Document pp8eqna1nmKLOGLEJ1MqXaZKB

Health Policy Advisory Center No. 52 May 1973 HEALTH / PAC BULLETIN Editorial FEDERAL HEALTH POLICY AT THE CROSSROADS No sooner had Richard Nixon begun his But the problem is as much theirs as it is second term than he startled the country his. Great Society health programs, of by announcing bold cuts in health, educa- which they were architects, failed to tion, welfare, poverty and other social and achieve significant health gains despite domestic programs. In so doing, he took vast outpourings of money. Even more im- steps to reverse growing federal involve- portant, they have been unwilling to face ment in domestic social problems - a pol- up to the irreconcilable conflict between icy of some forty years standing. meeting social needs at home and protect- Many believe that this move is person- ing, maintaining, and extending the " Em- ally and politically motivated - that the pire " abroad. In fact, the vast increases President is anti black - and anti poor -, an in the cost of the " Empire " since World. indifferent, reactionary and even vicious War II have taken place under Demo- man. However, they ignore the growing cratic, not Republican, administrations. economic crisis in the country which forces Hardly less vociferous, and just as ex- Nixon's hand, as it would the hand of any pected, has been the hue and cry of the other president, Democrat or Republican, conservative or liberal, at this point in time. health establishment, especially its aca- demic institutional - sector, which has suf- For the roof is caving in on the over- fered badly at Nixon's hands. Its rallying extended American economy. The dollar cry, of course, is " Stop the Budget Cuts, " is battered on all sides - by international and its goal a restoration of the status quo competition, overseas military spending, and a return to loose foot - and fancy the continuing war in Southeast Asia, the spending. declining U.S. balance of trade, uncon- " Stop the Cutbacks " is an instinctive trolled domestic inflation, and worldwide cry to health activists as well. For it is dif- loss of confidence in American political ficult to see programs, however inadequate and economic leadership. Almost daily or costly, cut and their beneficiaries hurt business newspapers and magazines warn as a result. Not incidentally, many socially- of impending crisis and admonish Nixon concerned health workers who gravitated to " do something. " And he has tried to " do something " from dollar devaluation, to to the more innovative, if marginal, pro- grams are losing their jobs as well. The ping pong - and vodka diplomacy, to wage immediate response is outrage and a de- and price controls. But these measures sire to resurrect the protest movement of have been insufficient, so now Nixon has turned to cuts in the domestic budget, par- the 60's '. And, as if this could be done by invocation, various leaders of that era ticularly in health. Congressional Democrats, of course, have called for coalitions, marches, dem- onstrations and nonviolent action to turn have raised up their expected hue and cry. Nixon's domestic policy around. CONTENTS 3 Federal Health Cutbacks 20 Cutbacks in the Bronx But the strategies of the'60's will not work for the'70's. With hindsight, the pres- ent predicament has much to teach the health movement about the limitations of those strategies. First, it is clear that Amer- ica's health problems cannot be solved by a patchwork of narrowly - based federal health programs. Such an approach builds only small, fragmented, " win no - " constitu- encies. But more than this, it exacerbates racial and class antagonisms between taxpayers, who finance the programs, and the recipients, who reap their benefits. Second, it is now clear that the issue is not money. Over the last seven years, massive infusions of money through Med- icaid and Medicare have left health care unchanged, if not worsened, by the medi- cal inflation they have caused. Only the health of the health care providers has flourished as a result. The real issue is who controls the health system and to what ends. Unless the control and priorities are changed, similar infusions of money- whether they be from the restoration of cutbacks or establishment of national health insurance - will come to no better end. For those who would address this issue, the problem is one of building a constitu- ency. Until there is a strong base for such thorough - going change, health activists will forever be the tail trying to wag the health establishment dog. The temptation now is to short circuit - this process, opting instead for the quick and easy route of building broad " cutback coalitions. " But in choosing this route, the health move- ment risks putting itself in a defensive pos- ture, seeking to restore an indefensible status quo, making money rather than con- trol the issue, and fighting for the right of the research superstars, hospital adminis- trators and medical school deans to con- tinue to mismanage and misdirect both the health system and the federal monies com- ing into it. Building a base for thorough - going change in the health system will be a slow, arduous process, which must be done from the bottom up. An opportune place to begin is in and around those bastions of power in the health system institutions - which provide care for ever growing - num- bers of health consumers and jobs for in- creasing numbers of health