Committee on Economic Security (CES)

Volume VII. Health in Relation to Economic Security


Part 5- Wednesday Afternoon Session, January 30, 1935


Medical Advisory Board

Wednesday Afternoon, January 30, 1935

The meeting was called to order at 2:20 p.m. by Chairman Sydenstricker.

CHAIRMAN SYDENSTRICKER: We have this very important and very fundamental question before us as to the question of contracts with physicians. Before we dispersed to eat, Dr. Leland expressed the views of himself and Mr. Simons. It is a rather fundamental thing in any health insurance plan, of course, and perhaps Dr. Davis might speak on the point. He has been studying this thing a good deal.

DR. DAVIS: In the first place I should like to express briefly my views as to what should be done, namely, I believe that we have to recognize the existing situation, which is--

CHAIRMAN SYDENSTRICKER (Interrupting): May I interrupt a minute? The reason I am calling on you is I think that the dissensions of the staff ought to be heard on this, since they dissent, and after you have heard our dissenting views you can give us your wisdom on the whole thing.

DR. DAVIS: There is a certain number -- not a very large number, relatively 200 -- of private groups of physicians working together in practice. There is a considerable number (probably a larger number) of industrial medical services to groups of employed persons in large establishments, which involve salaried physicians, on full or part-time, working as a coherent organization. And there are various hospital staffs which ostensible have professional relations, particularly as groups although they have different relations to their private paying patients than the private group members have.

There has been a development going on in the interrelations of physicians to one or another form of group practice, and it seems to me that the important thing is not through a law, health insurance or other law, to crystallize or prevent developments in medicine which are proceeding primarily because of essential professional tendencies. That is why what has taken place in the main has been done by the initiative of physicians for reasons which appealed to them as desirable. So in general my feeling is that it would be desirable to have such a form of health insurance, or any other medical care law, which did not preclude one or another form of arrangements rather than to have an exclusive form.

To come to the other side of the story, the memorandum which Dr. Leland read lays a good deal of stress on the importance of controlling the undesirable competition of groups, and particularly of unethical groups. Of course, Dr. Leland and I both live in Chicago. We have at least one example near us which leads us to think of this point a good deal. In substance I do not believe that a legal provision that contracts had to be made with individual physicians would result in the control of such a group as Dr. Berkowitz operates in Chicago, a body of salaried physicians. I don't believe that those groups could be controlled in this way. It would be quite possible that if the physicians in the group were interested in taking on insurance work they could then take the contracts as individual physicians and continue to function as a group, and it would also be possible for any reasonably clever promoter or head of such a group, whether he were a layman or a physician (Berkowitz happens to be a physician) to make arrangements with his staffs so that they would have to go in, and he might have a substantial rake-off from the insurance practice as a condition of their continuing in their salaried positions with him, presuming, of course, that they would be carrying through their group other than insurance patients, as they undoubtedly would be carrying a large number of private individuals other than insurance practice. So they would have to choose between enrolling and turning in a percentage of their enrollment or losing their positions entirely. In other words, I believe that it would be quite easily possible for any unethical group of this character to get around any such provision as this. I don't think it would control that element at all.

On the other hand I believe that setting up in a state machinery such as is contemplated in their general kind of a law as is outlined in these proposals, with a state medical authority and a local medical board representing the profession which have the power to lay down, broadly speaking, the professional conditions of practice, would make it possible for them to lay down professional conditions which would make it extremely difficult for unethical groups to operate at all, not because it would preclude contracts within the groups but because it would make it impossible for a group which, for instance, was owned and operated by a commercial organization and operated as such, or which was carrying on unethical practices such as commercial advertising. It seems to me so far as I can see the implications of the kind of law we are laying down, a state medical board could recommend to the state health insurance, the legal authority, only such-and-such kinds of organizations.

Certain types of hospitals would be excluded as being below a minimum standard, and certain types of groups, which may or may not have hospitals, also would be excluded.

It seems to me that the particular problem that Dr. Leland's memorandum referred to would not be assisted substantially by this limitation of contract with individual physicians, and it could be gotten at more effectively than we can at the present time by such a law as is proposed.

CHAIRMAN SYDENSTRICKER: Mr. Simons, have you anything to say about this?

MR. SIMONS: I wanted to ask whether in speaking of industrial groups you figure that a plan like in West Virginia, in clinics, hospitals, and so on, should be in any way incorporated in our system.

DR. DAVIS: I don't know about the word "should". Some of the criticism of West Virginia, as little as I know about the West Virginia situation, is to the effect that the system of contract schemes are widespread. I understand that some of them are very undesirable and some of them are quite good, but I should suppose that in any state (West Virginia is only one of them) in which there is a considerable amount of industrial practice -- I mean where there are large industries which have their own industrial medical service, and the medical services are of good quality -- it would be unconceivable that such services would not be carried on under insurance. They would almost inevitably be made part of the insurance system. The basis would be changed in certain respects, and, of course, they would impose certain supervisory authority which at the present time doesn't exist and which might benefit the poorer ones. But I can hardly conceive that any state which carries on such a large amount of such industrial practice would not continue, if it was giving reasonable satisfaction to the parties immediately concerned, the employers and the employees and the physicians who are directly involved. If it was giving reasonable satisfaction to that group and was not a large part of it unethical from the standpoint of the profession as a whole, I can't conceive that it wouldn't be recognized and with certain modifications incorporated under the system.

MR. SIMONS: You introduced the possibility of what they call "contracting out" in the general insurance system and the setting up of a parallel system almost alongside of it.

DR. DAVIS: Not at all. In a community where a very large part of the community, and probably a very large proportion of the insured community, that is the industrial population, were being covered both in general practice and in the specialist service, where you had general practice carried, the individual employee would have the right to choose any practitioner who wished to give insurance service, but in such a community as I have visualized the chances are that the majority of the practitioners would be serving that industrial population -- would be among those who were taking the insurance practice -- because they probably would be among those who were involved in the industrial scheme.

CHAIRMAN SYDENSTRICKER: To make a concrete affair, for example down in Birmingham, Alabama, in an isolated community (coal communities and in Tennessee coal and iron) they couldn't get any doctors, and they built a very fine hospital, so I am told. The doctors are hired on a salary at the present time, and the hospital, of course, is run by the company. At the same time they do have an insurance system. A certain amount of money is deducted from the pay of the employees, and the physicians serve the employees and their families.

Suppose Alabama should undertake a state-wide health insurance system for industrial employees, how would you visualize that a thing of that kind would come into the picture? That is not the type that Dr. Leland is talking about. Apparently that is a legitimate and perfectly proper thing, but that is the type that would be excluded.

DR. DAVIS: It wouldn't be excluded because the individual physicians in those organizations could make their contracts, but it doesn't seem to me that it would be significant. I can't believe that in any case that service would not go on substantially in the same way. I am sure that in California I should suppose the Southern Pacific Railway System would be very unlikely to be upset by a state health insurance law if it were passed.

DR. BROWN: That would be my impression.

DR. DAVIS: In other words, the very fact that it is a going concern, if it is sound and satisfactory to the profession and to those directly receiving service it is almost inevitably going to be carried on.

There is one other point I should like to make, namely, in the main, outside of these industrial affairs which give general medical service, it seems to me that the main function of the group practice, and that includes, of course, group practice under both private and hospital or clinic auspices, so far seems to be for specialist and consultant service rather than for the service of the general practitioners. There are some exception to that in some of the smaller Middle Western communities, in which practically all of the physicians of the community are in the group. So, of course, both general practice service and specialist service are given through this body of physicians. But in the larger communities the services of groups and of hospital outpatient departments generally, which are a form of a group of a different type, are confined largely, and sometimes wholly, to specialist service and do very little of the general practitioner service.

Even in New York City the studies of the Academy of Medicine show that something more than two-thirds of all the patients coming to the outpatient departments of the hospitals in New York City were of the medical type which in New York City would be cared for by specialists and not by general practitioners.

I think that has a very important bearing on the situation, that the problem of the group in the main and of the clinic of the hospital affects chiefly the problem of specialist service.

I was very much impressed in England a year and a half ago in discussing the method through which specialist services were rendered in Great Britain. When the Government adopted the recommendation of the medical association and extended the scope of its medical service, there were two opinions expressed: One that it should be rendered on a fee basis through individual specialists and the other that it should be rendered in the industrial sections in the cities very largely through the outpatient departments of the hospitals by the specialists in those outpatient departments.

MR. SIMONS: May I interrupt you because I don't think that it is our intention that these should be applied to the specialist service at all? It is the general system.

DR. DAVIS: The point I am trying to make clear is this: I am not trying to put forward an alternate proposal which gives to the group the idea of groups entering into contracts. In the first place I don't think the group has much bearing on the general practitioner service anyway, and in the second place I don't think the development of the group in one form or another should be unduly encouraged by the health insurance system by giving it preference.

DR. BIERRING: Is there any danger of competitive bidding in this?

DR. DAVIS: I think that on the whole there will be less danger than at present, for the simple reason that you open up under the law the right to any general practitioner to give the service, and on specialists you will lay down through the state or local medical board requirements which will very greatly exercise a supervisory influence over the kind of men who can engage in specialist practice, either as individuals or as groups. So on the whole I think there is much more chance of controlling undesirable competition because you set up a medical supervisory authority whose recommendations will have legal weight.

CHAIRMAN SYDENSTRICKER: At this point I think it would be well to turn to the larger document on page 77 and consider the other proposal which was made. We have Dr. Leland's and Mr. Simon's proposal, and I suggest that we turn to page 77 of the larger document, under the title, "Remunerating Organized Medical Agencies," and let's examine this and see how far the objections, which are very well taken I think in part by Dr. Leland and Mr. Simons, are met in this proposal of the staff.

"Up to this point, remuneration for medical care has been treated in terms of the several varieties of service. Yet one of our basic principles may be expressed in the following words:

"A compulsory system of group payment for medical care should provide opportunity for diverse arrangements in the provision of medical service, depending upon local conditions in respect to availability of facilities and the ability of the people to pay, except that the system should be planned: (a) to provide as complete care as possible; (b) to effect economy by proper organization of the practitioners and agencies furnishing services; and (c) to assure that the quality of service rendered shall be high so far as it can be assured through the joint professional responsibility of the groups of practitioners rendering the service.

"In accordance with this principle, it should be understood that nothing which has been proposed should be interpreted as prohibiting the organization of practitioners and institutions or the development of professional groups. Contrariwise, it is intended that every assistance should be afforded those practitioners, who are so inclined, to engage in the organized provision of medical care. The only limitation we place upon this recommendation is that the medical administrative authority should exercise all necessary care to assure themselves: (a) that the essential responsibilities to the insured persons are not sacrificed; (b) that the groups are so organized as to hold promise of furnishing service of high quality; and (c) that those groups which are approved for insurance practice actually do furnish such service. The medical administrative authority should be empowered to develop appropriate schedules for the remuneration of organized groups so that they will receive (on capitation or other bases) sums equivalent to those paid non-organized practitioners for the same services.

"It will be recalled that one of our basic principles provides for the exclusion of proprietary or profit-making agencies from health insurance." (I would say if we adopt that principle, and we have done so, that cuts out automatically the type of thing that Dr. Leland has mentioned.) "Accordingly, it is assumed here that contracts of service with organized groups should be restricted to professional groups which meet the essence of this principle.

"It is well known that medical agencies which are appropriately organized can provide service of high quality -- indeed, of higher quality than can be furnished by many individual practitioners. Furthermore, organized agencies can provide equivalent services for smaller costs through substantial economies effected by organization, coordination and efficient use of personnel and equipment -- over and above the costs of high-grade service furnished by individuals -- shall accrue to the practitioners of the group who furnish the medical service and to patients who are being served. The remunerations which have been specified in preceding paragraphs have been designed with due regard to the need of providing reasonable and adequate incomes for those who furnish medical service in their individual practices. But the remunerations have also been designed to afford more substantial -- and yet not excessive -- net incomes to those who furnish service in more economical manner than is possible in individual practice and who do this through the reduction of operating costs without sacrifice of essential standards of quality. It is assumed that in entering into contracts of service with groups of practitioners scales of remuneration will be developed by the appropriate authorities of the states to guarantee that there will be no excessive competition among various groups to the point where the profit motive can invalidate the objective of assuring each competent practitioner a reasonable opportunity to earn a decent livelihood from his professional labors.

"In the proposed system, competition for patients, whether among organized groups or among individual practitioners or between groups and individuals, would not in any respect depend upon the size of the fees which are charged to those who are served, because neither groups nor individuals would charge fees to their patients. Competition for patients would rest entirely upon the nature and the quality of the professional services rendered. Yet income would none the less depend upon the number of patients served and upon the economy with which service is furnished -- provided economy did not involve the sacrifice of essential quality."

Dr. Leland, I wasn't present when you argued this out, but the point I want to make is it seems to me the main point of the objection which you raised is covered by the provision, or could be covered by a provision, that the medical authority in the health insurance system could say and designate which groups contracts can be made with and which groups are not of the kind and the quality with which contracts can be made. Of course, I realize that in certain states where you have unusual situations it might be pretty bad, but after all we have to leave it to the state.

DR. LELAND: The medical societies and the medical licensing boards and other agencies have been working on that problem for a long time.

CHAIRMAN SYDENSTRICKER: What is the medical opinion as to the whole proposition? We have perfectly reputable medical groups, they are doing fine jobs, and are we to exclude them entirely from this proposition as a group?

