for national
television AIDS education programming on commercial stations.

In the fall of 1987, Metropolitan Life sponsored, without
commercial interruption, a two-hour, $4 million, prime-time
television special, "The National AIDS Awareness Test: What
Do You Know About Acquired Immune Deficiency Syndrome?" The
question-and-answer format featured medical authorities and
leaders in the arts, sports, and government. The program was
designed to raise awareness by providing information on AIDS,
its transmission, prevention and treatment, as well as the
socio-economic implications of the disease.

Nationwide pre- and post-broadcast surveys were conducted by
Louis Harris and Associates to measure changes in the
knowledge of those who saw the program (See Attachment B).
The surveys indicated that viewing the program substantially
increased knowledge about key risk behavior.

Following the broadcast, Metropolitan distributed free of
charge over 15,000 videotapes of the program and 500,000
question-and-answer pamphlets based on the program to
schools, hospitals, community organizations, national non-
profits, and corporations. For instance, videotapes and
pamphlets were provided to all 650 American Red Cross AIDS
coordinators.

Another television initiative was launched this year, witha
$1 million commitment to underwrite Group W Television’s AIDS
Lifeline campaign, a five-part national syndication of prime-

 

 
time programs on AIDS. The first program in the series,
“AIDS 101," aired in March.

Stations participating in AIDS Lifeline donate the equivalent
of the license fees to local non-profit AIDS caregiving
organizations and to the National AIDS Network, a non-profit
patient care organization. In addition, stations are
encouraged to develop local programming that meets local
needs. A pamphlet providing basic information on AIDS is
also made available in three languages and braille.

Our Foundation developed a program of grants directed at AIDS
education for hard-to-reach and high-risk populations
entitled “Project Reach." We then invited various organiza-
tions to submit proposals. Our purpose was to encourage
organizations that could reach the target groups to become
involved in AIDS education. Our primary objectives were to:

- expand dissemination of existing educational
approaches and programs

- develop and disseminate new educational approaches
and programs

- encourage networks of national organizations,
chapters of organizations and/or local community
groups

We used an invitational request for proposals as a way to
stimulate interest in AIDS education, foster collaboration,
initiate action, and create a pool of proposals from which to
select potential award recipients. Those invited to submit
proposals were told that special consideration would be given
to bilingual materials; collaborative efforts; and the means
to reach significant numbers of people, both nationally and
locally.

A by-product of this approach was that some organizations
internally raised the question of whether they should
incorporate AIDS education in their activities. The invita-
tion to submit proposals had served as a catalyst to raise
the issue. Some organizations that submitted proposals, but
failed to receive grants from us, found financial support for
their ideas elsewhere. The discipline of preparing proposals
had helped them form their ideas into a plan of action.

In another effort, our Foundation worked AIDS education into
its “Healthy Me” campaign, an existing program designed to
promote a comprehensive health curriculum in the nation’s
public schools. This year, we have offered a bonus grant to
award-winning schools that have successfully implemented a
program of AIDS education. In this way, we hope to emphasize
the importance of systematic education about AIDS.
 

Although there are many ways for the private sector to
contribute, organizations are still reluctant to undertake
the effort. I believe that there is a crucial role for
government to play in encouraging the private sector.

It begins by recognizing that the very magnitude of the
epidemic and its consequences begs for direction at the
threshold of involvement. The agencies of government must
assure the private sector of their willingness to commit
massive resources to a full scale war on AIDS while continu-
ing to provide guidance to those who are willing to become
involved. Organizations in the private sector must know that
they are not being invited to enter the labyrinth alone, and
that government will continue to provide meaningful support.
 

 

Attachment A

METROPOLITAN LIFE INSURANCE COMPANY
AND
METROPOLITAN LIFE FOUNDATION

AIDS Education Activities

The nation’s concern over the spread of AIDS is intensified
by the current lack of any vaccine or cure for the disease.
At this time, education is the only way to stop its spread.

For over a century, Met Life has been a leader in educating
the public on important health issues, including
tuberculosis, infant mortality, venereal disease and
substance abuse. To meet the pressing need for lifesaving
information about AIDS, Met Life and the Metropolitan Life
Foundation have undertaken the following:

AIDS LIFELINE Met Life and Group W Television announced in
January 1988 a $1 million commitment by Met Life to become
the sole national underwriter of Group W’s AIDS LIFELINE
campaign, television’s first ongoing national AIDS education
and information effort. Five prime-time specials will be
syndicated nationwide in the first year: AIDS 101,
Heterosexuals and AIDS, AIDS and Health Care, How to Talk to
Kids About AIDS and The Names Project.

Stations participating in AIDS LIFELINE are donating the
equivalent of license fees to local nonprofit AIDS caregiving
organizations and/or to the National AIDS Network, a
nonprofit organization dedicated to AIDS patient care. In
addition, stations are encouraged to conduct local outreach
such as question-and-answer follow-up programs with community
experts. The AIDS LIFELINE pamphlet, outlining the basic
issues and offering information on national and local
resources, is now available in three languages and braille.

The National AIDS Awareness Test: What Do You Know About

Acquired Immune Deficiency Syndrome? Met Life sponsored,
without commercial interruption, this two-hour, $4 million

national television special in September 1987. The
question-and=answer format, produced by "60 Minutes" veteran
Paul Loewenwarter, featured the country’s leading medical
authorities and celebrities from the arts, sports and
government. Nationwide surveys were conducted by Louis Harris
and Associates to measure changes in the knowledge of viewers
who saw the program. The surveys, pre-broadcast and
post-broadcast studies, indicated that viewing "The National
AIDS Awareness Test" substantially increased viewer knowledge
about key risk behaviors.

Following the airing of the special, Met Life participated in
a major community outreach program. More than 15,000
videotapes of the show and 500,000 Q & A brochures based on
the show were distributed free of charge to schools,

 

 
 

 

-2-

hospitals, community organizations and corporations.
Videotapes and brochures were also sent to all 650 American
Red Cross AIDS coordinators.

Project Reach In 1987 the Metropolitan Life Foundation
developed a program targeted to reach “at risk"
populations-~young people, minority groups, and drug
abusers--with information on AIDS. A total of $150,000 was
awarded for AIDS education programs through Project Reach.
Grant winners were:

Hotline Cares, New York, N.Y.--an aggressive
bilingual education campaign on AIDS and drug abuse directed
toward young people in East Harlem, the South Bronx and
Queens, N.Y.

National Coalition of Hispanic Health and Human
Services Organizations, Washington, D.C.--to develop and
field-test a bilingual training module on AIDS education
targeted to Hispanic families.

Planned Parenthood of New York City--for a street-
based bilingual education program for high-risk youth in four
areas of the Bronx, N.Y., from the Hub Center based in the
South Bronx. —---

American Association of School Administrators,
Arlington, Va.--to produce and develop an Administrator’s
Guide to AIDS Education. The publication suggests a five-step
approach in instituting AIDS education programs in schools.

‘American Red Cross, National Headquarters,
Washington, D.C.--to expand existing outreach educational
programs to bring AIDS information to an estimated 10,000
minority school-age children and adults in rural areas.

American Medical Association, Chicago, I11l.--for
the pamphlet Physician’s Action Guide to HIV Issues, an
information pamphlet on AIDS issues, resources and patient
counseling sent to some 300,000 AMA physicians.

The Door-A Center of Alternatives, New York, N.Y.
--an organization visited each year by over 8,000 young
people, to expand its current program of AIDS education.

The Floating Hospital, New York, N.Y.--for the
creation of a shipboard bilingual AIDS information and
education center for school and community groups.

San Francisco AIDS Foundation--to expand existing
bilingual educational programs for residents, local health
departments and AIDS agencies in northern California.

 

 
a

Project HOPE The foundation has committed $150,000 over the
years 1987-1989 to the Center for Health Affairs at Project
HOPE for a study to evaluate AIDS educational strategies in
selected countries.

Girls Clubs of America In 1987 the Metropolitan Life
Foundation made a grant to the Girls Clubs of America to
support a greatly expanded AIDS education program, which will
include: staff training in AIDS education; dissemination of
AIDS education resource information; expansion of GCA’s
library of AIDS education resources; and sponsorship of a
one-time award to the local GCA that develops the most
effective AIDS education program.

Women’s Action Alliance The foundation gave the Alliance a
developmental grant for an eight-month project for packets of
information on AIDS issues, resources and service providers
for women’s centers in New York State. To enhance the use of
the packets, training sessions will be provided for center
professionals working with women.

Healthy Me In 1988 the Metropolitan Life Foundation’s
"Healthy Me" campaign to promote quality comprehensive health
education in the nation’s public schools includes a bonus
grant for the award-winning schools that have successfully
integrated an AIDS education program.

New York State Public Service Advertisements Working with
New York State Health Commissioner, Dr. David Axelrod,

Met Life committed $100,000 to help the state fund a public
service advertising campaign targeted especially to college
students. The campaign features well-known entertainment
celebrities.

Teens & AIDS: Playing It Safe The Metropolitan Life
Foundation purchased and distributed, in cooperation with the
New York City Board of Education, 50,000 copies of the
brochure, "Teens & AIDS: Playing It Safe," in New York City
secondary schools. The brochure was developed by the Health
Insurance Association of America and the American Council of
Life Insurance.

April 1988
Attachment B
LOUIS HARRIS AND ASSOCIATES SURVEYS

"The National AIDS Awareness Test"

Metropolitan Life Insurance Company
In the fall of 1987 Met Life commissioned Louis Harris and
Associates to conduct nationwide prebroadcast and
postbroadcast surveys to measure changes in the knowledge of
viewers who saw "The National AIDS Awareness Test" television
special. Program discussion centered around AIDS origin,
transmission, prevention and treatment,—as well as the social
and legal implications of the disease.

Prebroadcast Survey

One thousand Americans at least 18 years of age, representing
a cross-section of the country, were questioned as background
for "The National AIDS Awareness Test." The results of the
survey underscored the confusion many Americans feel
regarding this disease. For instance:

- 83% believed they were not at risk of getting AIDS yet

. nearly one-third believed you can get AIDS from a sneeze

- nearly 50% thought that mosquitoes can transmit the virus

- 60% polled believed AIDS was more contagious than
tuberculosis

Postbroadcast Survey

The study is based on interviews with adult Americans, aged
18 and over, comprised of 72 viewers and 422 non-viewers who
had also been interviewed before the broadcast, and 282
viewers and 332 non-viewers interviewed only after the
program aired.

Examples of key risk questions asked were: "Which is the only
sure way to prevent AIDS through sex--abstinence, sex with
protection, or early withdrawal?"; "Which is the best
protection against AIDS--a natural condom, a latex condom, or
a diaphragm?"; and "If your blood test is negative, you are
immune to AIDS. True or False?"

Results of the survey confirmed the program’s primary ain:
viewer knowledge was substantially increased in terms of key
risk behaviors, and reduced the likelihood that viewers would
be infected solely because of their ignorance. Highlights
included:

- Viewers showed the greatest drop in levels of
misinformation on how casual contact might transmit the
disease

- striking changes in knowledge appeared on high risk
questions, where the benefits of viewership seem even
greater for those with the most limited education and
income

. those groups who were most at risk, i.e., the least
knowledgeable about AIDS, showed the greatest shifts in
knowledge following the broadcast.
 

 

TESTIMONY OF ROBERT BERNSTEIN, M.D., F.A.C.P.
TEXAS COMMISSIONER OF HEALTH
BEFORE THE -
PRESIDENTIAL COMMISSION ON AIDS
April 27, 1988
Washington, D.C.

Although there is great concern about HIV infection in the major cities of Texas,
the trend from 1983 through 1986 shows a clear spillover from our metropolitan areas to
our rural counties. To date, AIDS cases have been reported from about 45 percent of
our 254 counties. Many more can be assumed to have cases of HIV infection.

The devastating impact AIDS will have in rural Texas is exemplified by the 108
counties of West Texas, 99 of which average fewer than 10,000 residents, one fourth of
whom live at or below the federal poverty level. These residents’ access to health and
medical care is limited. They do, however, have ready access to abusable drugs via the
Mexican border. Yet clinics to treat I.V. drug abusers are few and far between.

There is only one physician per 1,580 West Texans. Hospital care is provided by
small facilities, most with fewer than 100 beds. Tertiary care is available at teaching
centers in the widely separated metropolitan areas such as Lubbock.