workers. Here is where the real power in the health sys- tem lies, as well as the ability to meet the real health needs. Here too is where the vast majority of public monies are spent and misspent. In fact, institutional provid- ers are increasingly dependent on public monies (over half of all hospital income in the country is now paid by Medicare and Medicaid). To the extent that health institutions are publicly financed - , there is now a real basis for the demand that they also be publicly controlled - . In the long run Nixon's health policy may even unwittingly assist in building such a movement. For it is now the Admin- istration which has raised the issues of priorities, effectiveness, accountability and the inflationary impact of federal health spending. And while it would use these as rationalizations to cut back the federal commitment to health, the health move- ment must use them as cornerstones in building the foundations of a truly respon- sive and responsible health system. Like- wise, it is Nixon who has made clearer than ever the limits set on domestic and health spending by America's commit- ments to its " Empire " abroad. In so doing, he unwittingly reminds the health move- ment that, however strong, its success de- pends also on the success of a larger move- ment to change US policy not only at home, but abroad. Published by the Health Policy Advisory Center, 17 Murray Street, New York, N. Y. 10007. Telephone 212 () 267- 8890. The Health - PAC BULLETIN is published 8 times per year; January, February, March, April, May, Sept- tember, October and November. 3 special reports are issued during the year. Second class - postage paid at New York, N.Y. Subscriptions, changes of address and other correspondence should be mailed to the above address. New York staff: A. Sandra Abramson, Constance Bloomfield, Oliver Fein, Marsha Handelman, Nancy Jervis, David Kotelchuck, Ronda Kotelchuck, Howard Levy and Susan Reverby. San Francisco staff: Elinor Blake, Thomas Bodenheimer, Judy Carnoy. San Francisco office: 588 Capp Street, San Francisco, California, 94110. Telephone (415) 282-3896. Associates: Robb Burlage, Morgantown, West Virginia; Desmond Callan, New York City; Vicki Cooper, Chicago: Barbara Ehrenheich, John Ehrenheich, Long Island: Kenneth Kimmerling, New York City. 1973. 2 FEDERAL HEALTH CUTBACKS I. The Causes The Watergate affair isn't Richard Nixon's only problem. The President is likely los- ing sleep, as well, over the crisis of Amer- ican capitalism. The crisis is far more than an occasional article in the Wall Street Journal or a series of conferences of high level economists. It means life or death for many federally supported - health pro- grams, because one of the President's ways of handling the crisis is to slash federal spending on health. To understand the specific spending cuts, a more general ap- preciation of the crisis is called for. Fortune Magazine November ( , 1972), a leading corporate bellweather, warns of " galloping inflation, probably an interna- tional monetary crisis of vast proportions and, at the extreme, perhaps even another great economic recession. " Six months later Business Week (May 12, 1973) called for Nixon to cut 20 $ billion from the federal budget to avert such a crisis. The Wall Street Journal agrees. Behind these warnings lie a panoply of problems plaguing the US economy. OE First, the US is losing its competitive edge in the world market. Compared to American industry, European and Japan- ese factories are more modern, efficient and profitable. They can sell their products to the world's markets, including the US itself, cheaper than can American indus- trial giants. In sundry fields electronics - , home appliances, ship building - and auto- mobile manufacturing - American indus- try is being outpaced and outsold by more vibrant foreign competitors. The result is that American dollars pour out of the US to buy foreign products, creating a nega- tive US balance of trade and concentrating billions of dollars in foreign countries, es- pecially Europe. @ With its enormous wealth and power, the US might absorb these trade losses were it not for the cost of maintaining the " American empire. " Troops in Europe, B 52's - in Thailand, Navy bases in Japan and, very importantly, the immense cost of the Indochina war contribute to the enor- mous drain of dollars from the US. OE The recent emergence of multi nation- - al corporations has also exacerbated the problem. However much money they may ultimately bring into the US, in the short run they pump excessive dollars into the international montetary market. With all these dollars flowing out of the US, foreign governments and banks hold over 60 $ to $ 80 billion in US currency. With so many dollars, and with few profitable investment options, the dollars are rap- idly losing value. International capitalists have been converting dollars to German marks, French francs, Japanese yen and gold, thereby making the dollars worth even less. If confidence in the dollar as a stable medium of exchange goes much lower, international trade could experience multiple revaluations of currencies, erec- tion of tariff barriers, and a worldwide depression like that of the 1930's. Foreign investors are scarcely reas- sured when they look at escalating prices in the US. Inflation makes the dollar worth even less, thus aggravating the crisis. And American inflation is exported to other na- tions with