DR. LELAND: I am sorry I noted in Dr. Davis' remarks an inference to the effect that we would exclude groups. We have no idea of excluding groups. We agree with this proposal here that groups shall be a part of it. They have nothing to say about the advisability of including a good group in the practice of medicine, or of a physician affiliating himself with a group. We recognize all that it says here, but we have gone just a step farther in believing that there are certain features of groups that make it a little more advantageous for them to bargain or compete with the individual practitioners. We are talking about medical services.

In the staff committee we talked about laboratory services provided by groups. That raises another, it seems to me, rather important question of whether these laboratory services are going to be secured from those places where the state medical authority or administrative authority can secure them at the lowest bid, or whether they are going to be provided on the basis of regular remuneration similar to that system which is set up for the administration of the paid physicians. It seems to me that there is a bit of danger, if we are honestly endeavoring here to safeguard the system (and I hesitate to press that point again but I am trying--

CHAIRMAN SYDENSTRICKER: It is a good point you raised.

DR. LELAND: --to safeguard the system.) I am not convinced by Dr. Davis' argument (may I agree with Dr. Falk in insisting about not being convinced) that there is anything wrong about making a contract with an individual physician. We don't interfere with his group affiliations whatsoever. The only thing we are endeavoring to suggest here is that a group bargaining possibility be avoided, and that every individual physician practicing under the system be given equal opportunity so far as that particular phase of the system is concerned.

CHAIRMAN SYDENSTRICKER: Of course, we have to recognize things as they stand. We know that in certain localities, in larger cities, there is not only the question of group practice but there is also the question of clinics, perfectly reputable, approved and practical, with a number of physicians employed. Your idea would be that each of those physicians employed in those clinics would be contracted with individually?

DR. LELAND: Providing all these physicians signified their desire and willingness.

CHAIRMAN SYDENSTRICKER: Of course, that is understood.

DR. LELAND: --to become insurance practitioners. I personally can see no objection to making an individual agreement with these separate physicians rather than making a blanket agreement with the entire group. I may be wrong.

CHAIRMAN SYDENSTRICKER: I think the question has been presented now rather fully to the Board, and I would appreciate very much if I could hear from the members of the Board.

MR. SIMONS: Just before that, there are just one or two things that I think haven't been properly brought out. I have been sort of staggered at Dr. Davis' position. I thought that one of the things that was being aimed at in the insurance system was to get rid of certain evils especially that have grown up in industrial practice. Now I am sort of given to understand, if I have not misinterpreted, that such a situation as exists in the State of Washington, for instance, would be perpetuated, or in the State of West Virginia, or in some other states, that in other words we have rejected the idea of carriers of insurance. It seems to me that we are now letting them in at the back door. I can't see that there is very much difference between some of these organizations and the approved society proposition. I think you would have the fact of employer coercion which would make almost impossible any sort of maintenance of standards. You would have a lot of other elements come in there.

I understand perfectly well that you are not going to purify all of those at once by an individual contract. I just simply say that if you make the contract with the individual there is not the slightest objection in the world to his getting additional patients by virtue of the fact that he has access to a group and affords them better service, but the bargaining power is still with the individual.

I should like to have you check page 15 paragraph g, in this little one. There are things that we have accepted here. We have built the whole system around the idea of maintaining individual personal contacts. I somehow can't see, in these great industrial organizations especially and I have a little difficulty with the group, the individual practitioner's relations with the patient being maintained in the way that we have set up as our whole ideal and the whole basis of the system.

I don't want particularly to refer elsewhere, but the whole story of the clinics, and so on, elsewhere in the health insurance I think has been an unfortunate one. I also had the idea that you were not going to maintain anything near the extent of the outpatient departments and clinic organizations if you opened the way freely to the individual practitioners -- I think that has been the experience wherever that has been done -- except for specialist service, and it was probably an oversight that we didn't put in a paragraph saying that is handled so separately here that we didn't think of it as being under this. There are going to be individual and special arrangements there anyhow, but in the general contracting by an organization or panel -- whatever you want to call it -- in which we have this limitation of the number of patients that are taken, I can't see how you are going to maintain the standards, clustered around that and that is the heart of the maintenance of good service, if you permit the coming into this service of groups with superior bargaining power. The individual practitioner will have the advantage he is entitled to because the supposition is he can furnish better service.

DR. PARRAN: On what basis would the bargaining be made?

MR. SIMONS: The individual physician says, "We will take 1000 patients," or 200 or whatever number he could get, and he agrees to service them. He is their family physicians. That is the thing we have laid down. Now, as I say if he is connected with a group, as Dr. Brown is, he would be perfectly justified in saying to those physicians (I am not saying that he would be soliciting, but they would know it), "I am going to take you in." You will have all the services of that group that they are willing to contract with. That would give him a superior bargaining power.

DR. PARRAN: Bargaining power is money, as I understand it. A flat amount per year would be allowed for services.

MR. SIMONS: Yes, but the bargaining would consist of securing an increased number of patients on the panel. That would be the advantage.

DR. PARRAN: The state would pay the same amount per family, or per capita, to the group. I still don't understand the use of the word bargaining.

MR. SIMONS: Perhaps another way would be to say he would have a better advantage in soliciting patients, or in attracting patients.

DR. SINAI: Aren't there two questions tied up here? First the question as to whether or not this contract with the individual physician will eliminate the evil; for example, Dr. Leland may have in mind the Washington situation - whether or not it will eliminate that evil. As I see it, it will probably continue that evil in a bigger and better way, because the very groups against which we would be shooting in the adoption of this principle would be the first ones to do the necessary paper work (and that is all it would be) to arrange the individual contracts between the physician and the patient.

Secondly, in attempting to control the situation which has developed in Washington, is it wise to attempt to try to write into a Federal regulation the control of a situation in Washington, which is non-existent in Cleveland and which is non-existent where there are groups practicing in other sections of the country? It seems to me that if it is more or less of a local situation, it is quite amply handled in the regulations that have been proposed and in the professional control of the professional aspects of practice.

DR. DAVIS: May I add just a word to that? Take, for instance, the case that we cited a moment ago, of a physician who wishes to undertake general practitioner service, which he has a right to do under the insurance law proposed. He happens to be a member of a group. Under the proposal that contracts can be made only with individual physicians, he goes on the list as an individual physician and he gets his quota of patients. He may have a superior power to attract patients, we will say, because he is a member of the group. The effect of such a situation might easily be that groups already organized would find it particularly worth their while to have members of their staff who were not specialists and who wished to undertake general practice go on their staff in order to bring to the group not only the paying clientele of the physician in general practice but also that group be the natural group of specialists who would do all the special service. And so far as I can see no such plan would in the least subject the group to any control, nor would it prohibit the individual physician or the unethical group from proceeding, nor give an incentive to the unethical group to set physicians on its staff because of the increased pulling power which they would get from it. On the other hand, if you permit groups to make contracts and are in a position through the medical board to define the conditions under which group contracts are to be made and the kind of groups that shall be allowed, we haven't any system at all. You then aren't in a position to control the situation.

In other words, I don't see how the evil can be dealt with unless you recognize the group in the law and the administrative provisions and give the medical board authority to define, and, therefore, control the conditions of group practice. On the other hand, it seems to me to leave the door wide open to add to our present difficulties. I certainly appreciate the dangers.

DR. ROBERTS: Mr. Chairman, we have spent fifty-five minutes on this now. Don't you think that this Board is able to say a word or two on it and settle it?

CHAIRMAN SYDENSTRICKER: I think now is the time that we ought to get the views of the Board. You have heard both sides of the case and I am neutral. Go ahead, sir.

DR. ROBERTS: If you call on me, I will simply say it is a matter between tweedle dum and tweedle dee. I think it doesn't amount to much either way. I think if you are going to make a private contract with a member of a group, he is going back to his group and talk it over with the head man in it and see what they think ought to be done, and whether it is done that way or not it will be practically made with the group. I think Dr. Davis is right when he says that the groups will probably take unto themselves certain men who have large groups of patients. I think Dr. Leland and Mr. Simons are very correct when they say that they would like to break up some of these groups that are not ethical and are not doing right, but if the minute men on the Lexington green had waited to clean up the cow manure and make an ideal Utopia they never would have fired the first shot at the Red Coats.

I think that we have got to have faith to go ahead. This is not a reformatory. (Laughter) We just accept things as they are and do the best we can with them. I am not prepared to say that the groups in this country are not men with whom contracts should be made by the board. Furthermore you have an administrative body in each state and you have a medical board in each state, and that is the business of that board as to whether they made a contract with the individual man or with the individual man in the group. The group is nothing but a collection of individuals, and they are all citizens, and we can't rule out a group by a Federal law. The whole trend of this country is a group trend. I think it is just tweedle dum and tweedle dee. I would be in favor of leaving it out, and I think it is all covered in what you read, Mr. Chairman, under state regulations - state administrative and state medical board. If the state board can't do it, who can?


DR. HORSLEY: I have nothing to say.

CHAIRMAN SYDENSTRICKER: We will go around the table.

DR. GREENOUGH: I am rather inclined to agree with Dr. Roberts. I think we should get along pretty well either way, and as it stands in the interim report I should think the situation is covered.

CHAIRMAN SYDENSTRICKER: What do you think about it?

DR. PIERSOL: Of course, the controlling factor is going to be the state authority that is set up. I think that is undoubtedly true. I have just been wondering myself how you can get around this thing. As Dr. Roberts says, if men who are in a group take on insurance practice as individuals the result will be just about the same whether it is taken on as a lot of individuals working together or whether the whole group takes it on. On the other hand I can see some inherent dangers. For instance, with particular reference to laboratory work, x rays, and so on, how can you prevent having some organization that could do that work wholesale and cheaply step in and practically monopolize all that work in the community? I think there is more danger along those lines.

CHAIRMAN SYDENSTRICKER: Suppose they do it efficiently and properly and they do it more cheaply, would you have any objection to their doing it in the interest of economy?

DR. PIERSOL: I am not very clear in my own mind just how this thing is going to work. Suppose a scale of prices is set up for certain work, is it going to be possible for the administrating group to shop around, to go to different clinics, or laboratories, or hospitals in the city?

CHAIRMAN SYDENSTRICKER: That part will be under the professional control.

DR. PIERSOL: It will be under control of whatever administrative board is set up.

CHAIRMAN SYDENSTRICKER: We will have to pass on the quality of that.

DR. GREENOUGH: Will it be possible for them to go around and say, "We find that we can get an x ray plate for half as much by one group as the ordinary x ray man can do it for; therefore, we are practically going to give them a contract for all the x ray work at a reduced rate," or will they have to pay the fixed charge as that is agreed upon, whether it is paid to the group, or individual, or hospital? I suppose those are just details that every state has to work out itself, but to my mind the danger of being able to make a contract with a group, broadly speaking, is that possibility that you might have some outfit that would arrange to deliver work at a vastly cheaper rate than the ordinary individual can do that sort of work for, and that, of course, would defeat the very object of everything, which is to preserve the integrity of the general practitioner and to have the whole thing center around him as the individual family doctor. That is so important that unless that feature is jealously guarded it certainly would never meet the approval of the medical profession by and large, but if that feature is preserved then I think you would go a long way toward overcoming some of the objections.

CHAIRMAN SYDENSTRICKER: In our own view of the thing so far as we have gone, the question of contracts with groups is a question, of course, obviously left open to the proper authorities. They are the judge of the groups in the first place.

Dr. Brown, would you care to speak to this?

DR. BROWN: I should like to hear the most experienced man in the room in group practice give his opinions - Dr. Crile.

DR. CRILE: Of course, our group would naturally I think not enter into a panel, and for the rest of it I don't think there is much more for me to say.

DR. BROWN: I have read these two pages carefully. The final paragraph is that all contracts for the care of the insured individual patients should be with individual physicians. I see no objection to that provision.

I should like to ask Dr. Leland and Mr. Simons whether or not it would be possible under this provision for the business manager of a group, who is a lay person, to make a contract with an individual physician of the group for the insured patient.

DR. LELAND: Presumably the business relations will be between the state and the local administrative authority in the system with the individual physician. Whether the business manager of the group comes in that remains to be seen later.

DR. BROWN: That would be an individual contract anyway, wouldn't it?

DR. LELAND: Whether the business manager acts as an agent or not?


DR. LELAND: I presume so.

MR. BROWN: I mean there is nothing wrong in these two pages as I see them. I think, as Dr. Roberts said, tweedle dum and tweedle dee. I see no reason why, if a member of a group wished to enter this insurance scheme, he couldn't through his agent sign up as an insurance doctor.

CHAIRMAN SYDENSTRICKER: How do you feel about it, Dr. Bierring?

DR. BIERRING: It has been admitted that this individual contract can easily be carried out and there is no harm connected with it, but there are somewhat inherent dangers in the possible arrangements with groups. One thinks of groups largely as groups of specialists - probably the one or two members who are interested in internal medicine, or general practice, or possibly industrial surgery, and even that would not exactly be general insurance work, would enter into this agreement. It wouldn't seem that the nose and throat specialist, or the skin specialist, or the eye specialist, should be drawn into this arrangement. It does permit of a certain reference afterwards to a particular specialist, or the specialist in that group drawn into it.

CHAIRMAN SYDENSTRICKER: But not in this particular general?

DR. BIERRING: No, of course, not, but I mean if a specialist is required it will be natural for the physician in the group to bring in his group, and that might bring in an arrangement of services that might be contracted as a group, and that would be something that we feel would not be in keeping with this general plan.

CHAIRMAN SYDENSTRICKER: Dr. Davis, may I ask for information at this point? Taking New York City have you any estimate of what proportion of the population do not deal with the individual doctors at all but deal with clinics and things of that sort?