Last year, Lubbock’s major hospital treated 14 persons with AIDS, at a cost of
$242,000 plus $120,000 in professional fees. Only 39 percent of these costs have been
collected. In 1991, an estimated 91 persons with AIDS will be treated in Lubbock, at a

cost of $2.55 million. Projecting for the full 108-county region, costs in 1991 will be $15-
$20 million.

The small county hospitals caring for even one or two persons with AIDS will be in
jeopardy. Governments of small counties will not have sufficient funds to defray the
medical costs without diverting them from essential county functions. Some hospitals
will close for financial reasons. There will be a migration of persons with ARC and
AIDS to the region’s teaching hospitals for care. Because of the intensity of care
required, personnel and resources will be siphoned from elsewhere in the hospitals.

Community resources and support services for persons with AIDS are scarce in the
small towns of West Texas. Public transportation to carry a patient 25, 50, or 100 miles
for routine care and support does not exist.

The Texas Department of Health has established about 400 clinic sites in rural areas
statewide, but those are dedicated entirely to prevention services, not treatment. The
Structure is there to add education, counseling, antibody testing, and partner
notification services, but the money is not. We have been denied the necessary federal
support for these functions. Our needs for urban areas also were severely underfunded.
But I believe strongly that this approach - prevention, detection of early infection, and,
above all, extensive involvement of the local community to provide as much out-of-

hospital care as possible - is critical in averting the highly unfavorable impact on the
health-care system in rural Texas.

In the past year, we in Texas have been accused of not trying hard enough for a
fair share of federal funding and of not contributing enough as a state government. We
resent both comments. Public health officials in Texas have been as aggressive as those
anywhere else in seeking assistance in AIDS control. Our legislature took a long time to
recognize AIDS as a major state issue, but it then made a major appropriation of funds
for community-based organizations at a time when state revenue was shrinking.

A final point, then, would be the substitution of a single AIDS prevention and
services block grant to the each state’s health agency, instead of the inadequately
coordinated, relatively narrowly focused, grants from multiple federal agencies to
humerous state and local agencies and institutions. My state’s needs are as unique as

Rhode Island’s or California’s, and our approaches to meeting them just as diverse but
no less effective.

 

 
TESTIMONY OF ROBERT BERNSTEIN, M.O., F.A.C.P.
TEXAS COMMISSIONER OF HEALTH
BEFORE THE
PRESIDENTIAL COMMISSION ON AIDS

April 27, 1988
Washington, D.C.

I will discuss just three aspects of the AIDS problem: costs of
prevention and care, access to care, and quality of care. To keep
within my allotted time, | will focus on those issues as they impact
Texas outside its sprawling metroplexes. For a moment, let's
revive the mythical stereotype of the Texas cowboy and wide-open
spaces. Anyone who drives across Texas notices that the sparsely
settled counties greatly outnumber the densely populated ones.
(We have 254 counties, but only 26 metropolitan areas). Of
course, | am greatly concerned about HIV infections in our big

cities, but | also surmise that you have heard much on the subject

already.

AIDS has been reported from about 45 percent of Texas’
counties, and it seems quite safe to say that well over a majority of
the counties have been seeded with the human immunodeficiency
virus. We have looked at the annual incidence of AIDS per 100,000
men who are at least 25 years of age - and we chose that
denominator because the overwhelming majority of our state's

cases have come from that subpopulation). Despite all the
 

“caveats” of our epidemiologists and stacisticians, the trend from
1983 through 1986 shows a clear spillover from the major
metropolitan areas to rural counties; | have included the graphics

with my written testimony.

l am indebted to the Texas Legislative Task Force on AIDS and
to the Texas Tech University Health Science Center for many of
the data. The latter organization is the academic focus for
medicine in 108 counties of West Texas, which encompass 49
percent of the state's land but only 16 percent of the population.
Nine of the counties are distinctly urban, with an average size of
150,000 persons. The remaining 99 have an average population of
slightly under 10,000, and one fourth of that population lives in a
household that is at or below the federal level for poverty. At the
southern edge of the region are several hundred miles of border
with Mexico. There is a substantial flow - still - of persons who do
not bother with the formalities of international travel, obtain work
on ranches, farms, and elsewhere, and make use of the health-care
system. There is also a substantial flow of drugs across ‘he
border, and these surface not only in a city like El Paso, where

there are an estimated ten thousand intravenous drug users, but

also in the small communities in West Texas.

In the region, the ratio of physicians to population is one
physician per 900 persons, a third fewer physicians per population
unit than the state as a whole. In the 99 rural counties, that ratio

increases to 1 per 1580. Sixteen of the counties had no physician.
There is a similar disparity in the distribution of hospital care -
and this would hold true also for the other human services.
Tertiary care is available in the teaching centers - Amarillo, E!
Paso, Lubbock, and the Odessa-Midland area - hospital care is
provided by small hospitals - 99 of the 136 hospitals have few than
100 beds each, and average occupancy is less than 50 percent.

Twenty-eight of the 108 counties have no hospital.

Into that setting, introduce the problem of care of persons with
AIDS. The major hospital in Lubbock treated 14 such persons last
year, $242 thousand, to which must be added $120 thousand for
professional fees. Only 39 percent of the total costs of $363

thousand collected. (Those are costs, not charges.)

 

In 1991, it is estimated that 91 persons with AIDS will be
treated, at a cost of $2.55 million. If you project the Lubbock
experience - and it has been studied in considerable detail by the
Health Science Center faculty - to the full 108-county region, costs
in 1991 will be in the range of $15 to $20 million.

What do you suppose will happen to any of the small county
hospitals that care for one or more persons with AIDS and are
unable to pay for the care? | can predict three events at least:
first, the governments of small counties will not have sufficient
funds to defray the medical costs without diverting them from

essential county functions; second, some hospitals will close for
financial reasons; third, there will be a migration of persons with
ARC and AIDS to the region's teaching hospitals for care. Because
of the intensity of care required, personnel and resources will be
siphoned from elsewhere in the hospitals, which may lower the
quality of the teaching program. Not readily quantifiable, but
certainly a growing problem at teaching hospitals is the difficulty in
recruiting health professionals for full-time care of persons with
AIDS: the level of care demanded is intense, the stress high,
and the “burn-out,” without competent, frequent staff
counseling, inevitable; physicians and nurses prefer to care

patients who get well with their help.

There aren't many community resources for a person with
AIDS in a town of several hundred persons - many county seats
have a population of only two or three thousand. Buddies, social
workers, physical therapists, home health services, clinical
laboratories, and all the other support services that we are so
accustomed to in cities just aren't there. There isn't much privacy
in a small town, either: you can’t present a prescription for AZT at
the town’s only drug store and expect to be unrecognized, for
example. (Let me add,parenthetically, that we have enrolled
nearly 500 persons with ARC and AIDS in our AZT grant
Program and the SSI Vendor Drug Program, the AZT portion
of which we help administer for the Texas Department of Human
Resources; we believe that this is a much-needed and, literally,
vital program that needs continuation and amplification, with

the sole qualifications being the level of income of the person
 

 

and not which, if any, governmental benefit programs the person
may be enrolled in).

Another problem for residents of small rural communities is
the lack of public transportation system for the healthy, let

alone the sick, to carry a patient 25, 50, or 100 miles for routine

inpatient or outpatient care.

We, as the state health agency, have established a network of
clinics at about 400 sites statewide in rural areas, but those are
dedicated entirely to prevention services, not treatment. it would
be difficult and very expensive to add treatment services ona
walk-in basis. However, it might be practical to provide
scheduled consultations, to distribute prescribed medications like
AZT, and to obtain laboratory specimens for monitoring the
patient. We and other states need to begin exploring for

solutions; probably no single solution exists, but we should begin
exploring for

The structure is there to add education, counseling, antibody
testing, and partner notification services, but the money is not. We
have been denied the necessary federal support for these functions -
our needs for urban areas were similarly severely underfunded. But
| believe strongly that this approach - prevention, detection of early
infection, and, above all, extensive involvement of the local
community to provide as much out-of-hospital care as possible is
critical in averting the highly unfavorable impact on the health-care

system in rural Texas. Somewhat tangential to that, although

 

 
 

 

 

certainly near the heart of the AIDS contro! problem, is the need
for many more treatment "slots" for 1.V. drug abusers. That’s an
urban and suburban problem for the country as a whole, not just
a rural one. And while initial therapy for drug dependency is best
done in cities with adequate medical and ancillary services. some
serious consideration should be given to providing feilow-up
outpatient services in rural areas. This is a knotty problem, !
realize, but recidivism among persons who have been persuaded
to abandoned high-risk behavior is something that simpiy must
be prevented. One solution might be residential care for the first
four to six weeks of drug abstinence, with follow-up ambulatory
care in small satellite units of existing drug-dependency
treatment facilities; in some instances, rural public health clinics

might serve as the sites.

In the past year, we in Texas have been accused in the news
media and in some of the loftier offices in Washington of not trying
hard enough for a fair share of federal funding and of -not
contributing enough as a state government. We resent both
comments. Public health officials in Texas at all levels have been
as aggressive as those anywhere else in seeking assistance in AIDS
control. Our legislature took a long time to recognize AIDS as a
major state issue, but it then made a major appropriation of funds
for community-based organizations at a time when state revenue
was shrinking daily and severe cuts were made in almost every
other program. (Perversely, the country’s economic slump stayed

clear of Texas until it could coincide with emergence of the AIDS

 

 

 
epidemic.)

A final point, then, would be the substitution of a single AIDS
Prevention and Services block grant to the each state's health
agency, instead of the inadequately coordinated, relatively narrowly
focused, grants from multiple federal agencies to numerous state
and local agencies and institutions. My state’s needs are as unique
as Rhode Island's or California’s, and our approaches to meeting

them just as diverse but no less effective.

Thank you.
1983 AIDS CASES FER 100,900
MALES 25 YEARS CFAGE AND OLDER

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vazcuis] Less than 5 cases per 100,000

 

 

 

AM 5 or more cases per 100,000

 

 

 
1984 AIDS CASES PER 100,000
MALES 25 YEARS OF AGE AND OLDER

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etatera eo tetetere ee
eo ep a 6 8 6 ee

ee eee eee es

meas! Less than 5 cases per 100,000

 

 

 

HCI 5 or more cases per 100,000 se
 

1985 AIDS CASES PER 100,000
MALES 25 YEARS OF AGE AND OLDER

Co
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was} Less than 5 cases per 100,000

 

 

 

A 5 or more cases per 100,000 ek

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1985 AIDS CASES PER 100,000
MALES 25 YEARS OF AGE AND OLDER

     

 

ose te ee
ee ee ee ee
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A 5 or more cases per 100,000

ween
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eee
FINANCE HEARINGS
April 1988

RECOMMENDATIONS
Page 1 of 1

OBSTACLES TO PROGRESS

1.

Few or no appropriate community resources in rural areas for care of persons with
HIV infections outside hospitals.

Lack of transportation between rural communities and urban treatment/resource
centers for PWA/PWARC.

Insufficient revenue from PWA/PWARC patients to offset costs of hospital and
professional care, particularly at small rural hospitals.

Lack of treatment facilities and treatment slots for IV drug abusers in rural or
small communities.

 

5. Administrative overburden and lack of integration with a categorical grant system.

RECOMMENDATIONS

1. Demonstration project grants to develop small-community capabilities in supporting
PWA/PWARC.

2. Expansion of rural public health clinics to add treatment capabilities (scheduled
consultations, distribution of medications, etc.)

3. Partial federal underwriting of incurred costs for all low-income PWA/PWARC
requiring inpatient care, regardless of eligibility for other federal/state benefits,
including provision of AZT or similar maintenance drugs. Use cf well-defined
DRGs.

4. Expand number of treatment slots generally and establish satellite facilities (from
existing drug-dependency clinics) in rural communities. Consider transporting
individuals to residential treatment centers for 4-6 weeks of initial therapy.

5.

Establish formula for block grants to states, participating cities, to replace existing
categorical grants.

ESTIMATED COST & SOURCE

1.

2.

Robert Bernstein, M.D., F.A.C.P.
Commissioner of Health

Texas Department of Health
April 22, 1988

$15,000,000 ($500,000/state x 30 states) - staff estimate
$3,000,000 ($100,000/state x 30 states) - staff estimate

$30,000/indigent AIDS case/year; $7200/indigent AIDS case on AZT/year - staff
estimate based on published cost data; actual contract cost AZT

No estimate

No greater level than categorical costs; should be cost savings for administrative
personnel at federal, state, and local level.