consequent consumer and worker unease and political instability. So Nixon must act dramatically to reduce in- flation and convince world business that America's economy is under control. The easiest thing for him to do is to balance the federal budget. The federal budget has grown by leaps and bounds during recent years and gov- 3 ernment expenses have exceeded income at a rate to make even Keynesians blush. Two solutions are always at hand to deal with the problem: raise taxes or cut spend- ing (or some combination of the two). The US could certainly increase taxes, since its citizens are taxed less than citi- zens of many other industrialized coun- tries. And, according to the Brookings In- stitution, federal taxes have actually been cut three times in the last decade (1964, 1969 and 1971), reducing federal income by $ 35 billion a year in 1972. This provides little solace for taxpayers, however, since local and state taxes have been increasing, and more importantly and inequitably, there has been a sharp increase of payroll taxes (ten percent during the past ten years). The latter monies go to mandated social security programs, including health programs like Medicare. Nixon, however, does not want to raise taxes. Owing his loyalty (as well as cam- paign income) to corporate interests, in- creases in these taxes are out of the ques- tion. They would only be passed on to the consumer in the form of higher prices any- way, further fueling inflation. And owing his electoral success to millions of working class men and women who already bear the brunt of most taxation, Nixon is loath to jeopardize this support by increasing per- sonal taxes. Recent ( statements indicate that Nixon's hand may be forced on the tax issue anyway.) If tax increases are unpalatable, Nixon still has the option of tax reform or spending cuts. Tax reform is appealing to many Ameri- cans. Unfortunately, the large corporations and wealthy individuals who wrote the tax loopholes to begin with show no sign of rolling over and playing dead while their privileges are taken away. Both Dem- ocrats and Republicans are beholden to these groups; therefore significant tax re- form is likely to remain a seductive, but utopian vision.. The logic of Nixon's position leaves him, so it turns out, only one option: hold the spending line. Even this tactic isn't as easy as it looks. Some programs are beyond the reach of the Executive office and for all practical purposes the Congress (e.g., So- cial Security). According to Fortune Mag- azine (November, 1972), these virtually uncontrollable expenditures will increase by about 77 $ billion by 1977. As for the controllable portion of the budget, many point to the fat laden - De- fense Department (DOD) as a good place to begin slashing away. But it's not that 4 simple. Even without major new weapons expenditures (inevitable given Nixon's priorities), years of liberal opposition to the military draft have resulted in the " vol- unteer " Army. Unfortunately, its mainte- nance and support will cost billions. Mili- tary personnel costs already account for 56 percent of the DOD budget and, as re- cruits begin to get $ 288 a month starting pay, this figure will rise in the future. As it is, the DOD will spend $ 12.3 billion more in 1974 for its " volunteers " despite the fact that military manpower has been cut 37 percent. (These figures also include more generous retirement pay.) The problem is that a large military must be maintained if only to protect America's financial interests abroad; on this issue there is no discernible difference between Republicans and Democrats. The sobering truth is that the largest increases in De- fense Department spending in this nation's history occurred during the Kennedy- Johnson era (44.7 $ billion in 1961 to $ 78.0 billion in 1968). Thus, with large chunks of the budget out of reach of the axe, Nixon had to look for other spending programs to cut. When it comes to matching Nixon's political bi- ases to large, potentially expendable gov- ernment programs, social welfare pro- grams are hard to miss. Overall the fact is that, at least as a percentage of govern- ment spending, aero space - and defense- related spending has decreased from 53 to 34 percent of the federal budget during the last decade. It has been non military - spending which has leaped from 47 to 66 percent. Most of the increases, concen- trated in HEW, can be accounted for by Great Society programs. And when it comes to cutting down Health, Education and Welfare to size, health, having grown from $ 2 billion in 1964 to $ 22 billion in 1974, is an irresistible target. Aside from sheer size alone, there are additional reasons for cutting federal health spending. As surely as the average health consumer, Richard Nixon knows that the health industry has been the most inflationary of any major industrial sec- tor. By cutting health spending, Nixon hopes to save scarce treasury dollars as well as curtail health care inflation. More important perhaps, federal spend- ing on health contains an almost built - in escalator. This factor has already been seen with Medicare and Medicaid. Though less obvious, it also applies to service- oriented health programs. It's almost as dif- ficult for the government to build only one FEDERAL HEALTH SPENDING - FY74 TOTAL EXPENDITURES- $ 21.7 B MEDICAID 24% HEALTH SERVICES DELIVERY. - 4% MENTAL HEALTH - - 6% PLANNING & DEV. -1% MANPOWER - 2% RESEARCH - 7% MEDICARE 