DR. DAVIS: Yes. In New York City with a population of upwards of 6,000,000, it is estimated that approximately one person in five, perhaps at the present time only one person in four, is receiving medical service in clinics, that is out-patient departments of hospitals or other clinics. On the other hand it should be pointed out that a number of studies have shown that most of those patients are also receiving service in the course of a year from private practitioners or other practitioners. They go to the clinics mainly for the specialists.


DR. CUSHING: I have nothing to add. I merely wish to be assured that the private clinic that you speak of differs in some way from the hospital, as applied to the hospital.

CHAIRMAN SYDENSTRICKER: Of course, we will have to make contracts with hospitals. That, of course, implies much more than the medical care of physicians.

DR. CUSHING: When it applies to the hospital it applies to the clinic.

CHAIRMAN SYDENSTRICKER: Do you care to add anything, Dr. Crile?

DR. CRILE: I think that what Dr. Cushing just said would be more or less analagous to each other.

DR. PARRAN: I don't think Dr. Leland's expression would abolish groups and it would be possible to put that into the law.

DR. LELAND: I have no desire to do that.

DR. PARRAN: Second, if the arrangement is made only with the individual physician, the one opportunity of controlling groups, setting standards for their work, insuring the fact that they are non-profit making, in fact are not proprietary, would be lost. If the financial basis is removed, and if compensation is only on the basis of the best service rendered, or x ray, or general care as well as specialist care, then perhaps the groups deserve to get the most business if they can render better service through association. I personally think the whole tendency of medicine is toward group activity and that it is quite impossible to reverse that trend as we depend more upon the specialist as an accessory to diagnosis and as we need to utilize a wider scope of service.

DR. CUSHING: We are providing for that, aren't we?

DR. BIERRING: And put the general practitioner out of business altogether?

DR. PARRAN: I wouldn't, sir. Just to the extent that through association a group of physicians can render a better service, just to that extent will they prosper. At the moment they have the opportunity of competing on a financial basis under such a health insurance plan as is proposed, it would seem to me the opportunity of beating down rates of pay would be eliminated, and further the opportunity is given to control the standards of groups by dealing with them. If we do not, obviously physicians will continue in groups with control over the individual physician but not over the group activity.

CHAIRMAN SYDENSTRICKER: Unless there are some other comments, we appreciate very much your comments and your discussion of this, and we will pass on to page 21 of the smaller document:

"The state medical authority (state medical board, with the state medical officer)"- we simply use those terms as possible terms, as representing something we can think about at least -"will prepare a list of services which are regarded as specialist services. The local medical authorities will prepare lists of physicians regarded as capable of rendering these various types of services from among those physicians who express desire to render such. These lists must be approved by the state medical authority.

"Flexibility is necessary, since in small communities the same standards cannot be applied for admitting a physician to a list qualified to render certain specialist services, as would be applied in a large city."

I suppose you have covered that more fully, haven't you, Dr. Falk, in the appendix part?

DR. FALK: Somewhat more fully, but not very much.

CHAIRMAN SYDENSTRICKER: The essential idea is there. We will be very happy to hear from you on that very important point.

DR. LELAND: I should like to ask a question, Mr. Chairman, how these state medical boards, state medical officers and local medical authorities, presumably in the insurance system we are talking about, are going to evaluate the capabilities, the competence of men who are to give the special service. On whose judgment are they going to depend to classify these men as with or without the competence to render special service?

CHAIRMAN SYDENSTRICKER: They can't do any more than what the medical profession already has got. They can't go any further at the present time. I should imagine that this sort of thing would stimulate a great deal the definition of what we call a specialist.

DR. BIERRING: Where is the medical profession represented in that?

CHAIRMAN SYDENSTRICKER: In the local medical authority and in the state medical board.

DR. BIERRING: Again I say that might be a Middlesex graduate or an osteopath.


DR. BIERRING: That local medical board.

DR. FALK: Who is it now, Dr. Bierring?

DR. BIERRING: There is no local.

DR. FALK: Every physician does it now. I mean every physician can hold himself out as a specialist in whatever he chooses to hold himself out as one.

DR. BIERRING: We are speaking about who is this authority that is to judge specialism.

CHAIRMAN SYDENSTRICKER: That skips over a little bit to what we are talking about.

DR. BIERRING: We know in organized medicine the matter is very well in hand now. Specialists are now going to be designated in registers after they have completed a qualified examination before a special board, and in the future there will be no more self-styled specialists, or over-night specialists, on any kind of official register. So that will be easy, and a simple reference to these official registers will determine who are qualified.

CHAIRMAN SYDENSTRICKER: It might be a good idea to put in our proposal, if you wish, some reference to that particular thing.

DR. FALK: We must remember, Mr. Chairman, that we can go just so far as that situation permits, but obviously we don't require that only men who are members of the American Ophthalmological Society shall qualify as ophthalmologists. That would restrict the number of ophthalmologists to the United States, that are at the moment inadequate.

DR. BIERRING: In the course of a year or so that will be overcome.

DR. FALK: I think that what we can do is to go as far as the existing circumstances permit, but we must recognize that we have to go further than that, although we may lay the basis for rapid accretion to the existing standards or new developments in the control of specialists and the definition of specialisms through the work of properly qualified professional societies. I mean to endorse everything you have said, Dr. Bierring, but I think you would probably agree with me that is for the moment still an insufficient basis.

CHAIRMAN SYDENSTRICKER: I would assume on the state medical board, or whatever body represents the medical profession, they will at least pay some attention to what has been done. I can't conceive that they wouldn't do that.

DR. HORSLEY: What kind of state medical board do you refer to, the state medical examining board or the state medical health board?

DR. FALK: When we come to administration we will be able to indicate what we have in mind, but there is apt to be a certain amount of vagueness, because we can't--

DR. BIERRING (Interrupting): I don't see why.

DR. FALK: We can define them in a certain broad way, that they shall include a certain proportion, if you like, that shall be chosen from the practitioners of the state, or nominated by the state medical societies and chosen or appointed by the governor. We can make certain broad provisions. Although we have wrestled a great deal with that question, I have not been able to see how we can lay down for the states explicit standards that can be applied to all states. If we can get some assistance from you on that, we shall welcome it most cordially.

DR. BROWN: In the State of California the State Medical Society is not a legal entity, isn't that strange?

DR. BIERRING: It is incorporated, isn't it?

DR. BROWN: No. It has no legal standing.

DR. BIERRING: No charter?

DR. BROWN: I don't know about that. I have heard it stated by several prominent attorneys in the State of California that the State Medical Society has no legal entity.

CHAIRMAN SYDENSTRICKER: I should think that regardless of whatever the administrative authority is (and we will come to that later on) the fact that they do have a medical profession fully represented ought to take care of this question of specialists and follow the lead of the A.M.A. and the other organizations which are considering the question. We assume that will be safeguarded in that manner. Of course, it would be unfortunate in some state where the state medical board were all osteopaths and chiropractors. It would probably result in an impracticable possibility.

DR. PARRAN: Isn't it true that if this function is appropriately exercised a tremendous impetus will be given to the fine start that has been made in defining a specialist? Under the present situation I take it that this will be one of the most troublesome of the administrative provisions of the law, and it seemed to me that perhaps this section should be modified to recognize the current efforts of the several specialities to define standards, and so far as possible those standards should be recognized by any state health insurance system in their definitions of specialists.

CHAIRMAN SYDENSTRICKER: In other words, you would probably like to add to that the fact that in the selection of specialists the standards that are being set up by the medical profession should be followed. That would be a very good idea.

DR. BIERRING: Of course, your modifying paragraph that follows it is very proper because it would apply to communities in which a certain flexibility would be necessary.

CHAIRMAN SYDENSTRICKER: Is there any further discussion of that point?

"h. In general the plan of payment for the specialist will be on the basis of fees for services rendered or on a salary basis for a given amount of time."

That is, of course, left open to the community.

DR. BIERRING: I should hate to be the administrator who would fix those practices.

CHAIRMAN SYDENSTRICKER: So would I. That is a terrible job.

DR. CUSHING: I think they have already had experience with that in New York, Mr. Chairman.

DR. PARRAN: Only in connection with compensation work perhaps. That is chiefly surgery.

DR. CUSHING: I thought for crippled children.

DR. PARRAN: Yes, we have had it in that respect.

DR. CUSHING: I heard from a young fellow who happened to spend an evening with me on the train not long ago, who is an orthopedist at the Strong Memorial Hospital, that some such arrangement as this was made, a certain payment for operations, and in his department, although he had been operating continuously, they collected two fees during the six months (or I don't remember the exact time) both for operations. One was for $35 for puncturing a tuberculous abscess, which should have been done by anybody for nothing, and the other was another fee of $35 for spending four hours taking a tuberculous astragalus out of a child and for the dressings and all, and it lasted for months afterwards - the same price for the two operations.

DR. PARRAN: I can only say that the schedule of fees being followed was recommended by a committee of the State Medical Society. The delegates refused to adopt it as a fee schedule, since the State Medical Society has consistently refrained from approving any state medical fees. A comparable situation exists in compensation work where the New York County Society did approve a schedule of fees for various types of work under the New York Compensation Law. This too was taken before the State Medical Society and in that instance also the Society refused to adopt a state-wide system but enunciated the principle that it should be left on the county basis.

CHAIRMAN SYDENSTRICKER: That is about as far as we can go on this particular thing. Is there any further comment on it?

MR. SIMONS: To my mind that is administratively the weakest section in the entire law. Perhaps there is no way of fixing it up.

CHAIRMAN SYDENSTRICKER: Well what can we do? We can't ask this board to fix fees. The whole thing must be dealt with on a state basis and probably a community basis.

DR. ROBERTS: That is all there is to it.

CHAIRMAN SYDENSTRICKER: Well, let's pass on to the next then.

"i. In determining the method of payment adopted for specialists the administrative authority is responsible for selecting that method which (i) will yield a quality of service satisfactory to the medical authority, and (ii) will be most economical in cost. The medical authority (primarily local, with appeal when necessary to state medical authority) is responsible for passing on quality of service rendered, not on method of payment. A given method of payment, if claimed by a medical group to involve or lead to unsatisfactory service, must be reconsidered by the final administrative authority."

Will you explain that, Dr. Falk?

DR. FALK: We are trying there to define the separate fields of interest and responsibility of the lay and of the medical authorities that we concede every state should have and yet also recognize that in addition there is an intermediate ground with which both are quite properly concerned. In the first place we recognize that in the field of lay authority, representing a public group and the funds contributed by such a group, they must of necessity have final authority in respect to financial matters. Correlative with that the medical council, or the medical board, or whatever name it may be called, the responsible medical agency at the head of a state system must have equally the final authority in respect to such matters as quality of care and responsibility for professional matters. So that the first two points are meant to indicate that so far as the question of method of payment is merely a financial matter, the final choice, or the final decision, must rest with the lay group and they should have the privilege of making that final choice in the method of payment which they believe will be most economical in cost provided that it yields a quality of service which is satisfactory to the medical authority. But we recognize the intermediate problem, that an administrative authority may choose a procedure of remuneration which the medical authority may allege is not compatible with good service, either because it destroys certain financial incentives to good work or because the volume of too much record keeping or red tape prevents good service, or for other reasons, and if a given method of payment is claimed by a medical group to involve or lead to unsatisfactory service, it must be reconsidered by the final administrative authority.

I don't know whether we can or should go any further than that. I hope that we have succeeded there in defining the difference, and yet also the overlapping fields of interest, between the two types of authorities. We mean to make specific and clear that there are those two fields but also to recognize that there is the overlapping field, because all through this we must recognize that public authority, if it properly discharges its public responsibility, must look to economy of cost, medical authorities must look to quality of care, but the two are not separate and distinct until after appropriate arrangements have been worked out, or until they are repeatedly or periodically, readjusted, so that the decisions from the one side are in accord and do not conflict with the decisions from the other side.

This is in a sense the type of specific case with which one of our basic principles adopted at the last meeting deals, when, you remember, we laid down among others the principle that in formulating the plans there is of necessity a dual responsibility and interest between both the professional and the public groups.

CHAIRMAN SYDENSTRICKER: I think probably we will get a little more realistic view of the thing if we will go over the next two paragraphs that lead to those two specific methods of payment.

"j. (Salary Basis) A schedule for the full or part-time employment of physicians on a salary basis for rendering specialist services will be drawn up by the state medical authority and may include different rates, applying to different sized communities, or maximum and minimum rates. Local medical authorities will present proposals for the rates which may be applicable to their areas, which are to be approved for these particular localities by the state medical authority and by the state administrative authority before becoming effective."

Possibly we might go on to the next paragraph too.

"K. (Fee Basis) A schedule of fees for various specialist services will be prepared by the state medical authority, and may include different rates, applicable to different sized communities, or maximum and minimum rates. Local medical authorities will present proposal for the rates to be applicable to their areas, which are to be approved by the state medical authority and by the state administrative authority before becoming effective."

That gives us some idea of the procedure that we have thought out.

DR. CRILE: Isn't that about all you can do? The states, after all, will have the detail.

CHAIRMAN SYDENSTRICKER: Do you agree to that? It is about the best general statement you can draw up.

"1. Fees to specialists may be paid to individual physicians for services rendered under the local schedule, or may be paid under a group plan. Under the latter plan a total sum will be agreed upon by the local administrative and the local medical authority, to be applied to the payment for specialist services to be rendered by a designated group of physicians; and this lump sum may be paid to the physicians concerned and be divided by them among their members in proportion to the amount and nature of the services rendered according to the locally applicable schedule.