 

 
Established by the Association of State and Territorial Health Officials

(PHF Public Health Foundation
—— = 1220 Lives WW,
Washington, 2 >

5
(20: Has-Lb05

 

 

 

STATE HEALTH AGENCIES’ HIV CONTROL EXPENDITURES

Testimony by
James T. Dimas

Executive Director

before the

Presidential Commission on the Human Immunodeficiency Virus Epidemis

April 27, 1988

 

Public Health Network Electronic Mail Address. PHF AC ‘To PHF
STATE HEALTH AGENCIES’ HIV CONTROL EXPENDITURES

Mr. Chairman, it is a pleasure to appear before the Presidential Commission
on the Human Immunodeficiency Virus Epidemic. I am especially honored to appear
before my good friend and esteemed colleague Kristine Gebbie, whose leadership on

the AIDS issue within the public health community is second to none.

Mr. Chairman, our future hopes for curtailing the spread of the AIDS
epidemic lie with science and medicine, and the search for an effective treatment
for AIDS, and, ultimately, an effective vaccine. Until then, the most effective

means of slowing the spread of the AIDS virus lies in prevention activities.

Today, I would like to discuss expenditures of state health agencies in their
HIV control programs. The majority of these expenditures were for prevention
activities, not for treatment. These expenditures do not include Medicaid, which

often come under the authority of a department other than the state health agency.

The Public Health Foundation is the research and data collection arm of the
Association of State and Territorial Health Officials. The Foundation collects
uniform service and expenditure information from state health agencies. In 1987
the Foundation began collecting information on state health agencies’ AIDS
expenditures. The data focused on fiscal year 1986 expenditures, the most current
data available at that time. Currently, the Foundation is in the process of
collecting fiscal year 1987 data. Fortunately, we are able to share some of those

data with you today.

The figures that I am about to report, Mr. Chairman, are in fact actual

expenditures; that is, they are what state health agencies actually spent, not what
was budgeted. Where states were able to identify them, the expenditures also
include funds that were not originally earmarked for HIV programs but have

subsequently been reallocated to those programs.

So, how much money have state health agencies spent on HIV? As you can
see, in 1984 state health agencies’ expenditures totaled slightly less than $10
million. By contrast, their 1987 expenditures totaled over $149 million, a fifteen-

fold increase since 1984.

Despite the geometric growth in HIV expenditures, they remain a small, but
growing portion of total state health agency expenditures. In fiscal year 1986,
AIDS spending made up less than | percent of total spending, In fiscal year 1987,
AIDS spending constituted nearly 2 percent of the $8.2 billion in state health
agency expenditures, By way of comparison, spending for all chronic disease
programs (including hypertension, cancer, heart disease, diabetes, and renal disease)
accounted for less than 3 percent of all state health agency expenditures in fiscal

year 1986.

As you can see from the next slide, state funds account for a larger portion
of state health agency AIDS expenditures than they do for state health agency
expenditures as a whole. More than two-thirds of state health agencies’ AIDS
expenditures in fiscal year 1987 came from state appropriations. In comparison,
state funds made up 55 percent of total state health agency expenditures. Federal
funds accounted for three of every ten AIDS dollars spent by state health agencies

and for 36 percent of total state health agency expenditures.

As you know, Mr. Chairman, certain areas of the country have been especially

hard hit by AIDS. Not surprisingly, in many of the hardest hit states, a large
portion of state health agency AIDS expenditures come from state treasurics.
Tables t and 2 display selected expenditure statistics for the 10 states with the
largest number of AIDS cases in 1987, arranged according to the number of AIDS
cases. These states collectively represented 78 percent of the nation’s AIDS cascs

in 1987, and accounted for 85 percent of the total funds spent for AIDS by state
health agencies in that year. In seven of the 10 states, state funds accounted for
more than 75 percent of total expenditures. There are some notable exceptions,
however. In Texas and Pennsylvania, for example, state funds represented 6 and 14
percent, respectively, of the health departments’ HIV expenditures, far less than the

national average of 68 percent.

However, members of the Commission should be aware that looking simply at
total expenditures can be misleading. State health departments have widely varying
organizational structures and responsibilities. Some have responsibility for alcohol
and drug abuse, mental health, or institutions: in other states, these responsibilities
are delegated to other departments. The populations served by health departments
also vary widely. Some of these differences cannot be controlled for in an analysis
such as presented here. However, population can be controlled for by examining
per capita expenditures. Table 2 displays state health agencies’ AIDS expenditures

per capita by source of funds.

Total AIDS expenditures per capita varied widely among the 10 states with
the highest number of AIDS cases, from $3.35 in the District of Columbia to $0.07
in Pennsylvania. The average total AIDS expenditure in the 10 states was $1.09
per state resident. Expenditures in the remaining 41 states averaged $0.19 per

resident.
State

 

California
New York
Texas
Florida
New Jersey

Pennsylvania
Mlinois
Georgia
Massachusetts
Dist. of Col,

Subtotal

All Others
{41 atates)

U.S. Total

Total
Expenditures

$61,632
35,549
1,285
9,237
6,458

798
2,355
2,469
4,316
2,100

$126,199

$22,948
$149,147

Table 1
State Health Agency AIDS Expenditures

FY 1987

(000 omitted)

State Funds
Amount _ Percent

Federal Funds
Amount___Percent

$51,588 83.7% $10,044 16.8%
16,960 47.7 18,000 50.6
78 58 1,210 942
7,487 81.1 1,749 18.9
4,998 17.4 736 11.4
117 14.7 681 85.3
2,126 90.2 230 9.8
1,916 717.6 554 22.4
4,073 04.4 243 6.8
1,800 85.7 300 143

$91,129 72.2% $33,747 26.7%

$8,319 36.3% $14,528 63 3%
399.448 66.7% $48,275 $2 4%

Other Funds
Amount Percent

$600

724

$1,824

$100
$1,424

1.7%

112

1.0%

BE
Table 2

State Health Agency AIDS Expenditures, Per Capita

FY 1987
Total State Federal

State Expenditures Funds Funds Other
California 2.34 1.96 0.38 -
New York 1.92 0.90 1.00 0.03
Texas 0.08 0.01 0.07 -
Florida 0.81 0.66 0.15 -
New Jerscy 0.85 0.66 0.10 0.10
Pennsylvania 0.07 0.01 0.06 -
Hlinois 0.20 0.18 0.02 -
Georgia 0.41 0.32 0.09 -
Massachusetts 0.74 0.70 0.04 -
Dist. of Columbia 3.35 2,88 0.48 -
Subtotal

(10 states) 1.08 0.78 0.29 0.01
All others

(41 states) 0.19 0.07 0.12 0,00
US. Total 0.62 0.41 0.20 0.01

 
 

Per capita expenditures of state funds varied widely. In general, AIDS per
capita expenditures differed according to variations in funding from state coffers.
In addition, state health agency expenditures of federal funds do not appear to be
related to either the number of AIDS cases or the size of the population. This may
Suggest the need to review the assumptions underlying the allocation of federal

AIDS monies.

Members of the Commission should interpret these figures with caution,
however, A variety of factors affect state health agency expenditures. In Texas,
for example, the state legislature meets biennially; thus, that state’s 1987
expenditures are based on appropriations voted in 1985, when the state had only 500
AIDS cases. The New York figures do not include spending by New York City.
Also worth noting is that AIDS appropriations for fiscal year 1988 increased
substantially im some states. For example, in New York and Pennsylvania, state
appropriations have doubled.

}

The next slide shows that most state health agency spending has gone for
prevention activities. We do not yet have a breakdown of states’ spending in
fiscal year 1987, but in fiscal year 1986, 27 percent was spent on-AIDS education;
23 percent on faboratory, surveillance, counseling, and testing: 8 percent on
research; and 27 percent on other activities, such as administration. Only 15

percent was spent medical treatment for AIDS patients.

One concern that I know members of the Commission share is that funds used
by state health agencies for their HIV control activities not be diverted from other
critical public health programs. Some health departments have, in an effort to keep
pace with the epidemic, been forced to shift funds from other public health

6
programs into AIDS activities. In fiscal year 1987, rebudgeted funds accounted for

about 5 percent of AIDS expenditures.

Given the precious few resources now available to health departments, the
diversion of funds from one program to another can seriously hamper states’ health
promotion and disease prevention efforts. Particularly hard hit by reallocations of
funds to HIV control programs have been state health agencies’ sexually transmitted

disease programs,

Sound public health practice dictates that we not rob Peter to pay Paul. The
money that some think we can save now by forcing reallocation of funds, as
opposed to appropriating additional AIDS monies, may in fact end up costing us

more in the long run.

In summary, Mr. Chairman, state health agencies are spending increasing
amounts on their AIDS activities. Still, tremendous variation exists in the amount
of federal and state funding for AIDS available to state health departments.
Because the AIDS virus does not recognize state boundaries, its control is a
national problem. Thus, there may be a need to reexamine the fundamental
assumptions underlying the allocations of federal support in order to bring about a

more rational distribution of resources.

I would be happy to answer any questions you or other members of the

Commission may have.
 

H IQ STATE OF FLORIDA
| DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES
April 22, 1988

Mr. Daniel Wartonick

Presidential Commission ‘
on the HIV Epidemic

655 15th Street, N.W.

Suite 901

Washington, D.C. 20005

Dear Dan:

I have not completed my remarks at this time, however, I am
including an outline that I am already working from. My remarks
will highlight the following pointa:

@ The cost of providing health care for indigent AIDS
patients only highlights the problems of providing health
care for all indigent persons in this country;

@ The burden of paying for this care falls heaviest on
states and localities where the cases are concentrated,
and on those hospitals that have traditionally shouldered
most of the burden for indigent care (i.e., teaching
hospitals) ;

@ The obligation of the private sector to pay for necessary
care through private health insurance cannot be shirked
through discriminatory practices, nevertheless;

@ Most of the cost of the care can be expected to be
assumed by government in the near future.

As a result, recommend the following.

1. That following the examples set by the Budget
Reconciliation Acts of 1986 and 1987, eligibility for
medical assistance be further unhooked from welfare
assistance by extending coverage to persons with AIDS
up to 100% of the poverty level, regardless of other
categorical and financial requirements.

2. That states be required to provide the only known
treatment, and any other treatment that becomes
available, that extends the life and productivity of
persons with AIDS (i.e., AZT).

3. That states be required to establish systems for
assisting AIDS patients in less costly, more
dignified home and community~based settings.

I3I7 WINEWOOD BLVL). © TALLAHASSER, FL 32399-0700
BOS MART'NEZ, GOVERNOR

 
Mr. Dan Wartonick
April 22, 1988

Page Two

4.

Pb Aye”
ps

GJC:kb
Attachments

That the federal government immediately convene a
panel of experts to determine a new criteria for
assessing whether or not persons with HIV infection
qualify for disability determination, and that all
Such determinations be expedited (i.e., the
definition of AIDS is for "surveillance" purposes,
and not sufficient for determining disability).

That the federal government immediately engage in the
provision of funding for, and provision of technical
assistance to, hospitals and communities in
establishing centers of medical and community
excellence in the care and treatment of persons with
AIDS.

That the Federal government, in concert with state
and local governments, and private foundations and
enterprise, establish programs to provide supportive
housing for persons with AIDS.

/ Re
iy e arke

Deputy Assistant Secretary
qx Medicaid

  
   
Testimony of
The National Coalition of Hispanic Health
and Human Services Organizations
(COSSMHO)

before

The Presidential Commission on the Human
Immunodeficiency Virus Epidemic

on the topic of

"Financing the State and County Prevention and
Education Effort"

April 27, 1988
Washington, D.C.
 

 

INTRODUCTION

The National Coalition of Hispanic Health and Human
Services Organizations has a l4-year track record of working
with all levels of government, community based organizations,
and academic interests to promote improved health and
psycho-social well being of the nation's Hispanic population.
Since 1984, we have included among our priorities the
development of programs addressing the prevention of AIDS in the
Hispanic community. In the next two to three years, we project
that AIDS will comprise almost one-third of our overall level of
activity.

Our experiences in the earlier days of the epidemic
illustrate to a limited degree the frustrations encountered by
some of us seeking direct funding for community-based Hispanic
and Black organizations.

° a federally-financed small grants program announced a
minority-emphasis RFP but had no minorities on the
review panel. Only Congressional intervention
resulted in minority participation in decision-making.

° a state department of health - in a state with one of
the largest Hispanic populations of any state - called
to ask COSSMHO's help. They said they didn't know any
Hispanic organizations in their state to notify about
the grant availability for minority programs.

° a major municipality, with over 25% Hispanic
population, could provide no Hispanic health educators
for a COSSMHO conference, could announce no Hispanic
initiatives, and could make no clear promises of what
the future would hold.