56% " UNCONTROLLABLE " SPENDING * EXCLUDING HEALTH EXPENDITURES OF DOD, VA, AND OTHER NON HEALTH - AGENCIES WHICH SHOULD BRING TOTAL TO $ 30.3 B. model health center as it is for someone to eat only one potato chip. As soon as one community is satisfied, hundreds of others rightly demand their due. And so it is with most federal health oriented service - pro- grams. Unlike shot one - cuts of other parts of the federal budget, cutting health is a preemptive, as well as an immediate sav- ing. A federal dollar not spent today on a demonstration project may save ten fed- eral dollars a few years hence. Finally, of course, in the real political world some are favored and some are not. There is little question but that the pro- ponents of missile bearing - nuclear subma- rines and even construction of new federal prisons carry infinitely more political in- fluence with Nixon than poor people clam- oring for better health care. The Health View from the White House Not only has federal health spending shot from $ 2 billion to 22 $ billion in the last ten years (a 1000 percent increase), largely as a result of the liberal Great Society health programs enacted during the mid- sixties, but there is painfully little to show for the investment. Even worse, there is mounting evidence that particular pro- grams, like Medicare and Medicaid, are at the heart of runaway health care inflation. The Great Society health programs rep- resented the liberal approach to solving America's health problems. Were there large groups who couldn't afford health care? Give them health insurance in the form of Medicaid for the poor and Medi- care for the elderly. Were there other ur- gent needs going unmet by the existing health system? Create special health serv- ice programs to meet them, such as mater- nal and child health and family planning programs, community mental health and neighborhood health centers. Did health care seem irrational and unsystematic? Give it a shot of planning through Com- prehensive Health Planning and Regional Medical Programs. 5 The Great Society health programs of the'60s demon- strated best that money alone, without restructuring the power and priorities of the health system, is no solution. While the liberals prescribed a lot of money gilded with a little planning, the real problem lay in the issue of who con- trolled the health system and for what ends. After decades of fighting the reac- tionary AMA, it was hard for many to realize that, by the sixties mid - , power in the medical system had shifted to the lib- eral, academic, institutionally - based med- ical establishment, or that its self interests - might be as pernicious to the delivery of good health care as those of the AMA. It was natural for the government to rely heavily on this group, both in the design and the administration of the Great Soci- ety health programs. The result, however, was programs that benefited the institu- tional academic - medical establishment as much if not more than they did the groups for whom they were ostensibly intended- programs that gave away large chunks of money with few, if any, cost controls or performance standards. This is especially true of Medicaid and Medicare which account for the vast ma- jority of all federal health spending (see box, page 12). Medicare and Medicaid costs are often called " uncontrollable " because, on the one hand, these programs are not subject to the Congressional ap- propriations process and, on the other, they are obligated to pay for whoever is eligible and claims their coverage. Medi- care and Medicaid reimburse health insti- tutions on the basis of " cost " without strin- gently specifying what makes up that " cost. " Thus it has been possible for hos- pitals to add staff, compete for big name - researchers, buy exotic equipment, expand 6 facilities, pay lavish doctor and adminis- trative salaries, hire public relations firms. and do virtually anything else they wanted, all at the taxpayers'expense. In the seven short years since their inception, Medicare and Medicaid have come to cost the government $ 17.3 billion - 80 percent of the federal health budget. They now pay over half of all hospital income in the country. Last year alone, Medicare expend- itures increased 23 percent and federal contributions to Medicaid rose by 21 per- cent. But aside from the increased cost to the government (with little evidence of equiv- alent improvements in care for the poor and elderly), Medicare and Medicaid, lacking significant controls on spending, have acted to drive up the cost of health care for everyone. In the five years follow- ing their passage, medical costs escalated at nearly twice the rate of the previous five years. The cost of the nation's health care reached $ 83.5 billion last year - top- ping for the first time what the country spends for defense. Medical costs have risen so much that today the elderly actu- ally pay more out pocket - of - medical ex- penses than they did in 1966 when Medi- care was passed! The average American last year paid $ 394 for medical expenses- nearly twice that spent in 1966. Hardest hit by the legacy of the " Health New Deal " has been the working class. They benefit from none of these programs (except Medicare), yet pay a dispropor- tionate part of the taxes for these (as for all) programs, while suffering under the burden of inflated medical costs. But what is tax burdens and inflation to some is power, profits