"The administrative authorities shall be empowered to enter into contractual arrangements with hospitals, clinics, laboratories, individuals or organizations furnishing medicines, appliances, supplies...."

Does that include x-ray service?

DR. FALK: Yes. We have defined those services sufficiently broadly so that it covers any and all types of services which a hospital customarily renders.

CHAIRMAN SYDENSTRICKER: "....for the appropriate services or commodities; or to make arrangements with associations of these several bodies, such as local or state hospital organizations."

Is there any discussion of that?

MR. SIMONS: Does that first paragraph indicate the possibility of competitive bidding?

CHAIRMAN SYDENSTRICKER: I would assume that this bidding or the contract in the first place must be passed on by the medical authority and upon his recommendation to the administrative authority, and the administrative authority views it from the national point of view. If you want to make a laboratory contract for service for an insured person in the community and you have outrageous fees for it, of course the medical authority may think it is all right because he is used to it, but the administrative authority will say that won't do, it will bankrupt the whole thing.

MR. SIMONS: There is no security there for the payment of the physicians who may be employed by such an organization, that their salaries may not be cut to where they won't be profitable.

CHAIRMAN SYDENSTRICKER: By the organization with which the contract is made?


CHAIRMAN SYDENSTRICKER: Of course, in the first place a large amount of the practice done in that group which will be insured is very little concerned with the use of laboratories and other things of that sort.

DR. DAVIS: May I clarify that point? I think there is some confusion on this point. Paragraph j dealing with the salary basis obviously stands by itself. There will be certain conditions, as everyone can see, that it will be certain conditions, as everyone can see, that it will be advisable to pay for special service on a salary basis, various isolated arrangements where you have to import a specialist to do the surgery in industry and perhaps pay for on a salary basis, various isolated arrangements where you have to import a specialist to do the surgery in industry and perhaps pay for on a salary basis. On the other hand paragraphs k and l as I understand them represent two methods of handling the fee basis. I think the word "group" in paragraph l is ambagious, because "a designated group of physicians" does not mean a group in the sense that we used it before. It means merely the fact that specialists by the nature of the plan are a designated number of physicians, and it merely means that the payments for those men who are a body of physicians working as specialists in a community may be pooled for that number as a whole and divided among them on a basis which they mutually work out among themselves. That plan would be particularly applicable to some hospital arrangement, as has been suggested.

DR. BIERRING: I think they would like that.

CHAIRMAN SYDENSTRICKER: Dr. Parran, you had a county there, a place where you had $3,000 available for medical care or something of that sort, and the doctors said their fees amounted to $3,000, and you told them to take the $3,000 and divide it up.

DR. PARRAN: I had nothing to do with that. This was an arrangement comparable to arrangements in some of the Middle Western States where county authorities enter into contracts with the county medical societies to take care of all indigents on a flat amount per year. That is essentially what it was. The only difference was that when the depression came on the number of welfare patients increased faster than the county appropriations for their care increased. I imagine that is not a unique experience.

MR. SIMONS: That situation that you describe was common where they had a very small amount to divide.

If you make a contract with a clinic, or a laboratory, or an organization furnishing medicines and supplies, is there any security for the physicians employed there, or do you have a competitive bidding contract in which the financial standard of the physician is not maintained?

DR. ROBERTS: May I answer that question by citing a concrete example? In Atlanta there has been a tremendous demand for hospital insurance. The hospital authorities picked out five hospitals that were perfectly adequate and high-class, giving good medical and hospital service. Four of them refused to have anything to do with it because they said they wouldn't make enough money out of it. One of them said, "We will go into it on a basis compatible with the ethics of scientific medicine." That community really undertook a bid without knowing it. Emory University Hospital said, "We will give a man a private room with hospital service, including everything but x ray, for $14 a year, with a thirty-one day annual limit." Eighty-five of the largest industrial establishments have already signed up, and 200 of 250 of the Gulf Refining Company signed up in an hour after it was presented to them.

There is unconscious bidding, if you want to put in that way, for hospital services on an insurance basis.

In the City of Dallas, Texas, as you well know, some of the other hospitals wouldn't go into it and Baylor University took it up many years ago, and is now furnishing hospital services I think with a twenty-one day annual limit for $6 per year, and the leading members of the profession in the City of Dallas have that hospital insurance.

I have it for my wife and myself at the Emory University Hospital, with a thirty-one day annual limit for $14 per year.

Whether we like it or not, it is spreading all over the country and it is going to spread all over the country. Four of those hospitals turned it down. The real reason was ( I have told nearly the truth, like Hauptmann does) to tell the whole truth the other hospitals demanded that whatever was left over from the annual expense should be divided among them, and the University took the ground that it should not be divided among them but should be returned next year to the hospital insured in the form of lower rates. That was the real reason. In Atlanta (and the system is spreading all over the State of Georgia) anyone that is recommended by a physician and by a citizen of standing in the community (he has to be recommended by his physician and that physician has to be a man of high standing) can get for $14 a year hospital insurance, a private room, nursing, laboratory facilities to the limit, operating room rights - everything but his x-ray and his medical and surgical fees. There is unconscious bidding which this thing attempts to describe in a more technical way.

MR. SIMONS: He didn't make himself clear because I don't think hospital insurance has anything to do with what I am talking about. Here is a proposal as understand it to get certain, say, x ray service or laboratory analysis, and so on, which I understand will require a certain number of medical employees. They may gain their advantage by cutting the salaries of those medical employees. That is the thing, it seems to me, there ought to be some little security on if we are going to have this lower bidding.

CHAIRMAN SYDENSTRICKER: Would you put a provision in here that if you made a contract for service you should not cut the salary?

MR. SIMONS: I don't know just what you can do, but the other is a pretty bad evil.

DR. ROBERTS: Mr. Simons, you dismissed me very beautifully, but I should add, to make a diagram, that the salaries of the laboratory director, the doctors, and so on by virtue of the fact that the hospital will be more patronized, that the rooms will fill up, and there will be a larger income from month to month and year to year, and that income will be stabilized. The physicians voted for it unanimously because the patients had money left over, they didn't have to pay any hospital bills, and they could pay their fees promptly.

MR. SIMONS: We are shooting right back at one another. I guess there is not use of keeping the discussion going.

CHAIRMAN SYDENSTRICKER: For what reason do you believe that if a laboratory gets a contract for certain services it will cut the salaries of the employees?

MR. SIMONS: That is just plain, common business proposition. The one that pays the lowest salaries gets the lowest bids. I don't think there is any denying that.

CHAIRMAN SYDENSTRICKER: The medical authority has to judge the quality of that service.

MR. SIMONS: They may be giving as good service and they may be giving it at the expense of these men.

DR. HORSLEY: The word "clinic" is practically another term for a group of doctors practicing together, is it not? Contractual relations with hospitals, of course, as I understand it, includes hospital service, not doctor's service, and the laboratory's and other conditions furnishing medicine, but isn't the conception of the other conditions furnishing medicine, but isn't the conception of the word "clinic" in there a group of doctors practicing together? Going into contractual relations with a clinic is practically going into contractual relations with a group of doctors.

DR. FALK: It may also be the outpatient department of a hospital.

DR. DAVIS: I think that should be qualified because the term is ambagious if used as applying to the outpatient department of a hospital and to a group of doctors practicing on a group basis. The word "clinic" means an arrangement not for professional service rendered, but for instance in a number of cases at the present time on the Federal Relief in Chicago, the local state relief is paying for clinic service to the clinic organization for patients sent there on relief. That is entirely separate from the payment of the doctors with whom arrangements are made as physicians. I think that should be clarified.

DR. HORSLEY: A clinic usually connotes - like the Crile Clinic or the Mayo Clinic - just a group of doctors.

CHAIRMAN SYDENSTRICKER: We can clarify that.

DR. LELAND: Facilities as distinguished from individual services.

DR. HORSLEY: That will be better.

CHAIRMAN SYDENSTRICKER: Yes, thank you very much, that is very good.

Now are there any other discussions of the first two paragraphs under '1' on page 22?

DR. GREENOUGH: You were going to put in there something about the controlling board, were you not, as we went over it before?

CHAIRMAN SYDENSTRICKER: That is discussed in another section, in the administrative set-up. We will repeat this over again in each one of these things.

DR. HORSLEY: Dr. Greenough has had considerable experience, as the President of the American College of Surgeons, in promulgating some hospital insurance, and I am quite sure that he can qualify some of these points, or amplify them at any rate.

DR. GREENOUGH: I don't know that I could contribute anything to this discussion. I can quite appreciate that point that Mr. Simons is making, namely, by screwing down the salaries of physicians who are engaged in giving laboratory service a hospital might possibly be in a position to underbid a little bit another hospital, and yet I suppose that problem is with us today and the hospitals are meeting it, because under the pressure of this depression the hospitals have been reduced to all sorts of economics which they would gladly avoid, among which is undoubtly cutting to the minimum the salaries of all their employees. But I should think the danger of that being used for underbidding would be relatively slight and that the increased advantage to the hospital of these health insurance measures would finally offset the disadvantages. I don't think it need be of serious consideration.

CHAIRMAN SYDENSTRICKER: Unless you wish to consider the next point we will not bring it up before this Board.

Below it is "Financial aid from the Federal Government shall not apply to expenditures for specified professional services which, for a state as a whole, exceed a prescribed sum per person eligible to receive the services."

The point there being that the Federal Government is going to give so much and a state can do very much as it pleases. I think unless there is some discussion on that, we will pass on.

"Schedules of professional remuneration established within the states shall be subject to periodic readjustment with due regard to the general financial status of the insurance system."

DR. ROBERTS: May I ask who is going to do that adjusting?

DR. FALK: I think the implications are somewhat of this kind: Suppose as of the first of the year a series of scales of remuneration are set up and schedules of remuneration for the practitioners, and the hospital and the others, on the basis of the fact that the state of the employment and of wages are such that a certain fixed proportion of the income coming in contributions furnished a certain amount of money from which it is therefore possible to pay these schedules of remuneration. Let us assume that six months later, or a year, employment increases, or wage scales fall, or conversely employment increases or a year later, employment goes down, that is, unemployment increases, or wage scales fall, or conversely employment increases, or wages go up, obviously the practitioners of medicine, dentistry, nursing, the hospital, laboratories - all must share in the ups and downs of general resources, except in so far as an operating reserve is built up to minimize the necessity for fluctuations.

What we have tried to so here is to prescribe a Federal provision which will make it impossible for physicians, and dentists, and hospitals, and others, to be dealt with unfairly, in that a schedule fixed at one time has to be periodically reviewed and not remain permanently fixed; conversely that when the administrative authorities find that the general financial position of the whole community is changed, they in turn have the privilege of calling attention to the fact that the time has come for a review of the rates. It is simply an attempt to provide that, that shall be more or less automatic instead of involving a professional or administrational row to bring it about.

Perhaps it should be phrased so as to specify the frequency of that periodic adjustment. I think that may be unwise. If we make the provision that may be unwise. If we make the provision that any properly constituted person or group has the right to demand a readjustment once a year, or the law of the state may specify that shall be reviewed every year, or every two years, or three years, the matter can be covered.

DR. ROBERTS: Your explanation is so much better than the item, it seems to me it could wisely be enlarged with some of the verbal tact that you displayed put in it.

CHAIRMAN SYDENSTRICKER: All right, we will look at the record and see what we can do.

Twenty-two at the top of page 23 I suggest that we leave until immediately before we take up the question of the alternative proposals.

Passing on to 23 on page 23, we suggest that the Federal standards should provide that states set up by law an appropriate central authority and local authorities for administering the system. Does this appendix 5 go into any more detail?

DR. FALK: This has been rewritten so many times I have really forgotten just what the last draft contains.

CHAIRMAN SYDENSTRICKER: Let's look over the whole thing as we have it here first, and then if you need further enlightenment, we will try to give it to you:

"Owing to the diversity in the form of state governments and of state constitutional and legal requirements, no specific form of state organization can be prescribed by Federal action."

In other words, it is impossible to say that we shall have a medical director of health insurance, or that the health insurance shall come under the health department, or anything that we feel like doing. It is pretty hard to do because of the diversity of conditions in the various states.

"Federal standards should in addition provide:

"a. For the proper handling by the state of health insurance funds, with due reports to the Federal Government, for which Federal subsides or grants are to be made. In any state which creates insurance to provide both cash and medical benefits there shall be separate accounting of sums paid in and paid out for each class of benefits.

"b. That agencies organized for profit be excluded from the administration of the system, either in states as a whole or in local areas.

"c. For professional responsibility and representation, as indicated at various points above.

"The general principle of health insurance administration should include a coordinate financial and professional set-up in the state, district, and local authorities. Each group should be headed by the appropriate official or professional officer. There should be a professional committee or committees in an advisory relation to the professional officer on purely professional questions, and a council or board having official relation to the administrative authority on financial and on mixed questions. The professional groups should be represented on such boards or councils.

"Differences or disputes which arise between physicians or dentists or which involve purely professional questions should be arbitrated or decided finally by a wholly professional board."

You see that is very, very general.

MR. SIMONS: I am for that, but do you again think that last is legal, that you can set up the final authority? Of course, there is always appeal to the courts, but wouldn't it probably be the question of a person having his day in court?