° a county health department, in a jurisdiction that is
ever 60% Hispanic, refused to add Hispanics to their
local AIDS advisory committee until COSSMHO conducted
a fact-finding visit and met with the advisory group.

These examples are tip-of-the-iceburg items which indicate
an endemic problem in the AIDS fight. Black and Hispanic
community-based interests literally have had to fight their way
into the AIDS battle and struggle to become partners in
prevention. Unfortunately, although much more attention is paid
to Hispanic community interests these days, there are broader,
everriding policy and program issues which - until they are
addressed - will continue to restrict community programs.

In part the problem derives from the failure of the
nation's public health agencies to address Hispanic health
concerns in general. Thus when the AIDS epidemic arrived, there
was little in the way of policy or program as a foundation for

=-l]=-

 

 
 

 

working with Hispanic communities. More importantly, the
response to AIDS has not been conceptualized around a community
focus. Rather, the federal government operated in a
business-as-usual mind set, at a time when innovation was
required. In our testimony, we would like to focus attention on
these larger agenda items. Clearly, though, we would caution
that solutions to these issues would have to be further tailored
to address problems of specific groups, including the Hispanic
community.

I. Defining the problem

To speak to the appropriateness of funding mechanisms for
AIDS education and prevention, one must first grapple with some
definition of the purpose of education and prevention and the
ways in which these tasks can most effectively be undertaken.
In the broadest terms, education means imparting knowledge
related to the nature of the disease; the means of transmission;
and disease progression and treatment. Prevention can be seen
as reducing or eliminating the behaviors or conditions resulting
in transmission.

For both missions - education and prevention, we can look
back to theory and experience in the field of health promotion
for guidance on the nature of the challenge. J. Michael
McGinnis, Deputy Assistant Secretary of the U.S. Department of
Health and Human Service for Disease Prevention and Health
Promotion (ODPHP) has observed that to be successful, programs
have to reach into the very fiber of communities, involving the
social networks, the trusted institutions, the respected
leaders, and the families and individuals themselves. His views
are not isolated from the mainstream of the prevention field.
Indeed, one can also cite the current program initiatives of the
Kaiser Family Foundation and major research and demonstration
programs financed by the National Cancer Institute and find at
the core an effort to mobilize and empower communities.

The word empowerment should not be dismissed as a borrowed
concept from the fringes of political ideology. In the disease
prevention field, it represents some of the most important
aspects of preventive strategies, namely:

© prevention must lead to community-wide changes and must be
on-going. To achieve the breadth and longevity of change, the
messages and behaviors must become rooted in and "owned" by
community institutions. Ownership cannot be imposed from
without but must be generated from within.

o prevention often touches on values and behaviors embedded in
the core of a community's culture. Outside experts are often
ignorant of or insensitive to these elements of prevention,
particularly in Black and Hispanic communities.

 

 
 

With a twin mission of education and prevention - which
entail distinct but complementary objectives, the balance
between the two and the weight of importance attached to each
must also be considered. Clearly, there will always be a need
to provide accurate information on AIDS to the population.
Myths are hard to kill and are resurrected by bad science or bad
journalism. Emerging scientific discoveries require
interpretation for the lay public. Young people need ongoing
exposure to messages as they mature intellectually and
sexually. More demanding, however, is the task of reducing or
eliminating risk-related behavior. One can assume that more
progress has been made to date in educating the public than in
eliminating risk behaviors, and that even among those still
engaging in risky activities, some basic knowledge of the
problem can be found.

Changing behavior - the prevention component - then becomes
the more urgent of the two tasks. Unfortunately, the state and
county public health agencies - along with much of the medical
sectors - come into the AIDS epidemic poorly equipped to accept
this challenge. While these agencies may be quite good at
devising mechanisms to communicate AIDS information and
administering funds for testing and counseling in a traditional
STD mode, behavioral change to the degree required by the AIDS
epidemic traditionally has not been their forte. Youth services
agencies have much more experience in dealing with risk-taking
behavior of young people. Community services programs have
developed expertise in counseling families and individuals on
sexuality and family matters. Churches and other institutions
have provided leadership on changing norms and values for
community survival. At least in the Hispanic community, it is
the community-based and approved institutions which are likely
to have the acceptance and credibility to promote behavioral
change. Government agencies in most jurisdictions do not have

this foundation. AIDS organizations lacking Hispanic or Black
erigins do not have this foundation.

In our discussion of AIDS education and prevention funding,
then, we are proceeding with the assumption that prevention,
which entails behavioral change, is of paramount concern; that
in Black and Hispanic communities, non-health institutions can
play very vital roles; and that the role of state and county
health departments, along with federal agencies, should be to
facilitate community empowerment and program development.
II. Assessment of efforts to date

 

Level of financing

In its 1986 study, the Institute of Medicine recommended a
spending level of $5 per person on AIDS education and prevention
at the national level. This goal was to be reached in the next
several years, with the federal government playing a major
role. Using this formula, national AIDS spending - federal and
state combined - would total in the neighborhood of $1.2
billion.

There is a dramatic difference between this projection and
the reality of federal and state funding. In FY 1988, the
Centers for Disease Control budgeted only $304 million for
activities related to education and prevention. On a per capita
basis, this amounts to CDC spending of $1.27 per person on a
national basis.

At the state level, spending for education and prevention
also remains low. According to published and unpublished data
collected by the State AIDS Policy Center of the
Intergovernmental Health Policy Project (HHPP), state
appropriations in FY 1988 were estimated to total approximately
$32 million for education and information and $18,500,000 for
testing and counselling. Among those states with signficant
Hispanic populations (a list which also represents states with
approximately 75% of diagnosed AIDS cases as of November, 1987)
there was considerable variation in the level of state funding.

Selected Categories of State AIDS Appropriations, FY 1988
Per Capita Basis

Jurisdiction Education/Information Testing/Counselling Total

All States $ .14 $ .08 $ .22
California 44 34 78
Texas -09*
New York 13 20 ~33
Florida ell ell
New Jersey -29 ~14 ~43
Illinois 13 -10 23
Arizona ~0O1 -Ol
New Mexico ~14 .03 17
Colorado -0-
Massachussetts 245 -09 54

These data confirm that the nation is still far from
reaching the goal set by the Institute of Medicine. Further,
the data indicate a wide variation in resources on a state basis
- a differential which should be seen as unacceptable given the
nature of the AIDS crisis.

-4=-
Priorities for Financing

Using the AIDS budget of the Centers for Disease Control as
an indicator of federal priorities over time, a clear and
disturbing pattern emerges. Between fiscal years 1987 and 1989
(requested) spending on public information, youth programs, and
other health education and risk reduction efforts decreased
proportionately from 57% to 39% of the total. However, spending
on surveillance, testing, and counselling between 1987 and 1989
(requested) rose from 43% to 61%.

Testing and counselling are not the most powerful
preventive interventions to stop high risk behavior. They are
only one component of an overall strategy, and they are not
among the best-suited measures for hard-to-reach populations.
Thus, there appears to be a fairly profound gap between what is
being funded and the understanding of preferred prevention
strategies.

Another indicator of priorities is the level of funding
specifically targeted for minority education projects. As
identified by CDC, these funds accounted for approximately 5% of
all agency AIDS expenditures in 1987, 7% in 1988, and only 6%
(projected) in 1989. In contrast, 40% of all reported AIDS
cases are Black or Hispanic. It appears that, at best, minority
spending has remained proportionately stable, while the overall
CDC AIDS spending increased almost three-fold over this
three-year period.

Although not obviously identified in CDC budget figures,
the agency is beginning to reach out to institutions outside of
the traditional public health networks. This is evidenced in
their school-age projects, which fund school systems and
organizations skilled at reaching out-of-school youth programs.

In the minority-specific money directed to states, but with
strong CDC controls to ensure funding for community-based
organizations, it appears that non-health organizations are now
being funded. Whether or not these efforts constitute a larger
strategy to utilize community infrastructures remains to be
seen. At the same time, the proportion of CDC AIDS funds
directed to state and local agencies increased from 19% to 26% .
Fragmentation of funding efforts

From a community perspective, the problem is not just one
of disagreement over prevention priorities, it is also one of a
lack of coordination of federal funding. Although CDC remains
the primary source of federal prevention dollars, other
initiatives have begun under the auspices of the National
Institute of Drug Abuse and the Health Resources and Services
Administration. The National Institute of Health, as well, has
sponsored information dissemination activities.

It seems that presently these various initiatives are
poorly coordinated. Several examples illustrate this problem.
In one locality, the local public health office and the AIDS
coordinator were unaware of a major local project which was part
of a national contract awarded by a non-CDC procurement
process. In another case, the local AIDS office was not aware
until two weeks prior to the event that CDC would be sponsoring
well-attended workshops on new priorities and models of
educational programs.

As a matter of policy, it appears that local AIDS offices
are not asked to comment on awards proposed for their
jurisdictions; nor are they routinely informed when such awards
are made. Thus for local jurisdictions, it is virtually
impossible to develop, let alone manage, AIDS education and
prevention on a comprehensive program basis.

Lack of leadership aimed at the private sector.

Studies available through the Foundation Center have
already documented the failure of foundations to recognize their
responsibility in the AIDS field. As of mid-1987, foundation
giving for AIDS totalled approximately $18.6 million. However,
very little of this was targeted to education or prevention.

The field of giving was dominated by the Robert Wood Johnson
Foundation grants for services and several large donations for
research purposes. By late 1987, it was clear that two large
foundations - Ford and Robert Wood Johnson would announce
education initiatives. The American Foundation for AIDS
Research (AmFAR) became more visible in the education field, and
singer/philanthropist Dionne Warwick announced her intentions of
establishing a new foundation to increase resources targeting
Black and Hispanic communities.

It is likely that other foundations will follow in these
steps, and that additional resources will reach communities in
the upcoming years. To a large degree this expansion of giving
will take place with minimal federal leadership. The
opportunity for breakthrough efforts on this front was lost
several years back. However, a leadership role for the federal
government remains.
It becomes even more important, as foundation and corporate
giving increases, that coordination of private and public sector
education and prevention programs is initiated. Just as local
AIDS officials are frustrated by uncoordinated federal efforts,
they also face problems in anticipating initiatives that spring
from private sector resources. This type of role for the
federal government is not without precedent. The Office of
Human Development Services, in the mid 1980's, introduced a
number of grant programs that encouraged foundation partnerships
on federal priorities and that built upon a variety of
coordination strategies.

A similar federal role in AIDS would be especially
important in localities, states, and regions where attention to
Blacks and Hispanics traditionally has been inadequate.
Foundations, even more so than the federal government, have a
less than adequate record on giving to these two populations -
perhaps a reflection of the lack of Black and Hispanic trustees
and staff guiding these institutions.

III. Cooperative Arrangements

The preceeding section identified problems in the areas of
level of financing; funding priorities; fragmentation of effort;
and leadership. This section offers recommendations which
address these issues, for the most part looking to ways in which
coordination instigated at the federal level can contribute to
improved education and prevention programming.

Levels of financing

It is likely that federal spending on education and
prevention will continue to grow, but the rate of growth appears
to fall short of that envisioned by the Institute of Medicine.
While nothing should be done to lessen the burden of
responsibility at the federal level, it will also be important
to stimulate a higher level of commitment at the state level.
One strategy to trigger more state spending is to link the
federal grants to minimum state appropriations reflecting
population and need.

Priorities for funding

Local AIDS officials have concerns about the spending
priorities reflected in the CDC budget, particularly the
emphasis on testing and counseling rather than primary
prevention achieved through reduction or elimination of
high-risk behavior. Clearly, there needs to be additional
informed debate and policy review on the nature and direction of
the federal education and prevention effort. If the federal
government is not prepared to be more aggressive in its
prevention efforts, then consideration should be given to
increasing the flexibility at the local level in directing
federal funds to local prevention priorities.

-7-
However, nothing should be done to diminish the recent
commitment of CDC to mandate state grants to community-based
organizations, as has happened with minority emphasis funding.
It should be possible to simultaneously promote both concepts:
more effective involvement of communities and more discretion on
the nature of prevention activities undertaken by local and
state public health agencies.