and prestige to oth- ers. Doctors'fees have risen by 7 percent and hospital fees by 15.6 percent a year since 1965. Over 80 percent of Medicare and Medicaid went to institutional provid- ers of health care, consolidating their al- ready growing dominance in the health system and making possible a whole new industry of profit making - providers - Hos- pital Corporation of America, Extendicare, American Medical International, Ameri- can Medicorp, etc. Nor did the bonanza stop with institutions. Profits accruing to pharmaceutical companies, hospital sup- ply companies, construction companies, management firms, banks, etc. have made health one of the hottest and surest invest- ments on Wall Street. Health service delivery programs, such as neighborhood health centers, maternal and child health and family planning pro- grams, have been less inflationary than Medicare and Medicaid, if only because they are small in comparison and are nar- rowly targeted to meet specific health needs. But they have hardly been more effective. They have been so limited as to constitute a patchwork of tangled, fragmented, bureaucratically - encumbered projects and so small as to represent at best a token gesture in the face of the need. While they have made possible some ex- emplary and heralded much - local projects, health insurance could have lived up to such expectations or not is an academic question because, for the time being, the light has faded (see box, page 19). And without it these programs were left stranded, demonstrating only that the fed- eral government was getting into a very expensive commitment indeed. In fact, what the Great Society health programs of the sixties demonstrated best is that money alone, without restructuring the power and priorities of the health sys- SUMMARY OF HEALTH BUDGET HEALTH DIVISIONS OF HEW + (In Millions) National Institutes of Health A. Research Institutes B. Health Manpower C. Miscellaneous TOTAL NIH FY72 FY73 Revised FY73 $ 1,467 673 69 2,208 $ 1,571 535 79 2,185 $ 1,483 440 75 1,998 FY74 $ 1,532 382 51 1,965 Health Services and Mental Health Admin. A. St. Elizabeth's Hospital B. Health Services Planning & Development C. Mental Health D. Health Services Delivery E. Preventive Health Services F. Miscellaneous 28 468 603 674 145 53 TOTAL HSMHA 1,971 31 330 657 751 157 81 2,007 36 157 604 706 139 73 1,715 38 163 1,282 * 852 ** 125 83 2,543 TOTAL, NEW HEALTH EXPENDITURES, EXCLUDING MEDICAID AND MEDICARE $ 4,179 Underlined figures represent cutbacks. * Includes $ 645 million in forward funding for CMHC's. ** Includes $ 117 million in transfers from OEO. $ 4.192 $ 3,713 $ 4,508 these have been at such cost as to make their replication across the country incon- ceivable. Many Great Society architects were aware of these shortcomings, but they as- sumed that the health service delivery pro- grams would serve as demonstrations. When national health insurance - the light at the end of the tunnel - was passed, not only would it pick up their costs, but it would make possible similar models throughout the country. Whether national tem, is no solution. Rather, it may exacer- bate the very problems it was intended to solve. Nor has the lesson been lost on Rich- ard Nixon who, having a different political philosophy and facing different economic circumstances, has little interest in solving health problems or restructuring the health care system. His single consuming interest is saving money, and health bloated - with often ineffective, exorbitantly expensive, inflation producing - programs - is tailor- made for the Nixon axe. 7 II. The Casualties Trimming the Fat (and the Lean) If there was any doubt about the serious- ness of Nixon's intent in health, it should have been dispelled a year ago when he issued his Fiscal 1973 (FY73) budget re- quest. Although the total for HEW in- creased substantially over the previous year, health items, with the exception of Medicaid and Medicare, were cut by $ 40 million. Nixon then took up cudgels with Congress, twice vetoing an HEW appro- priation which exceeded his request. (Consequently Congress never passed a FY73 appropriation, and HEW has been operating since July 1, 1972 under continu- ing resolutions.) But even with this forewarning, Nixon's FY74 budget message came as a bomb- shell to the medical world. More startling than the actual FY74 budget was a revi- sion of the budget for the remaining six months of FY73, issued simultaneously, which slashed health by another $ 500 mil- lion. The FY74 budget will " hold the line " after that, although " holding the line " in this era of spiraling general inflation will mean cutting the budget by 6 to 8 percent across the board. Health programs were shaped according to three considerations, says the HEW budget document: (1)... Emphasis " on programs that directly support individual economic well being - and access to the marketplace; (... 2) Decentralization of authority and decision making to states and local governments and away from central control in Washington, and (... 