DR. FALK: I am advised that in certain kinds of special legislation of this type there isn't always appeal to the courts, and, therefore, it is necessary to set up a body which is judicial or quasi judicial, as in certain workmen's compensation laws. Certain matters of fact or law in many states cannot be taken to the courts. The compensation board is the final authority, and we were trying to prepare for the fact that, that is the exigency in certain states, and that the findings of the administrative authority here, which may be final in the state, may have to be protected both in respect to the rights of the public and of the practitioners, through the establishment of a judicial body to which appeals may be taken from any local authority and may be determined there in point of factor or law.

I didn't know that was so except in connection with certain of the workmen's compensation acts where I knew it was so, but I was advised by counsel that we should make that provision.

CHAIRMAN SYDENSTRICKER: I do not think the larger document amplifies it a great deal except in so far as it says there shall be a different administration of the cash benefits and of the medical benefits. There are broad principles laid down that have already been discussed more or less. It is a question of how much further we can go in this very general outline of suggestions.

DR. FALK: I had in mind, Mr. SYDENSTRICKER, that after we knew the opinions of this Board on a number of the other matters where the administrative structure is touched upon, if those were approved, we would then incorporate more explicitly than we have what we have meant by the medical authority or the medical board.

I don't know whether we can go so far as to specify how a medical board shall be appointed, or nominated, or created, but I think we can specify that there shall be a board of licensed physicians, resident within the state, but how much further we can go, I don't know. I don't mean as a question of fact, but as a question of legal provision which we may have.

DR. DAVIS: Would it not be advisable, not so much in respect to the officials drafting something that the Committee on Economic Security might approve and which might go in as a bill in a different form, but in respect to the information of the public and the profession to which this report will get out, to include in this report not only the necessary skeleton framework of the Federal provision but some brief descriptive account of the kind of state set-up which this group contemplates would exist, recognizing that there will be differences in detail. But it seems to me that after all, since the administrative work is done primarily by the state, the professional groups are especially interested in knowing what in a typical state set-up is contemplated, and a descriptive account of that seems to me also would have very great educational value in making definite what this would mean.

CHAIRMAN SYDENSTRICKER: I quite agree, Dr. Davis, and the counsel of the Committee, as Dr. Falk pointed out, has gone to the limit in putting into the law the thing that was recommended to them.

Let's take this question of a state set-up and let's take the question of what should be the administrative authority and what should be the medical authority or advisory proposition. Dr. Berring, could you open up the discussion on that? If we had an insurance system, what would be your conception of the professional authority, or the professional advisory board, or how would you select things of that kind?

DR. BERRING: I presume that it would be contemplated that the financing and administrative interest should be represented on it. Would that require more than two or three members?

CHAIRMAN SYDENSTRICKER: Do you mean the board?

DR, BIERRING: Yes, for instance if you organize first a state medical board.

CHAIRMAN SYDENSTRICKER: I suppose the state medical board would deal more with medical matters, but would you have the financial problem of administration which would be an entirely different thing?

DR. BIERRING: You think this would be a separate body?


DR. BIERRING: For administration?

CHAIRMAN SYDENSTRICKER: Wouldn't you think so? In the first place you have the question of a collection. That may be by law collection from pay rolls - that is the simplest thing, of course - in industrial establishments, and that money has got to go somewhere, it has got to be accounted for. It may go to the treasury department of the state. It might be a part or a branch of the treasury department of a state. That is possible you see.

DR. BIERRING: You ought to have a board of about five of which the commissioner of health should be a member. The others would be members of the state medical society.

CHAIRMAN SYDENSTRICKER: Who would appoint them according to your idea?

DR. BIERRING: I guess the governor would be the best man.

CHAIRMAN SYDENSTRICKER: Not the best man, but



CHAIRMAN SYDENSTRICKER: Gentleman, shall we take our seats again?

Mr. Whittier is here and I have invited him to say a word to you collectively. He has spoken to you individually.

MR. WHITTIER: I wanted to spend some time with you in order to become a little familiar with the important problem that you are dealing with, but unfortunately we are tied up very badly this week with hearings in both Houses of the Congress.

The Secretary of Labor also wished me to say to you that she would have liked to have sat in with you and to say in her behalf and on behalf of the Committee to you that we greatly appreciate the sacrifice you are making in trying to work out a solution of this very difficult problem. We are relying on you.

We believe that it should be possible to devise something in this country that will be beneficial alike to the profession and the public, and the Committee certainly doesn't want to start anything that will not prove beneficial and we are relying on your assistance and advice.

I just want to say that we greatly appreciate the sacrifice you are making in helping us work out this problem. We can't even pay your expenses, as I think you have all found out by this time, in any adequate way. I think you all are stuck for half of your expenses and it is unfortunate.

DR. CUSHING: It is worth the price of admission to hear the Chairman. (Laughter)

MR. WHITTIER: As I say I hoped very much that this time I might be able to sit in with you and really learn something about this problem, but I will have to forego that pleasure I am afraid. But I again want to thank you.


CHAIRMAN SYDENSTRICKER: We were talking about the administrative set-up. Dr. Bierring I think had ventured a suggestion that as far as the medical society is concerned, it ought to be devised of a medical board of five, one being the state health commissioner and the others being nominated by the state medical society and probably appointed by the governor.

Have you anything further to say, Dr. Bierring?

DR. BIERRING: Mr. Chairman, with the help of Dr. Davis, I have a set-up here which perhaps might answer. Of course, the administrative officer, or the appointing officer, I presume should be the governor, and the insurance or health insurance board to consist of five members to be named by the governor of which of the commissioner of health, or state health officer, shall be a member, and one or two of the medical profession and two other citizens. It might be that there would be only one additional medical man to the health commissioner and three citizens. Then there should be an administrator, whom I presume would be the financial administrator. He would be named by this health insurance board. There would be a medical board nominated by the state medical society, of which the health insurance board. The medical board would name the chief medical officer of the state. So that the chief medical officer, the financial administrator, would be responsible to the medical board, and the medical board would name the chief medical officer.

DR. HORSLEY: The medical society name or nominate?

DR. BIERRING: Nominate, but the medical board I mean as constituted would select the chief medical administrator.

CHAIRMAN SYDENSTRICKER: But the medical board would be nominated to the governor?

DR. BIERRING: Nominated to the governor.

CHAIRMAN SYDENSTRICKER: By the medical society.

DR. BIERRING: By the medical society.

CHAIRMAN SYDENSTRICKER: The four members they would nominate, the fifth one being the ex officio.

DR. CUSHING: The chairman of the medical board being on the central committee.

DR. BIERRING: And the health commissioner would be a member ex officio.

DR. HORSLEY: How many others constitute the board?

DR. BIERRING: I think that ought to be five too -- hardly three. It might be three, of course. State boards are usually three or five. Here and there you occasionally have seven members of a board.

CHAIRMAN SYDENSTRICKER: I think that suggestion of Dr. Bierring's is very constructive.

DR.BROWN: Mr. Chairman, I would suggest that each state medical society nominate from the state medical society a number of men who would create a panel so to speak, not a British panel but a panel from which the governor could select four of five members, and that those men who were nominated should be in addition to good ethical doctors, socially-minded.


CHAIRMAN SYDENSTRICKER: It is pretty hard to write that into a law, but it is all right.

Well, Dr. Bierring's and Dr. Brown's suggestions are before you.

DR. BIERRING: I think that incorporates what we intended. It is customary for a society to submit a list from which the governor may make his selections. That is customary on many appointive boards.

DR. ROBERTS: Dr. Bierring, you don't think it would strengthen the board if a properly constituted authority in Washington should appoint one member of the health insurance board and a member of the medical board?

DR. BIERRING: It makes it rather difficult for a Federal agency to do that.

DR. ROBERTS: They are strong on funds. Doctor, I am afraid for the profession and for the plan for this whole matter to be turned over to certain governors of a certain stripe, characteristic of certain states.

DR. BIERRING: Of course, I was speaking for the State of Iowa, that has a good Democratic governor, distinctly health and socially minded.

DR. ROBERTS: But here to my mind is the greatest danger. I am not in favor of ghosts, although I have a good ghost story, but there are some ghosts down this pathway.

DR. HORSLEY: You are not superstitious, are you?

DR. ROBERTS: No, no, oh no. I think Dr. Brown's suggestion is very fine, but I do think personally my feelings would be to have it federally administered throughout. I am afraid of the state. I know most of you wouldn't agree on that, but I am afraid of the state. I do think we could have some arrangement by which one or two of the members of the health insurance board and the medical board could be appointed from Washington.

CHAIRMAN SYDENSTRICKER: That is a very interesting suggestion. How do you react to that? Dr. Parran, what do you think about that?

DR. PARRAN: Constitutional objections I think would make it impossible to do it just that way.

CHAIRMAN SYDENSTRICKER: You might have a person appointed by the Federal Government to administer the Federal funds and then have him name the members of that board by the governor.

DR. ROBERTS: You will be compelled to do that in some way it seems to me.

DR. HORSLEY: I think that Democrats in some states would object to that Hamiltonian procedure.

DR. ROBERTS: On the other hand, on Federal roads, in Montgomery there is a man for the southern end and another one for the northwest, representing the Federal Bureau of Roads. And in this administrative thing here you have already arranged to have the sick benefits administered from Washington, federally administered, and you are arranging to have the medical service state administered.

I think you will bear with me when I say that the state governments in this country are wavering and tottering in character to a degree in some sections. I am putting it with New Testament charity. Think of Louisiana, for example,


DR. DAVIS: Don't go below Georgia.

DR. ROBERTS: You would accept that, wouldn't you?

DR. BIERRING: As far as Louisiana - oh yes.


DR. CUSHING: You would accept the idea?

DR. BIERRING: Yes, I would be glad to except for the point raised by Dr. Parran.

CHAIRMAN SYDENSTRICKER: It is a very interesting series of suggestions. I don't know how far Dr. Bierring is accepting all of them that come along.

DR. HORSLEY: There would be no harm in recommending it.

CHAIRMAN SYDENSTRICKER: No harm in recommending it.

DR. ROBERTS: They are good at appointing postmasters at cross-roads from Washington.

DR. GREENOUGH: Are you in favor of your suggestion now or against it?

DR. BIERRING: Could the nominations be submitted to the Federal authority for approval?

DR. ROBERTS: I don't think so, no, sir. That is contrary to diplomatic custom. I think they must originate the appointee, but I so think Dr. Brown's suggestion is most worthy.

CHAIRMAN SYDENSTRICKER: I would assume, Dr. Parran, is it not true that any sort of federally-aided medical care in a state the state would accept? That is what you are thinking about, or even less than what you are thinking about. With any considerable amount of Federal subsidy for health care, it would almost be necessary to have some sort of a Federal officer there to check it up, wouldn't it?

DR. PARRAN: Yes, it would need intimate Federal supervision on the regional basis, as is the case of roads or otherwise, and the techniques of doing that are being worked out in connection with the Federal Relief Administration and the Federal Work Administration, and the Federal Department of Agriculture has had a long experience in various aspects of the state-aid problem.

CHAIRMAN SYDENSTRICKER: But the Federal agents or officers are never a part of the state machinery?

DR. PARRAN: No, except casually and incidentally and not necessarily so. Their function is to see that the standards laid down by the Federal Government are in fact met, and if they are not met to recommend the withholding of Federal funds.

CHAIRMAN SYDENSTRICKER: I should like to make this comment on Dr. Robert's suggestion, that if we had a Federal representative on one or both of these boards that Dr. Bierring has suggested it might be less effective than if we had Federal supervision of the Federal Government's part. That is bound to be anyway. If he was tied up on the board and had to assume responsibilities of the board along with those other members of it he might be considerably embarrassed. That is my own observation, however.

Would you like to speak, Dr. Crile?

Dr. Greenough, would you like to speak?

Dr. Piersol?

DR. PIERSOL: I think the idea of the society submitting names is a good one.

DR. BIERRING: There is question of whether on this main administrative health board there should not be a dentist, that is, there should be a dentist on the state medical board.

CHAIRMAN SYDENSTRICKER: It depends whether you include dentistry.

DR. FALK: You may have to have a board upon which all of the professional groups are represented, and then you may have to have in addition either subcommittees thereof or special committees answerable to that board, representing each of the several professions concerned, if the scope of the benefits is broad in a state and includes more than hospital care, or more than physician's services, or dentistry.

CHAIRMAN SYDENSTRICKER: Is there any further discussion of Dr. Bierring's suggestion as somewhat modified? If not, we are very glad indeed to get it, Dr. Bierring. I don't know how far it will go but at least it will help the bill drafters of the Committee on Economic Security to visualize what we are trying to do.

DR. CUSHING: The chief danger of governors appointing is the administrator. Could there be an administrator and a sub-federal administrator?

DR. ROBERTS: As a matter of fact, I don't think we can get along without a Federal administrator, you have to have somebody to watch the state men.

DR. FALK: That is there for the Federal aid provision.

CHAIRMAN SYDENSTRICKER: Dr. Roberts wants to make a remark.

DR. ROBERTS: Very briefly, Mr. Chairman. In our previous action under professional customs (I am now discussing purely professional questions) in a phrase in the middle of paragraph c, page 24, we have approved of the policy in the health insurance of making the general practitioner the sole pivot on which the whole system revolves, and then in addition have said in effect, if not in phraseology, no consultation can be had unless the general practitioner approves it, or requests it, or gives it his confirmation. It seems to me that is the weakest professional element in what we have done. In my clinical experience 75 per cent of all the consultations are forced by the family. I think that is a conservative element. I have seen people die, I have seen people dismissed to die - all clinicians have - because the general practitioner for some reason suitable to himself, either of hopelessness, or fear that he might be embarrassed in a consultation, or that the patient would be removed to the city - the reason makes no difference - failed to have a consultation.