A problem underlying the establishment of funding
priorities is the isolation of decision-makers from non-public
health prevention experts. Education and prevention policy at
the federal level needs to draw upon the knowledge of those in
youth services, juvenile and criminal justice, family
strengthening and counseling, community organizing, and other
fields. If there is to be a commitment to prevention, then
these disciplines - familiar with the concepts of individual and
community empowerment and capable of achieving change in
community norms and individual behavior - must be brought to the
center of decision-making. Likewise, at the state and local
level, AIDS advisory committees should draw upon these
resources. In many cases, the advisory groups early on drew
their membership from the gay community and the medical
profession. This configuration served a purpose for a time, but
now that attention is focused on other populations and
non-medical aspects of the AIDS epidemic, the advisory committee
perspectives should be broadened. One way to hasten this
diversification would be through minimum standards for advisory
committees to be included as part of federal AIDS grants.

Improving coordination

One of the most urgent tasks is the reorganization of the
federal AIDS bureaucratic structure to achieve an integration
and coordination of education and prevention efforts. At the
highest level, this reorganization will have cut across federal
agencies, including the Department of Defense. More immediate,
though, is the appalling lack of coordination of the primary
grant-making agencies within the U.S. Department of Health and
Human Services. Within the DHHS structure, two levels of
coordination are necessary.

At the administrative and policy-making level, the key
agencies need to have a permanent structure to coordinate
funding for education and prevention. This will provide some
assurance that grant programs are not working at cross-purposes;
that distribution of funds reflects regional and local needs;
and that gaps can be more readily identified. At the same time,
the implementation of federal grants from these various sources
needs coordination at the regional or sub-regional level. Local
AIDS officials need to be assured that the proliferation of
federally-sponsored meetings, the unexpected announcements of
grant awards, and the increasing burden of responding to RFP's
will be addressed in some reasonable fashion so that they can
fulfill their prevention missions and not be swamped by an
out-of-control federal bureaucracy.

-38-
Leadership for the private sector

Calls from Washington for more private sector giving for
AIDS have been overdue, intermittent, and half-hearted. In the
absence of such moral leadership, the response of the nation's
philanthropic community is not unexpected. However, as more
foundations are implementing a response, the issue of
coordination among the private and public sectors becomes more
important. This can best be achieved at the regional or
sub-regional level. Several mechanisms could be used. Federal
agencies could sponsor planning meetings hand-in-hand with
foundation leadership. Ongoing communications and planning
systems could be devised. State and local governments applying
for federal funds could be required to demonstrate their
linkages with foundation efforts. These and other mechanisms
should be given immediate consideration.

V._ Concluding Remarks

As these and other suggestions for expanding and improving
funding mechanisms are considered, the primary goal of
prevention should not be lost in attention to bureaucratic
structure and operations. Every player in the AIDS scenario
needs to be infused with the notion that individual and
community empowerment - not just testing and counselling, not
just public service announcements, and not health education
lectures - are the keys to reducing the transmission of AIDS.
This philosophy needs to be voiced by leaders, backed with
resources, and implemented thoughtfully.

Our testimony has dealt exclusively with primary prevention
- preventing new HIV infections. Despite the urgency of this
mission, we must not loose site of the importance of secondary
and tertiary prevention. The thrust of secondary prevention is
to reduce the likelihood of the onset of disease, once infection
is present. Given the expanding scientific knowledge base and
the increasing availability of therapeutic agents, there is
growing hope that progression to ARC and/or AIDS to some degree
can be controlled. Likewise with tertiary prevention, which has
as its goal the control of disease once symptoms are present.
The experience of AZT and the many clinical trials underway also
show promise that AIDS can be therapeutically managed.

Given the large number of Americans estimated already to be
be infected, we simply must pay more attention - and devote more
resources - to education that will promote higher levels of
involvement in secondary and tertiary prevention regimens. The
lives of those infected are just as precious as those who have
escaped the virus.
PRESIDENTIAL COMMISSION ON THE
HUMAN IMMUNODEFICIENCY VIRUS EPIDEMIC

PUBLIC HEARING ON FINANCING

Testimony of Joel L. Nitzkin, M.D., M.P.H., D.P.A.
President - National Association of County Health Officials

Contents: Page
Statement of Testimony 1-5
Preliminary Draft AIDS ''Model Standard"

for Local Health Department in New York

State - by New York State Association
of County Health Officials 6-10

Summary 11
NATIONAL ASSOCIATION OF COUNTY HEALTH OFFICIALS
MEMORANDUM
April 26, 1988
To: Presidential Commission on the HIV Epidemic
From: Dr. Natzki ng
Subject: Testimony on Panel on Financing, April 27, 4:GOPM

Good afternoon.

Iam Dr. Joel L. Nitzkin, Director of the Monroe County
Health Department in Rochester, New York, and current President
of the National Association of County Health Officials. based
right here in Washington. I appreciate the opportunity to
present these views to you today, but wish I would have had more
than just a few days to accommodate this trip to Washington, and

to prepare these remarks.

My personal experience on Public Health, now spanning twenty
years of work at state and local levels, including six years as
President of the New York Association of County Health Officials.
and the last three years as President of the national association
has convinced me that a local health department is fundamentaliy
different from a state health department in several critical
respects. First, a local health department is the only direct
service agency in the community in a position to consider the
fill range of preventive and therapeutic services that the

community might need, and take direct action to meet whatever

 
 

April 26, 1988

needs may be unmet, either by advocacy, or by expansion of its
own direct service capacity. The other difference is the role of
the local health officer as part of the lecal community power
structure, with direct ties to major providers of other health
and health related services and, not infrequently, close
continuing contact with local news media. This is quite different
from the usual role of a state health agency, seen as part of the
governor's office or a health and social services umbrella
agency, and with a clearly circumscribed role to play within the

state administration.

I readily admit that many local health departments are
simply not interested in or capable of fulfilling the role
specified above. Where it is not, for historical reasons. or
because the population base is simply too small to support that
kind of leadership capacity, it 1s hard to avoid the impression
that the community, even if partially served by a branch office
of the state health agency. simply does without some of the
benefits a full service local health department can provide, and

suffers the consequences of the missing local leadership.

It is from this perspective that I would like to offer the
following remarks relative to the need for AIDS -related funding

from the federal government:

The major roles of the local health department relate 92
April 26, 1988

general community leadership, education and delivery of
preventive services, especially those related to screening,
counselling of screenees, and case-contact notification. In some
communities, there may be no other institution to provide some or
all of the diagnostic, therapeutic and support services. The
need for general community leadership, education and screening
related activities are pretty much universal, and perhaps csoste3
out on a per capita basis, without regard to local levels of AIDS
related morbidity and mortality. The case-related contact
notification, support and therapeutic service costs can be
roughly estimated on the basis of anticipated new incident cases

per year.

The community leadership role, articulated in the Model
Standards as the "AGPALL" concept, costs money. In the Monroe
County Health Department, in Rochester, New York, this AIDS
related leadership role consumes about 80% of the time of one
physician deputy health director, and significant time of other
top level staff. I roughly estimate the cost of this function to
be in the range of about fifteen cents per capita, or about

$10C,000 per year in this community of 710,000 persons.

The need for education and policy guidance is conditioned on
the extreme emotionalism related to AIDS, its consequences and
major risk factors. The education must be direct, intense, up to

date and frequently repeated, especially when erroneous messages
April 26, 1938

are transmitted through the mass media, such as police officers
"needing" yellow rubber gloves to handle demonstrators or
Masters and Johnson type reports on transmissibility of the HIV
Virus. These activities include but are not limited ts
education of local physicians, non-physician staff and providers

of health and social support services, education of public and

mu

private sector policy makers, training of local educators and
jJeneral community education. Yet other channels are used to

educate and re-educate high risk groups.

These educational responsibilities require staff, funding
and facile means of staying up to date on current developments in
the field. Not counting costs imposed on school districts for
comprehensive AIDS educational programming, with elements K
through 12 and emphasis in grades four through nine; and needed
enhancements to programming related to substance abuse, STD's,
HIV screening and pregnancy prevention, I would estimate the

total need as about $1.00 per capita.

Not to be forgotten are non-medical support services for
AIDS and ARC patients, HIV positives, and their respective family
and non-family support systems. These are the services that keep
family and friends reasonably intact and makes what remains of
life reasonably livable for the unfortunate victims of this
dread disease. Our local experience in the Rochester area leaves

ne with the impression that optimal meeting of these needs can
April 26, 1988
srobably be estimated in the range of $5,000 to $10,000 per

incident case per year.

I leave it to others to estimate the therapeutic costs, and
other zosts related to AIDS and HIV. Before concluding, howéver.
I think 1t important to develop sone concept of the respective
roles of federal, state and local governments in picking up the
“osts of those elements I have presented. While the services
T've described are apt to be largely provided by voluntary and
private agencies within many communities, it is unlikely that
much af the cost will be picked up by non-governmental payers,
especially for the community leadership and educational
components described above, and totalling about $1.15 per capita.
Given the respective abilities to raise and distribute funds and
provide skilled staff support, it seems to me that at least half
of these costs need to be picked up by the Federal government.
with the rest to be covered at state and local levels. I think
the sare 1s probably true of the $5,000 to $10,000 per incident

case for the support services noted above.

I'd be happy to answer any questions.
NEW YORK STATE ASSOCIATION OF COUNTY HEALTH OFFICIALS
MEMORANDUM
February 16, 1988

To: Bill Grattan

From: Joel Nitzkin

Subject: Prelimin raft AIDS “Model Standard" for Local Health
Departments in New York State

As follow-up to last week's meeting with Dr. Rango of the
NYSHD AIDS institute, I've drafted the following in the format of
the second editions of the Model Standards to help guide our
further dialogue in defining community needs for AIDS related
services, and the role of the local health department in
providing those services. In structuring this communication I
have borrowed heavily from a variety of documents and reports.

After designation of the Area and Goal, a two column format
will be used, with the objectives listed in the left hand column,
and the Indicators listed in the right hand column. The
CAPITALIZED HEADINGS on the teft hand side show the "Focus"
1.e., the area of concern.

AREA:

AIDS

GOAL:

The community will experience the minimum possible levels of HIV
transmission, AIDS and AIDS related death, illness and attendant
medical costs and the minimum possible AIDS related economic and
social disruption, compatible with optimal delivery of health
and social services to AIDS and ARC patients and their families.

 
NYSACHO Preliminary Draft AIDS "Model Standard"

OUTCOME OBJECTIVES

O-1 By 19_. deaths due to
AIDS will be reduced to ___
among . (specify rate or
number, plus name of group

O-2 By 19__ new cases of
AIDS will be reduced to
among

 

0-3 BY 19. HIV
seroprevalence rates will
stabilize at among

 

O-4 By 19... Health care
costs per AIDS case per year
shall stabilize at

0-5 By 19__ complaints of
AIDS related discrimination
and/or denial of civil rights
shall cease to occur

O-6 By 19. complaints of
breach of AIDS related
anonymity and/or
confidentiality shall cease
to occur

group specific death rates

group specific case rates

group specific
seroprevalence rates

a. hospital bed days used
b. health insurance
expenditures

incident reports

incident reports
NYSACHO Preliminary Draft AIDS "Model Standard"

PROCESS OBJECTIVES

COMMUNITY OVERSIGHT:

P-1 By 19. sone = oor.” somore
community oversight boards,
task forces or committees
shall be in place and
functioning to oversee AIDS
related polices and programs

SURVEILLANCE AND
EPIDEMIOLOGY:
P-2 By 19__ surveillance

systems shall be in place and
tracking each of the outcome
parameters.

-8-

a.

Presence of board(s),
task force(s) and/or
committee (s)

Minutes and/or other
reports of committee
activity showing

consideration of policies
and programs

Documented evidence of
advocacy for needed
programs and services.