3) An assessment of federal demonstration and special project programs. Those that carry out genuine national priorities and are believed to be producing real results have been strengthened; those that are poorly designed or unproductive are pro- posed for reduction or elimination. " To substantiate what Nixon already sus- pected of being " poorly designed or unpro- ductive, " he hired a bevy of consultants to evaluate the Great Society health pro- grams. Such evaluations are common- place, but generally they have been con- ducted by medical and public health school people representatives - of the very sector that benefits most from these pro- grams. This time, however, Nixon brought in his friends from the defense industry to do the evaluating. Although the results have not been released to the public, it is 8 clear that they differed dramatically from those of the past. Intertwined with critiques of effective- ness and productivity are several other recurring themes: " Aid to individuals, not institutions. " getting the government out of the direct delivery of services. an.. end to government intervention... and a return to private market mechanisms... individ- ual self sufficiency - , self reliance - and thrift. " Together they reveal a relatively coherent philosophy, geared not to solving problems of health care, but rather to rationalizing the federal role in health care and recon- ciling it with the fiscal needs of the state. Hardest hit have been health services planning and development programs, re- search, training and manpower programs, and health service delivery programs. Many of these were terminated outright or cut back severely. Medicaid and Medicare, the big spenders, could not be cut in the same manner, but Nixon is hoping to put a lid on them through reductions in bene- fits or eligibility, plus a number of regula- tory measures. The following is a more detailed examination of these cuts and why they were made. PLANNING AND DEVELOPMENT PRO- GRAMS Two health services planning and development programs are slated for termination: the Burton Hill - program for hospital construction and the Regional Medical Program. Hill Burton - , a long stand- - ing political favorite, goes only to volun- tary hospitals, primarily those in suburban and rural areas. During its 26 year - history, Hill Burton - funds have paid for 13 percent of the national costs of voluntary hospital HEALTH SERVICES PLANNING AND DEVELOPMENT + (In Millions) Revised FY72 FY73 FY73 FY74 Research Development & Development $ 62 $ 65 $ 52 $ 60 ** Comprehensive Health Planning Reg. Medical Programs 26 42 35 38 99 130 60 - Health Maintenance Org. --- - - _ 60 Medical Facilities Con- struction (Hill Burton) 278 91-82 91-82 91-82 Other 3 3 3 2 Underlined figures represent cutbacks. ** Includes $ 15 million in transfers from RMP. construction. But recently hospital occu- pancy has begun to drop (falling from 78.0 to 74.8 percent in two years) and it seems clear nationally that additional beds are not presently needed. While the pro- gram has responded to these trends by moving more toward modernization and construction of ambulatory facilities, it has left untouched the most serious problems: the deteriorating and overcrowded urban voluntary and public hospitals. Given their indifference in the past, objections now by the medical establishment and Congress that Hill Burton - should be saved and re- structured to meet this need ring of oppor- tunism, if not hypocrisy. Destined for the same fate is the Regional Medical Program (RMP) which has dis- tributed over $ 500 million, mostly into the coffers of medical schools, since its begin- ning in 1966. RMP, originally directed at the treatment of heart disease, cancer and stroke, went to fund anything that could be rationalized as helping to " get research advances into regular medical practice. " And, needless to say, a lot of things (par- ticularly otherwise unfundable research) could be so rationalized, leading some crit- ics to call RMP " the WPA for medical schools. " Defenders of the program have been hard to come by, in part perhaps be- cause RMP is all but unknown except to those whose program budgets or salaries depend on it. And Congress, while up in arms about Nixon's attempt to terminate a program without its approval, talks only half heartedly - of reforming the program to make it more viable. HEALTH SERVICES DELIVERY PROGRAMS (In Millions) Revised FY72 FY73 FY73 FY74 Mental Health Neighborhood Health Centers 603 657 60- 4 637 * 230 22494 3 245 ** Maternal & Child Health 239 2245 4 32 44 Family Planning 97 139 107 107 *** National Health Service Corps 11 9 11 11 National Health Service Scholarships - - -22 -22 Patient Care & Special Services 90 94 94 99 Other 6 7 7 _6 + Underlined figures represent cutbacks. * Adjusted to exclude $ 645 million requested to meet balance of future commitments. *** Adjusted to exclude $ 102 million for pickup of OEO nch's. Adjusted ** to exclude $ 15 million for pickup of OEO projects. HEALTH SERVICE DELIVERY PRO- GRAMS, such as maternal and child health these programs is a nagging reminder of and family planning programs, community mental health and neighborhood centers, have received a great deal of public atten- tion because they have created local proj- ects which are concrete, visible, and in what might be. So they will be cut. For example, the Community Mental Health Center (CMHC) program will be terminated when present grant commit- ments expire. This nine year - - old program many cases exemplary. While they are has brought 515 CMHC's into existence actually small in terms of the federal health and has been credited with helping to re- budget (4 percent for health services, 6 percent for mental health), they are ex- actly the kinds of programs Nixon likes duce institutionalization of the mentally ill by one half -. (But whether the credit for this should go to CMHC's or tranquilizing least. In his view, the federal government is pouring money into a bottomless pit of drugs is unclear.) The program has been plagued from the beginning with disagree- unmet health needs through narrowly- ments about approaches to treating men- based categorical programs that serve tal illness, the direction of community- token numbers of arbitrarily chosen recip- based programs and the scope of services ients, and inefficiently at that. More seri- ous, however, is the precedent these pro- which should be included. Consequently the National Institute of Mental Health grams represent. For unless the federal which administers the program has never government is really willing to meet the been able to formulate criteria by which health needs they serve, the existence of to judge the success of a CMHC, and has 9 come under increasing fire for disregard- ing the criticisms of even its own evalu- ators in funding particular CMHC's. (See Health / PAC's study, Evaluation of Com- PREVENTIVE HEALTH SERVICES (In Millions) Revised FY72 FY73 FY73 FY74 Disease Control 90 95 84 74 Community Environmental Management Lead (poison, rats) 26 2292 27 22 Occupational Health 25 29 24 26 Underlined f igures represent cutbacks. munity Involvement in Community Mental Health Centers.) MATERNAL AND CHILD HEALTH, FAM- ILY PLANNING AND NEIGHBORHOOD HEALTH CENTERS have all been cut slightly. Apparent increases in the latter two represent transfers of OEO programs, not additional funding (see budget box, page 7). OEO projects will be maintained and administered like their former HEW counterparts. In the case of Family Plan- ning, the Administration claims that the cut will be compensated for by increased funds from Medicaid and Social Services provided under HR 1. More serious for ex- isting Maternal and Child Health programs than the cutbacks is the fact that project grants, which go to specific applicants and comprise 40 percent of grant monies, will be incorporated into formula grants which go to all states according to a population- income formula. This will hurt many areas, particularly urban areas, where a high, de- gree of awareness, organization and skill in grantsmanship have caused a concen- tration of maternal and child health serv- ices in the past. If health service delivery cuts don't seem so serious at the moment, it's only because HEW is saving its punches. HEW has announced its intention eventually to terminate many of these programs, forcing them to rely on state and local support, fees and third party reimbursements for their survival. Last year it notified neigh- borhood health centers to prepare plans for becoming financially self sufficient - . 10 This year HEW instructed them to stop serving those not covered by third party reimbursements. Presently, it is auditing their records to determine their " manage- ment efficiency " and potential for self- sufficiency, upon which federal support in the immediate future will be based. The same will no doubt be the case for other health service delivery programs. The handwriting is on the wall: the federal government is getting out of the business of supporting direct health services. It's back to the states and localities, to the private market, or to no services at all. If these programs wish to survive, they must begin dropping their less profitable pa- tients as well as their more innovative, but less reimbursable, services. RESEARCH, TRAINING AND HEALTH MANPOWER PROGRAMS - Less than three years after President Nixon signed into effect three major bills designed to relieve health manpower shortages (the Allied Health Act of 1970, the Health Pro- fessions Educational Assistance Amend- ments of 1971, and the Nurse Training Amendments of 1972), he has reversed his position almost entirely. Health Manpower support will be cut in half, ending institu- tional support for nursing, allied health manpower, and public health, as well as veterinary medicine, optometry, podiatry and pharmacy. Only doctors, dentists and osteopaths will receive continued, in fact, increased support. The shaky economy has also tightened the job market for health workers and caused many to question whether there still is a health manpower " shortage. " Nix- on's health cutbacks promise to tighten the market even more. Moreover, expectations that the " new professions " would provide more health services at lower costs have changed. Doctors and institutions have generally been unprepared to utilize these health workers and their presence has caused duplication rather than increased services. Where private doctors have used allied health workers most often it was to increase their own income, not reduce the cost to the patient. If the medical schools survived on the health manpower scene, they and their scientific colleagues lost badly on two other fronts. Research training grants and fellowships, which support 38 percent of all researchers - in - training, will be eliminated after this year. Half of these monies sup- port researchers - in - training; the other half goes to support salaries of medical school HEALTH MANPOWER PROGRAMS (In Millions) Revised FY72 FY73 FY73 FY74 Medical, Dental Osteopathic Nursing Public Health Allied Health 445 145 19 31 322 285 = 271 123 95 53 22 16 = 36 23 - Special Educ. Prog. 24 25 14 49 Other 10 9 9 9 Underlined * figures represent cutbacks. faculty. The Administration