I think we should have some qualifying phrase there that a consolation should be had either on the approval of the general practitioner or on the request of two or more members of the family of the patient. It seems to me it should not be left solely at the behest of one man to deprive the whole insurance population of consultation, of the services of specialist. We see nearly every month persons with headaches and brain tumors. We must be fair to the insurance population, and there is a loophole for abuse.

CHAIRMAN SYDENSTRICKER: I think that Dr. Robert's extremely interesting remarks apply a little more to a section, which we are going to take up later, on special services and things of that sort. That is all right, so if you don't mind I am going to continue with this thing here and finish this and then we will go into the whole question.

I don't know how far you want to go into the question of costs and the sources of the fund. Do you care to go into this question of costs and sources of the fund or not?

DR. PARRAN: May I ask if they are estimated on the basis of 1929 incomes or on the basis of current incomes?

DR. FALK: There is always this parallel relation, both things have been done, but whenever the sources of the funds are estimated as of 1923, 1929, 1930, and 1931, the costs of the service and the remuneration are estimated correspondingly. When we attempted to correct as to what the income would be in respect to sources of funds on any other basis, the payments to practitioner and others would be proportionally affected. So that the balance of the budget is not affected by that type of consideration.

That is one of the items, you remember, that I referred to introspect to the principle in the requirement of periodic adjustment, that by defining income as a per cent of earnings you automatically determine the source of the funds in point of time, correspondingly the benefits must be adjusted in that respect, but so far as we have used the weighted average costs of medical service for the years 1928 to 31 inclusive we have used the 1929 data as the sources of income, so that we keep that parallelism always.

CHAIRMAN SYDENSTRICKER: If you would like to go into that, we would be glad to do it.

DR. HORSLEY: We can't do anything about it anyway, can we?

CHAIRMAN SYDENSTRICKER: If anybody here is an outstanding financier, or tax expert, or what not, we will be glad to hear from him.

DR. HORSLEY: I think we will pass it over.

CHAIRMAN SYDENSTRICKER: If you do that, I should like to turn back to 22 on page 23, as a sort of an introduction to the general question that we want to take up finally: "Relations of public health, health insurance, and public medical services." This is a condensation, to some extent, of what we have had before. "Federal law can only suggest that the authorities administering public health work and public medical services shall be closely associated with the health insurance system, but cannot prescribe the details of such relationships. It can, however, lay down standards which will in effect assure that such coordination as is necessary in each state will be practiced for the efficient use of funds toward which Federal aid is given.

"a. So far as public medical services or public health agencies provide certain special services for practically the entire population (e.g. care of mental and of certain communicable diseases), these should not be covered by health insurance contributions.

"b. In so far as public medical services provide general medical care for certain groups of the population, it is desirable that public funds pay into the health insurance system an agreed amount figured on a per capita basis (or other suitable method) so that the medical service to these groups of the population shall be administered through the health insurance system. This would cover the general medical services, for instance, to relief and work-relief cases."

That, in effect, is simply saying that out of tax funds you pay the premium of these indigent or dependent individuals.

"c. When general hospital services are provided through governmental hospitals (city, county, state), financial adjustment should be made between the public authorities administering these hospitals and the health insurance authorities for the hospital care of injured persons. The administrative authorities of governmental hospitals should have an appropriate place among the authorities or in the councils of the health insurance system."

That also bears a little bit, Dr. Bierring, on your set-up there. You have in your hospitals management represented there.

"d. State and local health officers should be closely associated with the state and local administration of health insurance."

Those are very broad principles, of course.

The second one we discussed yesterday at some length, and you will recall that I made the observation that there was an alternative there. We will consider Federal subsidy for public medical services of certain kinds as a separate and distinct thing from Federal subsidy for health insurance. The third, of course, it seems to me is obvious. If we have health insurance some arrangement should be made with the government hospitals as well as with the private hospitals for bearing part of the burden.

DR. CRILE: Repeat the last statement, will you?

CHAIRMAN SYDENSTRICKER: It seems to me, as regards hospital services, we have governmental hospitals, tax-supported hospitals, where the premium for example need not be quite so high, you see, or some adjustment made to take care of that for hospital care.

I assume that the principle of correlation or coordination so far as possible between health services and insurance practice and medical service is generally accepted by this board because we have talked about it all the way around, however we may want to express it, but under "b" we do have a point, which again introduces, which we put over from yesterday, the discussion of the alternative which I proposed and which Dr. Parran elaborated on a great deal. The alternative as we conceived it in the present proposal was that all persons, with or without income, under certain levels should be insured (as Mr. Roosevelt expressed it, it should be an insurance system) and that would include people on relief, dependants of all sorts, and in that case their premiums, I say, would be paid out of tax funds.

But there is another possibility which can be considered, which was debated yesterday, and I gathered the opinion was rather favorable to it, that possibility the public medical service ought to be regarded as a separate and distinct thing from health insurance, but as I gathered Dr. Parran's argument, it might be considered as an alternative to health insurance.

Have you all got copies of Dr. Parran's argument?

Before we consider this we probably ought to consider a thing that is very closely allied to it and that is the scope of the medical benefits, because he brings in certain benefits for medical service that might be considered together, both for public medical service and also for health insurance. You might keep the two things in mind. That is beginning with page 17. It goes right into Dr. Parren's proposals and also the very fundamental thing on the health insurance side. That is item 19 on page 17. Do you want to read the longer edition of Proposal I or not?

DR. FALK: You have already read the text.

CHAIRMAN SYDENSTRICKER: Yes. Do you care to elaborate on Proposal No. 1? I thought I would get Dr. Leland to do that.

DR.FALK: Perhaps I might merely summarize as briefly as possible the contents of the appendix on Proposal No. 1 and perhaps Dr. Leland would be willing to do the same for Proposal No. 2.


DR. FALK: The scope of the benefits as embraced in Proposal No. 1 would cover, as indicated at the top of page 18 of the shortened memorandum, six types of services, with the understanding that this is not a proposal that all six of these, or any particular fraction of these six, of necessity must be embraced in any state insurance plan. The proposal is simply that a state insurance plan may provide for all of these six benefits as it chooses and that Federal aid will be available toward the cost of any or all of these six.

CHAIRMAN SYDENSTRICKER: May I ask a question, Dr. Falk, to make it perfectly clear? As it is phrased and as you said, the state health insurance plan, therefore, can omit care and health and sickness by general practitioners, specialist service, and can include only hospital.

DR. FALK: It may be merely a hospital insurance plan in a state that chooses to make it such, or it may be, as the British system is, a plan to furnish the services of only the general practitioner, or it may deal with a fraction of the medical service, and that fraction of the medical costs, the intent being simply to delimit the maximum cost and the maximum cost for which the Federal Government would offer to furnish aid to the states, the choice in respect to the scope of the benefits being left to the state, except in so far as they must meet certain broad principles which are laid down by the Federal authority before Federal aid may be available to the state.

Obviously it would be absurd to recommend that all six of these benefits must be covered in every state, or uniformly throughout every state. There are states or large areas in many states where in the hospital benefit could not be furnished. It isn't there. The hospitals aren't there to furnish the benefit. You couldn't furnish specialist service in rural areas in may states, for the reason that the specialist aren't there and there probably is not the financial resource with which to pay for the service.

A good deal of flexibility must be left in the matter, and our thought has been that the choice must be made in the final analysis by the state.

Briefly considered, the qualifications surrounding the several types of services are these: That the general practitioner service should be available substantially without limit, that is to say, shall be available without any waiting period, and under such conditions of payment of remuneration that there is not financial barrier between that general practitioner and the patient who has chosen him for service. You will find in the text of the appendix where that point is discussed that there is the additional provision in respect to the requirement that there may be introduced in a state system provision for periodic post graduate, or equivalent study or observation by the physician. That is a proper part of the cost of furnishing general practitioner service, and Federal aid may be available for it.

CHAIRMAN SYDENSTRICKER: That is the only thing it is available for? It is not for specialists or members of hospital staffs?

DR. FALK: Not at present. As we have proposed it, it applies to the general practitioner. I think the essential characteristics about general practitioner service is that it should be made available without waiting period, or without limitation, in respect to the type of condition for which the service should be available.

In respect to the specialist services, as I recall we have already dealt at some length with the definitions, or procedures by which specialists would be defined and qualified, and in respect to the procedures of remuneration. There is one other restriction which has only been mentioned very casually and needs to be called to your attention. This is mentioned on page 38 of the longer document where these points are discussed: "(1) the medical benefit shall include the specialist only when the patient has been referred to him by the general practitioner," the intention being to make it possible to deal on some budgetable basis with the provision for specialists service, and an attempt to control in a measure self-diagnosis and self-trotting of patients to the specialist.

Dr. Roberts has already touched upon what he considered an undesirable effect of that limitation, which I presume will need some further discussion.

Then there is the second limitation that the total expenditure for the services of specialists shall be limited on an appropriate basis in order to restrain excessive use of the specialists." That limitation does not mean that the state is limited as to how much it may choose to spend of health insurance for specialist service. It is a limit only as to the maximum sum toward which Federal aid will be available.

Hospital, clinic, and laboratory services are defined at some length in appendix 5. As used here the term "hospital" is meant to include more than merely bed and board. It covers all types of services which hospitals customarily furnish. That is merely a procedure of convenience, in that it is easier for us in estimating costs, or in budgeting, to use a single all-inclusive item for the cost of care furnished to the patient when he is hospitalized.

DR. HORSLEY: That does not include professional service?

DR. FALK: No. Practically everything except the service of the physician who is primarily responsible, although it does include the services of those physicians who are employed by the hospital. It would cover house physicians, resident, or interns.

I should like to add that we recognize quite numerous differences of practice in respect to what is meant by hospital care, what is covered in different parts of the country, so that we have pointed out that in one region or another certain types of care which we included in the term hospital would not ordinarily be furnished at the expense of or by the hospital in a particular area.

The budget item for hospital care would be appropriately cut by that item and that fraction would then be administered separately. For example, in some hospitals x ray service is a service of the hospital; in others it is a service of the independent private practitioner and the x ray is not covered by the hospital. Our hospital budget figure included all of those services, but it can be split and administered in various categories instead of in a lump sum.

We have limited the hospital care in this way, that no insured person may receive at the expense of the insurance fund more than three months of hospitalization in a single fiscal year, and that the insured person shall pay either 10 or 15 per cent of the cost of hospital care beyond twenty-one days and up to ninety days of hospitalization. We have attempted there to set down reasonable limits which on the one hand permit the patient to receive all general hospital care that is ordinarily necessary and yet not permit the general hospital to be used as a place for permanent residence of chronic invalids. That could be done, but our cost figures have not attempted to deal with that side of the problem. We have done it by delimiting the total amount of hospitalization furnished and by requiring the patient to pay a fraction of the cost beyond a certain day.

Actual experiences of what that means indicate that the limitation to ninety days does not exclude any - or to put it in the converse form, the allowance of ninety days covers practically all needs for hospitalization, only a small fraction of hospital care is excluded, and the requirement that the patient shall pay part of the cost after twenty-one days of hospitalization does not place any undue burden of costs upon the patient whose medical requirements actually indicate a longer hospitalization than twenty-one days.

These requirements, you will recognize, apply to general hospital care and not to mental disease hospitalization or to tuberculosis hospitalization.

I think that the clinic and laboratory type of service are primarily problems of methods of arranging for payment for service, and I think those have already been discussed at considerable length.

Specified dental services are included as a permissive form of benefit, but there we face of necessity a problem which is very peculiar and unlike anything else in the scope of medical benefits, and as you probably all are aware now, we are tentatively suggesting for further consideration by the Dental Advisory Group that dental benefits be considered in two classes to meet the impossible issue which we would otherwise face on costs, and an unlimited dental service would cost as much as physician's service and hospital service and perhaps nursing service combined, or more. It is beyond the means of any system that we can devise. So at the moment we are considering dental benefits in two classes: Certain minimum essential dental services which should be available to all insured persons and their dependents, the payment for them being guaranteed by a flat sum which is allowed in our budget, and that the additional dental service shall be available except that the cost shall be divided between the insurance funds, which means all potential patients, and the actual patient who actually receives these additional dental services. There are very complicated problems involved there, but those are being worked out with our Dental Advisory Committee and I think we shall make some progress there.

The nursing service in the home is considered then as a separate item because the nursing services in the hospital are covered in our hospital provisions. The nursing service in the home will be available on the prescription of the physician, but we limit it, as we have done in the case of hospital care, in this fashion: "In a single fiscal year, continuous (day or 24-hour) service shall be provided without direct charge up to a maximum of 60 days if a trained or untrained attendant is used; 33 per cent of the cost of nursing service beyond these periods shall be paid by the insured persons, and that nursing care in the home shall not be available to an insured person beyond six months in any single fiscal year," those limitations being absolutely necessary if the cost of nursing service is to be kept within reasonable bounds. Perhaps we have been even too liberal as it is.

Then finally in respect to drugs, medicines and medical benefits, we have shifted our position considerably since the first meeting of this Board. The matter was considered in considerable detail by the technical staff, and we were in general in agreement that almost no administrative procedures that we could devise could give us confidence that we could control the use of drugs, medicine and commodities, even though we had already laid down the requirement that those shall be limited to such commodities as are prescribed by the physician. Then we considered the alternative which was mentioned briefly at the preceding meeting, that only such drugs, or medicines, or commodities as involve, or may create serious financial burdens to the patient shall be included as medical benefits. It drastically reduces the costs, completely eliminates the question of whether the doctor will hand out a prescription rather than make an examination or diagnosis, and so on, and it vastly simplifies the need for administrative check.