Presence of each of the
gix outcome objective
surveillance systems
Biennial checks of the
accuracy and completeness
of each of the
surveillance systems
NYSACHO Preliminary Draft AIDS “Model Standard”

P-3 By 19__ the community
shall have established the
following services to prevent
HIV transmission:

P3a. High risk group
education
P3b. general community
education
P3c. School based
education
grades k-3
grades 4-6
grades 7-9

grades 10-12
P3d. Workplace education
and model policies

P3e. Retail outlet
condoms)

P3f. effective STD
programming

P3g. effective substance
abuse and control
programming

P3h. effective health
provider education

P3i. effective and
appropriate health
facility and dental
facility infection

control policies,
procedures and
practices

SCREENING:

P-4 By 19__ the community
shall have capacity for
confidential screening
adequate to meet community
needs

a.

presence of program,

policy or activity

b.

measures of quality of
program, policy or
activity

Availability of screening
at a suitable variety of
public and private sites
Adequacy publicity
relative to the
availability of screening
adequacy of pretest and
posttest counselling at
each site

adequacy of protection of
confidentiality at each
site.

availability of
counselling and testing
within one week of
request
NYSACHO Preliminary Draft AIDS "Model Standard"

P~5 By 19. the community (a. through e., as above)
shall have capacity for

anonymous screening adequate

to meet community needs

EARLY DIAGNOSTIC SERVICES:

P-6 By 19__ the community a. Presence of recognizable
shall be served by clinics and designated health
and/or other health providers services (in addition to,
seen as friendly to high risk not instead of
groups who have the "mainstream" health
capability of expeditiously services.

performing AIDS related b. evidence of acceptability
diagnostic workups and of these services by
follow-up as appropriate representatives of high

risk groups

c. Measures of quality of
service provided

d. Absence of waiting lists

THERAPEUTIC SERVICES:

P-8 By 19. #£4x®+¢the community a. presence of each service
shall be served by a health b. measures of adequacy of
care delivery system which availability of each
assures ready access to all service

services need to treat AIDS c. measures of quality of
and AIDS related illnesses in each service

a sensitive and high quality
manner regardless of ability
or inability to pay.
P8a. Case management
P8b. Primary care
P8c. laboratory services
P8d. Hospital Services
P8e. Home care services
P8f. Inpatient long term
care services
P8g. Hospice services

P8h. related social
services

P8i. related advocacy,
omsbudsman and
community support
services

cc: Dr. Merkens
Dr. Bell
Helen Meisner (APHA Model Standards Project
Nancy Rawding (NACHO)

-10Q-
PREVENTION AND EDUCATION: COST AND FINANCING

STATEMENT OF

GARY R. NOBLE, M.D.

CENTERS FOR DISEASE CONTROL
PUBLIC HEALTH SERVICE

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

BEFORE THE

PRESIDENTIAL COMMISSION ON THE HUMAN IMMUNODEFICIENCY VIRUS EPIDEMIC

APRIL 27, 1988
I am Dr. Gary Noble, Deputy Director (AIDS) for the Centers for Disease
Control, and I am pleased to meet with the Commission to discuss the funding
of CDC's AIDS prevention programs. With me I have Dr. Stephen Bowen, Deputy
Director for AIDS, Center for Prevention Services, CDC. Dr. Bowen will be
available to answer questions that relate specifically to the awarding of

monies by CDC to State and local health departments.

In fiscal year 1988, CDC has a budget of $304,942,000, and in fiscal year
1989, $400,017,000 has been requested by the President to carry out CDC
programs to prevent and control the spread of human immunodeficiency virus
(HIV) infection in the United States. These funds support HIV and AIDS case
surveillance; epidemiologic and laboratory studies; and prevention/information
and education activities directed toward the public, school and college age
youth, persons at increased risk, and health workers. With the addition of
new programs and the expansion of others, our budget has grown significantly
since 1981 when we spent about $200,000 on AIDS-related activities. During

this fiscal year, AIDS will account for 40% of the CDC budget.

In previous testimony before the Commission, Dr. James 0. Mason, Director of
CDC, described our AIDS program activities in considerable detail. Today, I
will discuss the kinds of funding mechanisms we use, some administrative
issues related to distribution of resources, and the adequacy of our AIDS

resources,
FUNDING MECHANISMS AVAILABLE TO CDC

There are many ways that we spend money in carrying out our programs, but for
discussion purposes I would like to categorize these into three groups:

cooperative agreements, contracts, and in-house operations.

We use cooperative agreements to finance joint programs of assistance with a
variety of recipients, These can be used for single, one-time projects, or to

assist in the conduct of ongoing nationwide programs.

o Examples of one-time efforts are the cooperative agreement with the
U.S. Conference of Mayors to provide seed money to minority community
organizations to begin AIDS prevention programs, and the cooperative
agreement with the National Science Foundation to identify behavioral

research needs related to AIDS prevention.

o Examples of ongoing nationwide programs are the AIDS surveillance and
prevention cooperative agreements that we have with all State and
selected local health departments. These cooperative agreements
support AIDS case surveillance; HIV seroprevalence studies; health
education/risk reduction activities; counseling, testing, and partner
notification services; State and local public information campaigns;
and activities directed toward preventing the spread of HIV among

minorities at risk.

 
o Another example of our ongoing programs is our school health education
program in which cooperative agreements were awarded in fiscal year
1987 to 15 State and 12 local education agencies to support AIDS

education in schools. Monies for these school health education

programs will be extended to all States this year.

With our nationwide programs, we have adopted a two-tiered funding strategy.
For example, we are supporting programs to prevent AIDS among minorities by
awarding funds to State and selected local health departments, and these
agencies in turn subcontract with local minority organizations. This year, we
will award grants directly to national minority organizations to complement
this State and local effort. We are employing a similar strategy in our
school health education program in which we have awarded funds to 15 national
organizations who serve youth in addition to the funds awarded to the 15 State

and 12 local education agencies that I mentioned earlier.

We use contracts to purchase services or products that we at CDC need to carry

out our responsibilities.

o We have contracted with the advertising agency Ogilvy and Mather to

assist us in conducting our national AIDS public information campaign.

o We have a contract with Aspen, Inc., to develop and operate a national

AIDS clearinghouse system.

o In 1986, we contracted with the*-American Social Health Association to

operate the Public Health Service national AIDS ‘hotline.
o And we have a contract with a publishing company to print 109 million

copies of the brochure, “Understanding AIDS," which will be mailed to

all households in America in late May and early June.

With our in-house operations, we are supporting the scientists, physicians,
other public health professional staff and support personnel that enable us to
provide leadership for the nation's efforts to prevent the spread of HIV
infection. CDC's epidemiologists, laboratory scientists, and information and
technical specialists assist the States and local areas in conducting the
cooperative agreements and in maintaining our responsibilities for these
agreements. In addition, our epidemiologists and laboratory scientists
provide CDC with much of the technical expertise research need to develop
recommendations, guidelines, and standards that can be used by the health
community and others across the country in the fight against AIDS and HIV
infection. Our staff also is available as a national resource for scientific

and technical information and assistance.

ADMINISTRATIVE ISSUES

As was mentioned earlier, AIDS programs and budgets have been increasing
dramatically each fiscal year. This means that each year we have been faced
with instituting new programs which require considerably more work than
continuing ongoing programs or even expanding established programs. When the
lead time for establishing new programs is combined with the late

appropriation of funds, the result is that new programs usually are

 
implemented in the fourth quarter of the fiscal year. Implementing new
programs often involves developing new concepts or strategies and working with
different organizations or recently hired personnel unfamiliar with the
specific program needs or the government's methods of operation. All of this
takes time. Another consequence of the late funding cycle is that in ensuing

years, these programs come up for renewal late in the fiscal year.

The rapid growth of AIDS prevention activities also has placed considerable
burden on our partners, the State and local health departments, who are the
primary recipients of our prevention awards. Programs have been planned and
applications developed under severe time constraints, sometimes with deadlines
at different times of the year for different programs. To ease this burden,
during fiscal years 1987 and 1988, CDC has consolidated 7 different programs
being conducted by State and local health departments through cooperative
agreement monies into a single award for each recipient, and has established a
common award date for all of the programs. This year we will be streamlining
and simplifying the process by which the States apply for continuation funding

for these programs in fiscal year 1989.

We have been well served by the competitive procurement process. All of the
contractors for our major projects have been selected competitively. However,
competitive procurement is a time-consuming process when we are operating in

an emergency mode as we are in our fight against AIDS. It would be helpful if
we had the authority to award sole source contracts for AIDS-related work up
to a limit of $1 million. In this manner, we could gain flexibility of
response for important projects that cost less than $1 million while we retain

the benefits of competition for larger contracts.

ADEQUACY OF RESOURCES

I would like to discuss two questions about the adequacy of our AIDS
prevention funding. Do we have enough money to do what needs to be done? Can
the health departments and other recipients effectively implement all these

expanded programs?

I do not believe we have reached the saturation point. In our latest funding
cycle, the States have requested more than $80 million more than the monies we
have available to award for the AIDS prevention and surveillance cooperative
agreements. Clearly, the States do not believe they have reached their limit
of effective use of federal funds. We can expect inefficiencies in the
initial gearing up to implement the newer and recently expanded programs.
However, as the dollars are translated into human resources, I am confident
that in the future we will see the States and local areas effectively use the

resources provided for prevention and education programs.

An area of critical need both today and for the near future is adequate
numbers of trained personnel to implement the programs that are needed and

that are being funded. In 1987 we had a meeting of ad hoc consultants to

 
advise us on areas in which the States might particularly need assistance in
implementing their AIDS prevention programs. Each of the consultants placed
highest priority on the need for experienced disease prevention specialists to
assist in managing the prevention programs. FTE limitations have hampered
CDCs ability to meet that need as rapidly and completely as we would have
liked, although progress is being made. By the end of this fiscal year, we
will have 25 public health advisors from CDC assigned to work full time on
AIDS in areas with the highest need. We would like to make more such
assignments; however, the pool of experienced public health advisors is low
because past FTE restrictions had forced CDC to limit recruiting for the past
3 or 4 years. Our long-term goal is to increase the capacity of State and

local health departments.

The question of whether or not CDC has enough financial resources to give to
the State and local areas is related to the issue of what the federal share of
the perceived need should be. For example, we are requesting funds for fiscal
year 1989 that are equivalent to approximately one half of the estimated State
needs (which total more than $200 million) to fully implement the counseling,
testing, and partner notification recommendations. It is unclear whether or
not States and communities have the ability to meet the balance of the
estimated need since they are also faced with escalating costs related to the

care and treatment of AIDS patients.

Historically, the FTE ceiling has been a major constraint to our ability to

implement effective AIDS prevention programs. In fiscal year 1988, we had an
increase to 416 FTEs for AIDS-related work from a ceiling of 278 in 1987. The
ceiling in the 1989 budget request provides an increase of 16 additional

FTEs. Out of the 432 FTEs anticipated in fiscal year 1989, only 165 represent
additions to CDC's overall ceiling. The remainder have been diverted from
non-AIDS areas; even these are far short of what will be needed to annualize

the positions filled this fiscal year.

The addition of these new responsibilities, including AIDS prevention, has
resulted in space shortages in Atlanta. Our headquarter's staff is currently
housed in 8 separate locations. We are in the process of moving more than 150
AIDS staff into leased office space located about 3 miles from the major CDC
facility in Atlanta in order to accommodate the expansion. When this move is
completed by the end of this fiscal year, approximately 35% of all CDC's

Atlanta-based personnel will be housed in leased facilities.

The question of adequate resources for AIDS prevention programs also relates
to the issue of emerging demands for resources at the federal, State, and
local level. Following are some factors that may increase the need for

resources to prevent the spread of HIV infections:

o Continuing surveillance programs for AIDS and surveillance of HIV
infection need to be expanded in some areas. For example,
seroprevalence surveys of HIV infection may need to be expanded beyond

the 30 metropolitan areas in our sentinel surveillance program.
o Counseling, testing, and partner notification services need to be
expanded to more fully implement the Public Health Service
recommendations. For example, these programs should be expanded to
include all clinics for patients with sexually transmitted diseases or
with intravenous drug abuse problems, and clinics providing prenatal

care or family planning services.

o Resources need to be provided to assist local minority organizations to

expand their capacity to effectively plan, organize, evaluate, and fund

prevention efforts.

o Education about the interaction between HIV and other sexually
transmitted diseases, especially those causing genital ulcers, needs to
be greatly expanded as part of a broad-based prevention effort.

Persons at risk of STDs should understand that these infections
increase the risk for acquisition and transmission of HIV infection.
Failure to convey that message effectively will only increase the need

in the future for STD control efforts.

o Behavioral research, surveillance, and evaluation are needed to improve
the effectiveness of our prevention activities and to better evaluate

these efforts.
Our experience with the AIDS problem has been that the epidemic of HIV
infection has stretched the limits of our planning and budgeting system.
However, we have put in place the basic elements of a comprehensive program to
prevent and control the spread of HIV infection. With this program in place,

we are better able to cope with the changing demands of the HIV epidemic.

Mr. Chairman, Dr. Bowen and I will be pleased to answer questions you and

other members of the Commission may have.

Attachments
(1) CDC "History Tables" FTEs and dollars

(2) FTE and space tables

 
I.

II.

xT

A.

D.

A.