Obviously we cannot propose that a state health insurance system shall not offer drugs and medicines, or prescribe drugs and medicine as medical benefits. We simply propose that no Federal aid shall be available except for the unusual, expensive types of items. In that respect and on that point we propose that the proper medical authority of the state system shall prepare a list of the types of medicines or commodities which are inherently expensive, or which in particular types of conditions or diseases might involve unusually heavy expenses because the reagents or materials being used are expensive, or because of their long continued consumption or use, and that those items shall be available on the prescription of the physician. It means a very drastic change in the estimated costs, and we think a very significant simplification of both professional and administrative problems. It, of course, increases certain political difficulties, but we felt that it was not our primary concern -- that ours was primarily the other type of concern.

CHAIRMAN SYDENSTRICKER: I should like to hear from Dr. Leland on the proposal that he and Mr. Simons have made, and we will call it Proposal No.2. It is summarized on pages 18 and 19 of the short memorandum of the report and is given in detail in appendix VI, page 100. Dr. Leland, could you state that -- I don't want to keep you down as to time -- so that we can understand it fully and clearly?

DR. LELAND: Of course, it is apparent to you that this is a minority proposal and since we recognize the neutral position of the Chairman and the eloquent presentation by Dr. Falk of Proposal No. 1, I trust you will bear with a less able discussion of what we believe in Proposal No.2. Furthermore we are grateful to our adversary for stating so well certain broad things which we believe ourselves. The point at which our disagreement begins is the point at which medical benefits may be paid for as provided for in the system.

I suspect that perhaps the reading of six pages would require no longer time than has already been consumed by the other side, so perhaps I might continue.

"One fundamental proposal for change in the administration of sickness insurance, viz. to require the insured to pay a portion of the cost of medical care at the time the services are rendered, has recently been widely urged in many countries. Because this proposal indicates an important change in attitude and appears to have arisen out of a desire to meet some of the greatest defects in existing systems of sickness insurance, it would appear to justify a thorough consideration by any nation contemplating the adoption of sickness insurance."

We offer this for consideration; we are not urging it as a proposal that must be accepted.

"The proponents of sickness insurance claim that such insurance is justified by its ability to transfer crushing individual burdens to a sufficiently large number of persons so that the burden on any one is not heavy. There seems to be little if any dispute on the fact that the burden of minor diseases is already fairly well distributed and can be borne by the individual without any change in existing social machinery. Such diseases constitute about 80 per cent of all cases of illness. The remaining 20 per cent incur a heavy burden on the cash resources of those with low incomes.

"The experience of all existing systems of sickness insurance seems to justify the conclusion that the larger part of the insurance resources are expended in meeting the burden of the 80 per cent of illnesses of a minor character which are already fairly evenly distributed and for which social relief is less needed. There seems to be considerable proof that insurance increases the insurance expenditures for these minor diseases as it certainly seems to increase the demands for medical attention for minor disturbances."

You will note I am not stating definitely that there is an actual increase in morbidity, although there appears to be in some systems an actual increase in recorded morbidity, which is something different, but at least there seems to be an increase in the demands for service.

"The inevitable result of this is that all such systems of insurance fail to meet adequately the problem of distribution of the burden of the 20 per cent of all diseases which are serious in character. The individual is left to bear much of this cost while hospitals, sanatoriums and other agencies concerned with methods of carrying this burden must continue to assume the remainder of the cost of much of the serious and protracted disease load.

"The general recognition of these facts by a large number of students of the workings of sickness insurance in many countries has resulted in proposals that are now receiving wide attention in influential circles within these countries. These proposals seek to modify the standard type of insurance in such a way that it may be better suited to achieve its avowed purpose of more equitably distributing economic burdens of illness. The central idea of all these proposals is that a larger share of the burden of minor diseases must be borne immediately by the individual without the intervention and expense of the collection and distribution of insurance contributions or premiums. It is urged that this be done by requiring the patient to pay a portion of the cost of medical care at the time the service is received. This may take the form of a direct payment up to a reasonable limit during the year, to be made when the service is required.

"This method would so conserve the resources of the entire scheme as to make it possible either greatly to reduce contributions or premiums and at the same time to reduce the consequent cost of collecting, administering and disbursing the insurance funds, or to give much better care for the really serious diseases and to expend larger sums in preventive work.

If a sickness insurance system should be adopted such services as regular health examinations, immunization and other preventive medicine measures should be exempt from any such individual immediate care.

"The exact methods of applying this principle may take various forms. The French system and the extensive voluntary German systems pay only about 80 per cent of the cost of medical care. This has restricted many of the abuses that characterize plans where the entire cost is distributed through insurance, but fails to distinguish between minor and 'catastrophic' illnesses.

"Other suggested plans provide for a minimum annual expenditure to be paid by the individual patient before drawing on the general fund. There are many suggestions for a further abandonment of the complete distribution of the insurance system income and the substitution of a modified compulsory savings plan. It has been proposed in this connection that about 80 per cent of the contributions or premiums of the individual be segregated and that if any portion of this remains unused at 60 to 65 years of age it be returned to the individual in some form. The 20 per cent which would be pooled in the sickness insurance fund would be drawn on for any serious illness.

"It would seem that all such details would have to be varied to suit local or state conditions or the objectives set up. Illustrations of the working of many such proposals now exist and offer opportunity for study."

Then we cite some literature which we needn't take account of here. If any of you are interested in that literature, we will be glad to have you look it over.

"Provision in the specifications for a Federal permission act for the United States (submitted for study November 14) to the effect that the cost of drugs and portions of hospital care should be paid by the patient at the time they are procured seems to be a first step in the recognition of the principle that at least a portion of the cost of medical care should be paid by the insured at the time the service is procured. This principle has already been adopted in some other sickness insurance systems. The 'deposit' contributors of the British system illustrate the possibility of keeping individual records and limiting relief to the amount contributed by the individual. The payment of part of the cost of medical care by the insured is also recognized in many systems. All systems really require an individual account to determine whether the applicant for medical care is a paid-up contributor. Such a distribution of funds in the central treasury would not greatly complicate record-keeping which at best under any sickness insurance system is very complicated and burdensome.

The many experiments by medical societies now in process in the United States furnish a wide variety of additional illustrations of this principle. In most of these the employed worker is expected to meet at least a portion of the immediate cost of treatment of minor diseases at the time of treatment. There may be adjustments according to standards that have already been established in some places in the amount of such payments and the utilization of existing institutions for the giving of such treatment, in certain cases, with or without charge. The problem in all these experiments has arisen only with regard to the more serious illnesses and operations.

"It would appear that the cost and complication of administration would be greatly reduced if this general principle of payment at the time the service is rendered were applied to the treatment of minor diseases.

"It is manifestly impracticable to enter into any detailed discussion of the methods of applying so fundamental a change as has been described until the principle itself is recognized as desirable.

"Judging from the writings of those who have advocated and observed the operation of this principle elsewhere, it would seem that the practical application of such a provision should be seriously considered by those who draft the legislation if and when such legislation is proposed.

"If sickness insurance is adopted in the United States and the principle described above is accepted as a part of the regulations, administration of this provision might be undertaken along one or both of two different lines.

"One method which might be considered would be that a definite sum, for example $10 annually, be placed as the limit to be paid in cash by the insured at the time medical services are received. This method may be open to the disadvantage that it would encourage the tendency existing in Workmen's Compensation and in some other systems of sickness insurance to exceed this sum by a small amount in order to come within the scope of medical relief furnished by the general fund. However, one safeguard against this has already been set up in the course of the discussions in another field by requiring a longer waiting period for cash benefits, if these are to be given, and the provision that these cash benefits, if these are to be given, and the provision that these cash benefits are to begin at the end of the waiting period. If the same principle were to be applied here and the general fund would be called upon only after the exhaustion of whatever amount might be fixed as proper to be paid within the year, the method of applying this principle would then be consistent with other provisions in the suggested draft of specifications for the Federal Act.

"The second method of meeting this is to require an initial payment of, for example, fifty cents or a dollar for the first visit in all cases of illness and no payments for additional treatment. It has been urged against this that this method would maintain an economic obstacle between the physician and the patient in the early stages of disease where treatment is most important. This objection would, to a certain extent, be offset by the provision already referred to in another portion of the submitted draft or abstract that no charge would be made to the patient in cases of preventive treatment including general health examinations at least once a year.

"These suggestions are offered only to indicate that there should be no greater administrative difficulties in the application of this principle than in the universally pooled compulsory fund system."

This idea of the partially self-sustaining system, or what not, seems to have permitted certain further considerations by Dr. Parran who has developed that idea a little further, and certain things that I have to say in discussion of this I perhaps could say a little better in connection with the discussion of the proposals of Dr. Parran.

CHAIRMAN SYDENSTRICKER: Dr. Sinai, do you want to take the floor a little while?

DR. SINAI: I should like to discuss the catastrophic illness, that phase of this particular recommendation, and it also applies to Dr. Parran's proposal. I think we will pretty much agree that if it were possible to so set up a system that the catastrophic illness could be included on a reasonable basis in the insurance system that would be the ideal. Actually when it comes to the consideration of the application of such a proposal, trying to make it work, to make it function, we see in this proposal particularly the setting up of an obstacle to prevent the abuse of the physician's time in order that he may devote himself to the 20 per cent of the illnesses that are regarded as catastrophic. That to me is a reversal of all the advice which has been given to the public by medicine and by public health officials -- the advice to see your doctor early, the earlier the better, in any illness -- and that virtually sets up the principle that if you do not see your doctor early in any illness, it means self-diagnosis, self-medication, and everything that carries with it.

I should very much like to hear how the so-called bagatelle case is to be defined in any practical system of insurance. In other words, what is to be set up as the dividing line between the minor and the major respiratory illness, between the minor and major illnesses of any type, and to see how a system would be administered so that dividing line would really mean something in the financial set-up of health insurance. It would have to be defined, for example, on a medical basis. It would also need to be defined according to the size of the family, according to the income on an economic basis, because what is a catastrophe in a family of seven or eight or nine, with a certain income, would not be regarded as a catastrophe in a family of two with the same income, and yet the insurance system would have to keep track of both of these families and know when catastrophes are occurring in one and not in the other.

When it comes to the proposals for the operation of such a system, the first one that there should be a small charge levied against the patient at the first visit, perhaps the charge for the first visit, or a small charge for a portion of the cost of that first visit, that, of course, assumes that under a system of insurance there is going to be abuse of the privilege of contact with the physician during illness. If we set up that economic obstacle and require the patient to pay the first cost, or a portion of the first cost, I can see developing in this system the very same thing that we saw in the analysis of the British system, the analysis of the problem of certification. I can see developing here a system of rebates.

You remember, Mr. Simons, in looking into the records of certification in Edinburgh, we would run down the list of names of the physician, finding that 16 to 18 per cent of the patients had been certified as disabled. Coming to one that ran 50 per cent, we said to the clerk, "Why when they average 16 to 18 per cent does this man show 50 per cent disability certificates?" The clerk said, "New man in the district, building up a practice."

I can see here too "New man in the district building up a practice," and old men giving rebates in order to build up their practices in order to attract patients, because they are not making that minimum charge or that first call charge.

It is going to subject the physician to as much patient pressure in this case as I am afraid the physician is subjected to under the British system where he is burdened with the certificates of incapacity.

When it comes to the consideration of the second method, the payment of any excess above $10, or any other sum, it means that immediately after the barrier drops, after that $10 is paid, and the greater proportion of the families will pay $10 and more, it means that there will be an incentive to rush to the physician just as soon as that economic barrier drops as a result of the payment of $10.

Finally having learned a lot about the very hot poker in England, the hot poker of cash benefits and medical service mixed up, we very carefully skirted cash benefits in the program that we have been working on here. Having skirted that we immediately walk over and pick up the hot poker of old age pensions, tying those to health insurance as they would be tied up under this third proposal, and then about the only conclusion to which I can come is that we haven't learned very much about hot pokers from the British experience and the experience over the world.

I am most interested here in the statement appearing on page 105, toward the bottom of the page, "This objection would, to a certain extent, be offset by the provision already referred to in another portion of the submitted draft or abstract that no charge would be made to the patient in cases of preventive treatment including general health examinations at least once a year."

I can't conceive how that provision would meet the previous objections at all unless the wider view of preventive medicine would include the early consultation with the physician, no matter what may be the illness, as a part of the field of preventive medicine. If that is the definition of preventive medicine, then this whole question of paying a portion is eliminated. I would be most interested in having Dr. Leland tell us whether preventive medicine would or would not include first consultation-I mean for the common cold, or any other condition requiring early diagnosis or early consultation with the physician.

In other words, what I am getting at is that while in theory insurance against the catastrophe illness might be regarded as the ideal, in actual practice it would so multiply your administrative procedures, and if the physician thinks that in any insurance system in the world he is being subjected to scrutiny and control, under a system of trying to determine what is and what is not a catastrophe, I am afraid the physician would be subjected to about ten times the amount of control that he is in England or in any of the other systems of health insurance where the barriers are down, where the insurance systems as far as early consultation with the physicians make it permissive.

CHAIRMAN SYDENSTRICKER: I am going to ask Dr. Falk to speak next and then I want to turn it back to Dr. Leland or Mr. Simons, so that you gentlemen can get at least the point of view of the staff before you give your views on it.

DR. FALK: I should like to touch upon one phase of the proposal, to which Dr. Sinai has not referred, and which I think is very seriously involved in these matters and which is in part responsible for my failure to be able to agree with Proposal No.2.

It is touched upon briefly but it is implied in the statement which I want to choose as the text, near the end of the paragraph on page 103 entitled, "Some Suggestions as to Administration." Dr. Leland and Mr. Simons recognize, of course, and we all recognize that their statement in respect to administration is only a suggestion, to touch on it, but they recognize a point which they cover in the first complete sentence at the top of page 104: "Such a distribution of funds in the central treasury would not greatly complicate record-keeping which at best under any sickness insurance system is very complicated and burdensome."

The administrative set-up that would be considered or implied in any such proposal as this would have to be designed with these objectives in mind. I should like to bring to your attention what runs through my mind when I analyze proposal No.2 on this feature of it, the administrative implication, record-keeping, and set-up. I want to offer it to you in the form of contrast between what, as I see it, this means as against what Proposal No. 1 means, not only in respect to the record-keeping in the central agency, but the record-keeping on the part of the physician or other practitioner.

As Proposal No.1 stands without limits of this kind, the essential records that are required are the records that the employers keep, or other similar persons who are responsible for the payment of the patients' contributions. If we use the British system he affixes a pseudo postage stamp to a card. The patient has a record which shows that his employer has been paying his contribution. You have an automatic check-up as to whether or not payments have been made, and the patient chooses a physician or calls for service when he wants it. If there has been a failure to pay the contribution that comes out as soon as any demand for service appears, but the essential characteristic of Proposal No. 1, all its implications for administration and finance is a system of insurance in which certain amounts of money are pooled each year and spent each year. There is no capitalization of risks, there is no accumulation of surpluses except for operating purposes, there is no necessity to keep any record as to the amount that has been expended from the pooled funds for any particular individual patient. All that is involved in the central administration is the receipt of certain funds, a record of who they came from, and the disbursement of funds to those who furnish the services other than the accumulation of operating reserve. I am avoiding obvious details there, but in principle it is an income and outgo in an extremely simple fashion.

Here, on the other hand, we have something that is very much in certain fundamental respects like what we had in the British system and precisely what we have been trying to avoid. The British system is essentially a system of book-keeping, very much like that which a life insurance company has to carry, very complex and very elaborate, as anyone coming from the outside who has tried to follow the bookkeeping of the British system very soon discovers, or even if he isn't an outsider, as the government actuarial and administration of the British system admit that they have the greatest difficulty in following the tortuous channels through which their figures go. It is almost impossible to find one's way in the details of bookkeeping of the administration of the British system from that point of view, because when the British system was set up, under the pressure of the Friendly Societies for their inclusion and incorporation under the British Act, Lloyd George gave way and took them in. The Friendly Societies had been operating for a very long time furnishing systems of insurance against two types of risks, namely, loss of wages and medical costs, on a capitalized basis, where each individual, so to speak, started an account when he entered insurance and closed it only when he died. When the British system was established and took unto itself the Friendly Societies', or Approved Societies', administrative agencies, it took over that whole burden of taking in that whole system of capitalized risk. The obvious advantage of it has been that the reserve built up for each insured person in the Friendly Society in which he has chosen to be a member can be kept as a record and transferred with that insured person wherever he goes, from one Friendly Society to another, one Approved Society to another, or one area to another, or from one branch of a Friendly Society to another.

That is the reason the British system is so enormously complicated in its record-keeping and its financing-because it took over an insurance system that had no bearing upon the real needs of sickness insurance.

Here I think, if I am right as to what Dr. Leland and Mr. Simons have in mind, that the adoption of proposal No. 2 would introduce no complications of bookkeeping or record-keeping, or very little beyond what one finds in the British system, and I dare say they are right, the maintenance of records for each individual for long periods of time and perhaps even the eventual return to him of a certain small fraction of the funds which he hasn't used up for himself is a totally different thing from what we have been talking about in our attempts to simplify administration.

We have built up our whole system of insurance, our concept of the actuarial basis, first by what is well established, that the sickness insurance does not require capitalization of risk, it does not require any permanent record-keeping for the individual insured person, and it does not require any system of records, either as to how much money the insured person has spent for himself or how much money the insurance system has spent for him or for services rendered to him. We have wiped out all that. We have merely set up a system which records who the insured person is and whether or not the premium has been paid, and on the other hand the disbursements of the funds to those who furnish the services.

So I would summarize the point that I want to make in this fashion, so far as I can think it through at this time: I must disagree fundamentally with the statements and the implication that this does not involve any important change in bookkeeping or record-keeping. I think it involves a profound change in the complexity of the administration, both on the part of the central authority and on the part of the physicians or other practitioners who must keep records of how much money they receive and must certify those records as to how much a patient has spent for himself, and it will introduce a very serious change in our estimates of costs which we allowed for administration.

To be sure, no system of health insurance such as either Proposal No. 1 or Proposal No. 2 contemplates is going to be made or broken on the cost of administration, but it does mean a shift from perhaps 4, 5 or 6 per cent as the cost of administration of medical benefits on the one hand to something like the British system which is 14 to 17 per cent on the other hand. As I said, I introduce that not because that difference in costs of administration will make or break the system, but because it illustrates; if you try to think of what that much difference in cost of administration means in bureaucracy, in red tape, in problems of administration, that difference, of course, will give you an idea of how it seems to me the implications of this proposal would bring consequences in respect to the administration of the system.

CHAIRMAN SYDENSTRICKER: I think that now we ought to give Mr. Simons and Dr. Leland a chance.

MR. SIMONS: I have been very much impressed with the wide extent to which the European system has been discussed and it has given me the impression that there is a feeling that there should be some plan for shifting the costs of medical care, or of a saving, or something of that kind. I am not wedded to any one of these plans.

CHAIRMAN SYDENSTRICKER: There are two or three points.

MR. SIMONS: Any one of them is just the same. The whole principle is that we shall take this very, very large sum of money which I think every one will agree is spent on minor diseases and spend it instead on those diseases that are really burdensome. That is the most important thing and the thing that is coming to be recognized as necessary in many of the existing systems.

I want to run over these points that are raised. I some how can't get frightened at this prospective change in cost of administration. In every system you have to have your cards stamped, and you have in some way or another to keep an individual account. You can't avoid it. It is the only way that you can tell if a person is eligible for insurance. It means no tremendous extension to suggest that you either enter on that card or in other ways keep some record of expenditures, and I believe that the cost of administration would be but a slight fraction of the sum that we would have to spend in caring for the diseases that are now the least burdensome.

The next thing is, as Dr. Sinai says, that we can't tell the distinction between the minor and the major diseases as a medical proposition. In this problem it is not a medical proposition for our administrative purposes. It is a financial question. When a certain expenditure has been reached, it automatically becomes a major disease. In other words, insurance is a method of adjusting financial burdens, and this proposes to take up the heavy burdens first before you take up the light ones.

The situation in Edinburgh raises the question as to whether or not there would be pressure for rebates, and so on -- I don't exactly get the point of that. I suppose the idea is that this physician would charge up this fellow with the $10 or the $5 that is required the first year and hand it back?

DR. SINAI: No, just rebate the cost of the first call.

MR. SIMON: Well, he would give it back to him. He would have to make a record of it. Somehow I just don't quite see that, that is going to be a universal proposition. There is nothing near the pressure there that there is when the insured wants to get several days of cash benefits that exist in the British system, and which we have gotten rid of, or when he wants to get a bottle of medicine for himself, or his friends, or his family, which seems to be equally difficult, but not on as large a scale as in the British system. While it may be true that the examples given here were very exceptional, there is a universal cry that they turn out gallons of liquid petroleum and a whole lot of things of that kind that go to the entire neighborhood, and there are not a few examples of where it works a rebate on the druggist and ice cream cones are taken instead of medicine. It can be worked and they know how to do it, and there are even instances of where they went out and sold the medicine and bet on the races.

Now just a word or two. In the system as we have laid it out it seems to me that our weakest point lies in what we have talked about before, or one of the weakest points, that as soon as we begin to reduce the amount that is payable on insurance we begin to drop the most valuable sections, and we come back finally to what I think everyone will agree is the weakness of the British health insurance, that is one that is condemned by the British Medical Association and everybody else, and that is that it is confined simply to G.P. service, no more and no less, for minor diseases. If we can instead of that pick up the burden which is the real one and care for it, and leave the insured to bear at least a portion of the burden that is by no means crushing him at the present time, it seems to me that we could start out in this country somewhat ahead on a very basic point of other insurance systems.

DR. CUSHING: You have emphasized that very much, haven't you?

CHAIRMAN SYDENSTRICKER: I personally feel this way, and I will be perfectly frank about this, the ordinary run of illness is not an insurable thing at all. It is something that occurs more or less frequently. Everybody can predict - well, I know I am going to have a cold about once or twice a year ---

DR. CUSHING (Interrupting): But you only have your appendix taken out once.

CHAIRMAN SYDENSTRICKER: Yes, that is it. You illustrate that point exactly. Now the appendix was a terrible catastrophe for me and that is something I ought to have been insured against, but the ordinary little tummie aches, and results of indiscretions and things of that sort - temporary affairs - are pretty predictable and theoretically insurance does not apply to that type of thing at all. It applies to the unforeseen, unpredictable things of considerable size. I think that Mr. Simons and Dr. Leland are entirely right in their theory, and I think that probably Dr. Falk agrees.

DR. FALK: I agree completely. I think we should say that the staff is in absolute unanimous agreement in principle on that thing.

CHAIRMAN SYDENSTRICKER: And the only thing that we are sorrying about is the carrying of that into practice.

I think one of the things that was not particularly mentioned by any of the discussants is if you insure against diseases of certain types and kinds you are laying the profession open to the same sort of temptation that the Workmen's Compensation Law laid them open to. You might have bronchitis and get a complacent doctor who would say, "We will call it pneumonia." It is very easy to specify pneumonia. He wants to help you out and so he calls it pneumonia and you stay in bed a couple of weeks more or three or four weeks.

I quite agree with Dr. Leland and Mr. Simons. Your theory is absolutely sound and I think every insurance man would agree with you. You go to any insurance expert in the country and he would agree with you, but how are you going to avoid the opportunity for venality? That is what I am scared of and I am thinking of it from the doctor's point of view and from the patient's point of view.

MR. SIMONS: It would be perfectly foolish were this offered as a suggestion to attempt to outline any methods of administration. The only thing is it seems to me that it would be unfortunate if in preparing such a plan we do not anywhere put in a suggestion of this possible way of meeting it, for further study and for investigation of states. I don't think we can go further. We couldn't work out a complete administration proposition, but in view of the fact that the German system is probably going over the that, if I can understand the Hitler proposals, very shortly.

CHAIRMAN SYDENSTRICKER: I don't think that is a very high commendation.

MR. SIMONS: I tell you it breaks my heart to have to agree with him, I will admit it, but it only indicates that he seems to be a fairly good politician and it evidently strikes him as the thing that will be popular.

CHAIRMAN SYDENSTRICKER: There is one thing that disturbs me a great deal. I had thought that the principle of the French system was pretty good. All the patient has to do is get his money from the insurance fund to pay the doctor. I didn't travel in France because the thing varies greatly in different parts of France, but I was in Paris for sometime. Some friends of mine there were well acquainted with the physicians and the management of these cases that they have there, and an extraordinary thing happened there that I observed and it really shocked me. The doctor has to fill out a blank saying how many visits he has made and what medicine he prescribed (he doesn't say what is wrong with the patient, he can't say that, of course, in France) and the insured people bring these little slips of paper into the doctor to get the money. There has grown up a considerable abuse of that thing, in that 50 per cent of the patients in these two large Paris cases were referred to physicians hired by the insurance fund to check that. They looked at it first and if the visits didn't look like they were too frequent they let it go by, but 30 per cent of them required the insured person to come to the office and be examined by a group of specialists, and the physician's work was checked up to this extent. That is pretty bad.

MR. SIMONS: That is an inherent problem in the fee system.

CHAIRMAN SYDENSTRICKER: It isn't the question of the fee system alone. It simply offers an opportunity in this sort of a thing where you have got to have a diagnosis and things of that sort in order to get it done. You have got to check up on the cases that are necessary. The minute you introduce, it seems to me, the diagnosis as the basis of whether or not you pay for a thing you are up against that problem. I wish it weren't so because I think the theory is thoroughly sound, if we could devise some way of doing that without having the doctors subjected to continuous supervision and check-up, which would be very obnoxious.

DR. CUSHING: As a senator said yesterday, there are scalawags in every profession from politics down, and one man of easy conscience doing this, of course, rouses suspicion against the whole profession. That is why I read that letter this morning from that young man. He said there has to be somebody there to watch his brothers. So that this thing builds up. The doctor is a crook, and, therefore, he has to be watched. So that I think almost everywhere the system is about double---

CHAIRMAN SYDENSTRICKER: Of course, the scheme that we are trying to outline here is to leave the practice of medicine exactly as it is. We are not interfering in the slightest bit with the practice of medicine.

DR. CRILE: Which scheme are you talking about?

CHAIRMAN SYDENSTRICKER: The whole plan we are talking about. We are not disturbing it in the slightest bit, but are simply enabling a large proportion of the people to budget against the cost of medical care. When we introduce the subject of diagnosis I get pretty scared about it.

It is possible that we may finish tonight and I should like to devote the rest of our time, if you please, to a further discussion of public medical service, particularly along the line that Dr. Parran suggested. Shall we meet at eight o'clock?

...The meeting recessed at 6:00 p.m. until 8:00...