DEPARTMENT OF HEALTH AND HUMAN SERVICES
CENTERS FOR DISEASE CONTROL
ACQUIRED IMMUNODEFICIENCY SYNDROME
FISCAL YEARS 1987, 1988 AND 1989 FUNDING

(IN THOUSANDS )

Information/Education

THE PUBLIC

National Public Information

State and Local Public Information
American Red Cross

SCHOOL AND COLLEGE AGED YOUTH

National Efforts

Material Development and
Training

State and Local Projects

PERSONS AT INCREASED RISK

State and Local HE/RR
Activities

State and Local Counseling &
Testing Activities

State and Local Minority
Activities

National Minority Emphasis

Demonstration Projects

Innovative Risk Reduction Prjs

Conference of Mayors

Hemophilia Projects

Prevention of Perinatal AIDS

TB/AIDS Prjs

HEALTH WORKERS

Surveillance & Epi/Lab Studies
SURVEILLANCE

AIDS Cases

HIV Infection

Laboratory Performance

EPIDEMIOLOGY/LABORATORY STUDIES

TOTAL

void supplemental request, State and local cooperative agreements will

1987
APPROPRIATION
$103,083
$26,885
$26,885
$0
$0
$11,076
$2,706
$1,268
$7,102
$64,974
$21,254
$25,802
$7,445
$0
$3,662
$960
$799
$3,500
$1,552
$0
$148
32,923
$11,913
$7,821
$2,800
$1,292
$21,010
$136,006

1988
APPROPRIATION

$209,717

$55,515
$41,615
$6, 900%
$7,000

$29,916
$6,427

$1,421
$22,068

$122,571
$19 ,097*
$66 ,565*

$11,500*
$8,000
$4,425
0

384
$6,300
$6, 300
0

$1,715
$95,225
$58,957
$11,964*
$44,151*
$2,842
$36,268

$304,942

fuuded for only 8 months to permit expansion of HIV suryeillance.

1989
REQUEST

$261,369

$41,040
$19,040
$15,000
$7,000

$36,450
$6,703

$3,574
$26,173

$179,800
$28,492
$102,376

$17,106
$8,050
$4,625
$0

$417
$6,300
$6,434
$6,000

$4,079
$139,350
$94,760
$19,287
$70,163
$5,310
$44,590

$400,719

be
DEPARTMENT OF HEALTH AND HUMAN SERVICES

CENTERS FOR DISEASE CONTROL
ACQUIRED IMMUNODEFICIENCY SYNDROME

FISCAL YEAR 1989 FTEs

I. Information/Education

A.

Dd.

THE PUBLIC
National Public Information

State and Local Public Information

American Red Cross

SCHOOL AND COLLEGE AGED YOUTH

National Efforts

Material Development and
Training

State and Local Projects

PERSONS AT INCREASED RISK

State and Local HE/RR
Activities

State and Local Counseling &
Testing Activities

State and Local Minority
Activities

National Minority Emphasis

Demonstration Projects

Conference of Mayors

Hemophilia Projects

Prevention of Perinatal AIDS

TB/AIDS Projects

HEALTH WORKERS

II. Surveillance & Epi/Lab Studies

A.

SURVEILLANCE

AIDS Cases

HIV Infection
Laboratory Performance

EPIDEMIOLOGY/LABORATORY STUDIES

TOTAL

 

 

73

oo Qo 0 &£ UM
Centers for Disease Control AIDS Personnel (FTEs) By Year

FIEs Appropriated and Used for AIDS Activities

Appropriated FIEs

 

Fiscal Redirected Total AIDS Budget

_Year New FIEs Cumulative FIEs FTEs** (millions )
1980 -- -- -- -- --
1981 0 0 4 4 0.200
1982 0 0 25 25 2.050
1983 20 20 25 45 6.202
1984 52 72 8 80 13.750
1985 17 89 8 97 33.298
1986 25 114 66 180 62.133
1987 38 152 138 290 136.007
1988 13 165 251* 416 304.942
1989 -- 165 267* 432 400.719

*Includes 126 FTEs acquired by reallocating field positions no
longer counted against CDCs FTEs ceiling.

*kSum of appropriated and redirected FIEs,
For Release Only Upon Delivery

 

STATEMENT

BY

ROY W. PICKENS, Ph.D.
ASSOCIATE DIRECTOR FOR AIDS
NAT.DNAL INSTITUTE ON DRUG ABUSE

ALCOHOL, DRUG ABUSE, AND MENTAL HEALTH ADMINISTRATION

BEFORE THE

PRESIDENTIAL COMMISSION ON THE HUMAN IMMUNODEFICIENCY VIRUS EPIDEMIC

ON

PREVENTION AND EDUCATION EFFORTS

WASHINGTON, D. C.
5:30 P.M.

APRIL 27, 1988
 

 

Mr. Chairman and Members of the Commission, I am Dr. Roy W. Pickens, Associate
Director for AIDS and Director, Division of Clinical Research, of the National Institute
on Drug Abuse (NIDA) of the Alcohol, Drug Abuse, and Mental Health Administration
(ADAMHA). We are grateful for the opportunity to participate in this hearing on the

agency's AIDS prevention and education efforts.

While the Centers for Disease Control has been tasked with the largest portion of the
Federal prevention and education mission, the ADAMHA does play a significant role in
this effort. This role is in four areas. The first and largest role is in the area of
intravenous drug abuse and its relationship to the spread of the AIDS virus. This role has
been assigned to NIDA. Asecond are concerning the psychological aspects of AIDS is
carried out by the National Institute of Mental Health (NIMH). Third, the agency
provides financial assistance to State and local treatment and prevention services
through its block grant programs. Fourth, the agency performs a number of prevention
and education activities aimed at substance abuse through its Office for Substance Abuse

Prevention (OSAP). I would like to address each of these areas in order.

AIDS AND INTRAVENOUS DRUG ABUSE

 

As you know, about 25 percent of all AIDS cases involve intravenous drug abusers, with
the virus being transmitted by needle sharing and sexual activity. In addition, about 70
percent of the AIDS cases in children occur in infants born to intravenous drug abusing
women or women who are the sexual partners of intravenous drug abusers. Furthermore,
approximately 65 percent of the U.S.-persons with AIDS for whom the disease is

attributed to heterosexual contact, report having sex with an intravenous drug abuser.

 

 
 

 

-2-
Surveys have revealed that the incidence of needle sharing is quite widespread among
drug addicts, ranging from 70 to 95 percent in cities across the country. In some areas,
such as New York City, health officials believe that as many as 50 percent of the AIDS
cases may be related to needle use. Although the infection rate varies from place to
place, recent studies by NIDA and the CDC have found the virus in drug injectors in most
major cities in the United States. Repeated studies by NIDA grantees in several cities
indicate an increasing level of infection, with higher seroprevalence in drug abusers »ho
are not in drug treatment programs. No geographical area can consider itself immune
from the epidemic and, indeed, cases of AIDS associated with intravenous drug abuse

have bcen reported in every State of the Union.

Since AIDS cannot be cured as yet, prevention of the spread of the virus that causes it is
imperative. As I stated in my earlier testimony, the most effective way to prevent the
spread of AIDS among intravenous drug abusers is for abusers to stop using drugs. As
long as individuals continue to inject drugs, it is likely that many will continue to share
needles. Therefore, as indicated in your interim report, high priority must be given to
the expansion of drug abuse treatment in order to help addicts discontinue their drug
use. However, while helping addicts to quit using drugs is our ultimate goal, many
intravenous drug abusers will be unwilling to enter drug abuse treatment and will
continue to inject drugs. Some users who enter treatment will subsequently relapse and
return to drug use. An effective AIDS prevention strategy must, therefore, go beyond a

focus on drug abuse treatment alone.

AIDS Prevention Through Information and Education

 

We must help those individuals who continue to inject drugs reduce their risk for

contracting or transmitting the AIDS virus. In addition to HIV transmission through

 

 
=3-
needle sharing, we must also be concerned about sexual transmission among intravenous
drug abusers and from addicts to their non-using sex partners, Perinatal transmission
from addicts and their sexual partners to their offspring is also of concern. Thus,
intravenous drug abusers and their sexual partners must also be alerted to the dangers of

sexual and perinatal transmission and how to reduce these risks as well.

information is the basis for AIDS prevention. Intravenous drug abusers and their sexual
partners must be reached through a variety of resourees, provided with accurate
information regardir - their personal risk of contracting AIDS, how the virus is
transmitted, how to access treatment, and how to reduce their risk of acquiring or

transmitting HIV.

Also, as I noted in my earlier testimony, changing the behavior of intravenous drug
abusers is admittedly going to be difficult. Historically, they have been resistant to
behavior-change efforts. Reaching and achieving behavior change in their sexual
partners will be equally difficult. As a group, intravenous drug abusers and their sexual
partners tend to be underemployed and poorly educated individuals who are socially and
economically disenfranchised and show high prevalence of both criminality and
psychopathology. To be effective, the information must be delivered by someone who is
credible to these target groups. The educational messages must be provided in graphic
"street" language that is understood by and meaningful to the target audiences.
Prevention messages must be delivered over and over, and behavior change must be
reinforced. It is not enough to provide information and expect change to follow. Of
special concern are the potential effects of “a little knowledge." Individuals who are
taking less-than-adequate precautions may consider themselves safe while unwittingly

exposing themselves and others to HIV infection.
NIDA's Current Initiatives

A major undertaking is NIDA's comprehensive community outreach demonstration
project designed to prevent the further spread of AIDS among three high risk
populations—-IV drug abusers who are not in treatment, their sexual partners, and
drug-abusing prostitutes. The goals are: to reach the target populations; assess behavior
that places subjects at risk for AJDS; employ interventions designed to change at-risk
behavior; refer at-risk persons to treatment; assess effectiveness of interventions and
treatment referrals; determine why some subjects at risk do not/cannot change at-risk
behavior; and determine seropositive rates. Each project is funded for three years and
will employ a variety of intervention methods, including the use of outreach teams of
trained indigenous leaders and ethnographers, outreach through hospital emergency
rooms and health facilities, criminal justice systems, and drug abuse treatment
programs. Comprehensive outreach programs have been funded in 11 cities, and we

anticipate funding projects in 12 more cities this year.

In addition, NIDA is funding eight demonstration projects in 24 cities targeted at
particular subpopulations or designed to test a particular outreach or intervention

method. Additional projects that will be initiated later this year include the following:

In collaboration with the U.S. Department of Housing and Urban Development
(HUD), NIDA will test and evaluate a demonstration project designed to prevent
the spread of AIDS among intravenous drug abusers and their sexual partners in

densely populated public housing projects.

In three different localities, NIDA will coordinate with criminal justice systems
to test and evaluate an AIDS education demonstration program targeted to

arrestees identified as drug abusers and/or drug abusing prostitutes.
-5-
NIDA will test and evaluate models designed to reach drug abusing minority
populations at risk for AIDS, communicate information about AIDS and the way
it is transmitted, and employ methods to change risk-taking behavior in specific

cultural groups.

NIDA will support a demonstration project to evaluate the effectiveness of
interventions targeted to women at high risk for AIDS who are not already

pregnant, and high risk women who are pregnant and their children.

In addition to these demonstration programs, NIDA is also supporting controlled research
studies to determine more effective methods of behavior change. Following are some

examples of these prevention projects:

At Johns Hopkins University, in research supported by NIDA, a multicomponent
AIDS education, risk reduction training program, and HIV testing and counseling
is Deing evaluated in clients in a methadone treatment program and drug users

not in treatment.

A NIDA grantee at the Veterans Administration Medical Center in Hines, linois,
is evaluating the effects of knowledge of personal HIV serological status on drug

use, drug risk behaviors and precautions used to prevent sexual transmission.

At the University of California, San Francisco, NIDA supports research aimed at

preventing AIDS in Latino intravenous drug abusers and their families.

Another component of NIDA's prevention and education program involves the provision
of training and technical assistance to State drug abuse agencies and drug abuse

treatment personnel. In 1987, NIDA developed, tested, and delivered a comprehensive
-§-
AIDS training program, "AIDS and the IV Drug Abuser,” which was targeted to drug abuse
treatment staff. Approximately 3,000 persons have received the basic AIDS training
course. In addition, it was recognized that NIDA could not assume full responsibility for
the training of drug treatment staff nationally. Therefore; a separate "Training of
Trainers" course was developed and delivered to 160 persons from 17 States. NIDA's
intention is for each State to develop and implement its own AIDS training program for
treatment counselors. The training is designed to help treatment counselors deal with

AIDS-related issues and to help prevent HIV transmission.

Finally, let me mention some of the educational material that NIDA has developed for
IVDU's and their sexual partners. NIDA's Office of Research Communications has
launched two major projects. One is aimed at risk reduction and the other is an effort to
mobilize communities to conduct outreach. Training sessions have been developed that
encourage local communities to form coalitions for developing public education programs
on AIDS and intravenous drug abuse. The training is being delivered regionally to cities
that have high numbers of intravenous drug abusers, but, as yet, low numbers of AIDS
cases. A key part of the training is a videotape that presents traditional and innovative

communication techniques.

NIDA is planning a publie service campaign with a full range of television, radio, and
print ads on AIDS and drug issues which would advertise our free telephone service
(1-800-662-HELP), which directs drug abusers to treatment. NIDA is working with the
Entertainment Industries Council to put on a series of seminars with information about
AIDS and IV drug use. ‘Writers, producers, and performers attending these seminars, are
encouraged to incorporate the prevention material into their own projects, radio and
television shows, movies, plays, and other forms of entertainment, which reach millions

of Americans daily.
 

 

NIMH'S CURRENT INITIATIVE

 

Research on Prevention

 

Research on the primary prevention of AIDS through changing high risk behaviors is a

priority in the NIMH AIDS research program.

NIMH currently supports AIDS Research Centers at Columbia University/New York State
Psvchiatric Institute, the University of California at San Francisco, and the University of
Miami, An estimated $3.78 million of the current annual funding of $18.5 million for
these Centers is allocated for prevention/behavior change research projects. These
Centers have crucial access to persons at high risk through their established links with
community organizations. In addition, the multidisciplinary approach utilized by the
AIDS Research Centers has facilitated the development of innovative research
strategies. Collaborative projects have been undertaken across Center sites to maximize

the vield from research findings.

In addition to the Research Centers, NIMH is currently supporting four RO] AIDS
prevention research grants totaling over $715,000. NIMH support of AIDS prevention
projects in the Research Centers and through individual research projects totals

approximat ly $4.5 million.

In FY 1988, NIMH is allocating $8,333,000 for research on the psychosocial aspects of
AIDS. Approximately $5,000,000 of that amount will be used for studies focusing on

behavior change to prevent the spread of AIDS.

For FY 1989, NI‘1H has $14.992 million for psychosocial research, and a major proportion
of these funds would be directed at prevention research. A large share of these

prevention research funds would be provided through the NIMH AIDS Research Centers

 

 
 

 

-8-
program, which provides a unique and valuable mechanism for multidisciplinary
prevention research and for access to high-risk groups and community contacts that are

essential for prevention intervention research.

It should be noted that the NIMH funds are in addition to the prevention efforts of NIDA
focused on intravenous drug abusers. The two Institutes are cooperating in prevention

efforts focused on sexual partners of intravenous drug abusers.

Beyond its primary research mission, the National Institute of Mental Health is

undertaking prevention and education as follows:

Health Care Worker Training Contracts

 

The NIMH AIDS Education Program for Health and Mental Health Care Providers
supports contracts to provide comprehensive AIDS education to address the special
mental health educational needs of health care providers, including medical
professionals, the core mental health discipline providers, and alternative health care
workers. Contracts use a comprehensive, multidisciplinary approach to work with a
defined communitv (e.g., a city, a section of a city, a state, a network of organizations).
Education and training cover psvchosocial and neuropsychiatric aspects of HIV-spectrum
infection. Among the basic topics covered are risk reduction guidelines and infection

control in health care work settings.

In FY 1988, NIMH is supporting 21 training contracts totaling $4.18 million. Additional
contracts have been awarded to develop a management information system for the

training contracts and to evaluate all the ongoing NMH-supported training activities.

 

 
-g-
Publications

NIMH is developing a series of publications for professional and public audience to
explain the mental health impact of AIDS, to foster compassionate care and
understanding of persons with HIV-infection and AIDS, to help allay unwarranted fears of
contagion, and to help prevent the further spread of HIV infection:

o Coping with AIDS -- currently available

o When Someone Close Has AIDS - —

on .
a.

—™
o How the AIDS Virus Affects the Brain
” “~ BEING FINALIZED
o Neuropsvchiatric Impairment Due to HIV Infection /
o Mental Health Impact of AIDS for Various Professions
Employee Assistance Counselors
College Counselors
Reproductive Health Specialists
Child Health Specialists
A series of focus groups composed of community members and health providers has aided
the development of training materials for high risk groups. Additional
prevention-focused publications and audiovisuals are planned for minorities, women, and

adolescents. All of these publications will emphasize reduction of risk behaviors.

Approximately $150,000 has been allocated for publications in FY 1988.

FINANCIAL ASSISTANCE TO STATES
As vou may know, the ADAMHA has provided treatment and prevention services funding
to the States since fiscal year 1982, through the Aleohol and Drug Abuse and Mental
Health Services (ADMS) Block Grant (Part B, Title XIX, Public Health Service Act).
Section 1916 (c) (8) of that law requires that each State set aside at least 20 percent of
its substance abuse allotment for prevention services. States are free to prioritize and

target those populations and areas of need they deem critical with these funds. At
-l0-
current rates, approximately $50 million per year are spent nationally on substance abuse
prevention. A majority of these funds are directed at youth programs designed to
discourage young people from either (1) ever starting to use drugs, or (2) heavy

involvement in the drug culture, if preliminarily involved with drugs but not yet addicted.

The ADMS Block Grant received a substantial enhancement with the enactment of P.L.
99-570, the "Anti-Drug Abuse Act of 1986." An additional $162,855,000 were provided in
FY 1987, and $155,917,000 (after reconciliation) in FY 1988 solely for substance abuse
treatment and prevention. This program, known as the Alcohol Drug Treatment
Rehabilitation (ADTR) Block Grant, has also made an impact in the drug abuse
prevention area. In addition to the general authority to fund primary and secondary
prevention programs aimed at preventing drug abuse, we know that at least 27 States
have coordinated their drug abuse prevention and education efforts with specific AIDS/IV
drug abuse organizations. As a direct consequence of this coordination, 14 States have
targeted block grant funds specifically to the AIDS/IV drug using segment of their
substance abuse populations. For example, California will utilize $3,500,000 (nearly 20
percent) of its ADTR allotment for prevention efforts targeted to AIDS/IV drug users.
Connecticut will expend over 60 percent of its $2,272,000 on five special populations
(AIDS/IV drug users, youth, Hispanics, correctional offenders, and intoxicated drivers);
and 75 percent of Maryland's ADTR funds will go toward three targeted populations (one

of which is directed to impacting up to 11,500 AIDS/IV drug users).

It is important to remember that each State is free to shift its funding emphasis

according to its self-determined needs.

At this point, all of the ADAMHA block grant money appropriated for FY 1987 has been

made available to the States. Each State has two years in which to obligate these funds.
-li-
States are in the process of applying for their FY 1988 funds. Completed applications
received by the ADAMHA are generally processed and awarded within 2 weeks of
receipt. Finally, the Administration has requested $165,917,000 for the ADTR Block

Grant, and $508,860,000 for the ADMS Block. Grant in FY 1989.

OFFICE FOR SUBSTANCE ABUSE PREVENTION

 

The Office for Substance Abuse Prevention (OSAP) was established with the passage of
the Anti-Drug Abuse Act in October 1986. OSAP's congressional mandate includes (1) a
model demonstration grant program for community-based prevention programs targeted
to high-risk youth; (2) the creation of the National Clearinghouse for Aleohol and Drug
Information (NCADI) by consolidating the formerly separate alcohol and drug
clearinghouses; (3) conference and workshop support, training, and on-site technical
assistance for parent and youth groups and organizations that serve ethnic minorities;

and a diverse communice ions program.

OSAP's funding for FY 1987 included $41.5 million allocated by the legislation and an
additional $11 million for prevention-related activities and personnel accrued from the
National Institute on Drug Abuse (NIDA) and the National Institute on Aleohol Abuse and
Alcoholism (NIAAA). If this $52.5 million, $24 million was earmarked by Congress for
first-year funding for the high-risk youth demonstration grants program. In FY 1988,
OSAP's funding level is $34.2 million, including $23.4 million in second-year funding for
the grants. The President's budget request for FY 1989 again calls for $34.2 million for

OSAP, with $19.7 million in third-year funding for the grants.

While OSAP does not have a mandate for activities directly related to AIDS, all of

OSAP's programs are indirectly applicable to IV-drug users. Through OSAP's
-12-
primary prevention and early intervention strategies, the intent is to prevent initiation
of alcohol or other drug use among youths or to curtail use early in the substance abuse
eyele. Young people who are prevented from using drugs do not become IV-drug users,

thus eliminating the possibility of contracting AIDS through contaminated needles.

IV-drug use among youth is most prevalent among minorities. Of OSAP's 131,
one-to-three year high-risk youth grants, 50 percent are fe~ projects in inner-city
communities and publie housing projects where a large number of ethnic minority youths
reside. Twenty-two percent of the grants target Black youngsters, and an additional six
percent target Black and Hispanic youth. These youngsters are at high risk for aleohol
and drug use, premature sex, teenage pregnancy, and other problem behaviors that also
put them at risk for IV-drug use and/or sexual contact with IV-drug users. Through
prevention and early intervention with these youth at greatest risk for contracting AIDS
through IV-drug use, OSAP is working to forestall early drug use before it progresses to

addiction.

A contract for evaluating these grants will be awarded in June 1988. The evaluation will
focus on (1) how programs recruit and retain high-risk youths and their families, (2) how
community support for programs is generated among various ethnic and cultural groups,
(3) what adaptations are needed to make conventional programs culturally acceptable
and accessible to ethnic minorities, and (4) identification of new strategies for reaching
and helping high-risk youth and their families. Following evaluation, the most promising

programs will be available for replication in other communities.

Through NCADI, OSAP distributes materials for the Department of Education, NIAAA,
and NIDA, including NIDA's materials prepared about the inherent risks for HIV infection

from IV-drug use. OSAP is conducting a series of five regional training sessions
-13-
targeted to ethnic minorities and those who serve ethnic minority populations. AIDS
training is included in these workshops which are already underway. In FY 1989, 15
additional regional training sessions are planned which will include information on AIDS

to be used at the local community level. .

Recommendations

 

The information and education programs described earlier are making a very important
contribution to AIDS prevention. However, these efforts need to be expanded. While a
variety of approaches, including the use of mass media, must be pursued, our experience
with intravenous drug abusers makes clear that our primary emphasis must be on
intensive information and education approaches, It is particularly important that
Federal, States, and local governments work together to expand« ‘reach efforts. We
believe that our program of basic support to States through the block grant mechanism,
as well as our targeted prevention programs in NIDA, NIMH, and OSAP, provide a solid
foundation for this Federal, State, and local partnership. However, it must be noted that
efforts specifically targeted to AIDS are the newest, and in some ways, the most
conplete of all of our prevention and education efforts. For example, in FY 1989,
NIDA's demonstration outreach programs will provide services to approximately 133,000
intravenous drug abusers and sexual partners annually. These programs are available
only in selected cities and are able to reach only a fraction of the target populations in
these cities. States must also expand outreach services outside of these NIDA-funded
efforts, Additional effort is needed to establish outreach services to contact as many
intravenous drug abusers and sexual pa-tners as is possible in cities across the U.S. We
estimate that there are currently over one million intravenous drug abusers not in

treatment.
-|4-
It 1s further estimated that there are approximately 960,000 regular sexual partners of

intravenous drug abusers who are not, themselves, intravenous abusers.

As I mentioned earlier, outreach is not a one-time effort. Repeated contacts with
intravenous drug abusers and partners will be needed now and in future years to
encourage behavioral change among those who continue to engage in high-risk behaviors
and to sustain behavioral change among those who have changed their behavior.
Obviously, the resources required to expand outreach services are substantial. We are
oleased that the President's FY 1989 budget requests $40 million to perform targeted
demonstrations in areas of high HIV seropositivity and high I.V. drug abuse. Funds are
also needed to develop, test, produce, and distribute print and audiovisual meterials to be
used by outreach workers and drug abuse treatment programs in educating intravenous
drug abusers and their sexual partners. Finally, research to improve information and
education efforts must also be expanded. We believe that future AIDS budget requests

will be cognizant of these needs.

The work that NIMH is doing is also vital. We must encourage health care workers, as
well as the general public, to deal with fears of contagion and to treat victims and their

sexual partners with compassion.

With regard to specific recommendations concerning the flow of funds, I would make the

following points:

(1) With regard to the block grant programs, we would urge that the
Congress not develop complicated funding formulas that require the

Department of Health and Human Services to define "need." We would