argues that because it is cutting back biomedical re- search, the need for researchers will be reduced. As one HEW spokesman said, " If we're going to cut research efforts, then we're certainly not going to keep on train- ing more researchers who are just going to turn around and pressure us to beef up research. " The impact will be substantial. For instance, Massachusetts General Hos- pital will lose 190 fellowships and 14 ca- reer development awards amounting to $ 2 million; the Medical School of the Univer- sity of California at San Francisco will lose support for 264 trainees for a total loss of $ 4 million. Stanford will lose $ 3.4 million. The second major blow to medical schools and their scientific colleagues took the form of biomedical research cutbacks. Although the overall National Institutes of Health research budget increased slightly (see budget box, page 7), the increase, plus additional money derived from cuts (averaging 14 percent) in all the other research areas, will go to cancer and heart research. Although there will be a rush to rationalize present research proposals in terms of their relevance to cancer and heart disease, it is as yet unclear what im- pact this emphasis will have on medical school research funding. What is clear is that Nixon is moving away from basic re- search and general research support to applied, targetted, publicly appealing - re- search. Because academic medicine has been established on a particularly shaky federal funding foundation, it is extremely vulner- able to research cutbacks. This situation is largely due to opposition of the AMA, which until recently has blocked direct federal support for the training of doctors. The AMA was less concerned about fed- eral research support which had the allure of improving the scientific nature of medi- cine without the threat of increasing the supply of doctors. Consequently, biomedi- cal research has become the cornerstone of medical education. Federal research funds, often entailing overhead payments of up to 60 and 70 percent, presently sup- ply over half of all medical school budgets. Another 10 percent comes from research training grants. In addition, medical schools have been in a good position to turn other programs - RMP, preventive health, health service delivery programs, to name a few - to their benefit. All in all, medical schools estimate that their in- comes will be trimmed 25 percent at least by federal cutbacks. NIH RESEARCH INSTITUTES + (In Millions) Revised FY72 FY73 FY73 FY74 Cancer Heart and Lung 379 432 426 500 233 255 247 265 Dental Arthritis, Metabolism, Digestion 43 44 40 38 153 159 14013 4 Neurological and Stroke 117 118 1061 01 Allergy & Infectious Diseases 109 113 101 99 - Gen. Med. Sciences 173 176 152 139 Child Health & Human Development 117 Eye 37 127 110 37 34 107 32 National Institute of Environmental Health Sciences 26 292 26 25 Research Resources 75 75 99 89 Fogarty Intl. Center for Health Science 4 54 4 Underlined f igures represent cutbacks. 11 MEDICAID AND MEDICARE - The above are nickel and dime programs compared with Medicare and Medicaid, which spend over 80 percent of the federal health dol- lar. Because they are outside of the appro- priations process, however, Nixon cannot simply slice dollars off these two programs. Instead, he must pursue the more tortuous route of obtaining Congressional approval for reductions in eligibility and benefits, and other cost cutting - regulations. The Administration already took a long Medicaid - Medicare Cuts The effects on Medicare and Medicaid of HR 1 and the new legislation proposed by Nixon are: m@ INCREASES IN THE COST OF PHYSICIAN SERVICES UNDER MEDICARE HR 1 increased the monthly premium which the elderly must pay to receive physician services from $ 5.80 a month to $ 6.30. It also increased the amount the elderly must pay for physician services before they begin receiving Medicare benefits (the deductible) from $ 50 to 60 $ a year. Now Nixon would like to increase this to $ 85. After that, he would build in automatic increases in both the premium and the deductible, proportionate to increases in Social Security benefits. He would also increase the share of physician costs paid by the elderly (pay- co - ment) from 20 to 25 percent. @ INCREASED COSTS IN HOSPITAL SERVICES UNDER MEDICARE - Nixon is now proposing substantially increased deductibles and payments co - for hos- pital care under Medicare. Presently when a Medicare patient enters the hospital, he pays on the first day 72 $, the average national cost of one day of hospital care. After that he pays nothing until the 61st day. Between the 61st and the 90th days, he pays $ 18 (one quarter of the initial amount). After the 90th day, the Medicare beneficiary begins to use his lifetime reserve of 60 additional days, during which time he pays 36 $ a day (one half of the initial amount). Under Nixon's proposal, the Medicare beneficiary will pay the actual cost of the first day of care (which can run as high as $ 200 in some hospitals) and 10 percent of the actual daily cost for each day thereafter. The Administration hopes this " consciousness of cost " will lead the Medicare patient to choose less expen- sive medical facilities, even though this decision is in the hands of the doctor, not the patient. For the Medicare beneficiary who is hospitalized, average costs will increase from $ 84 to $ 189. If the patient cannot pay the increased amount, presumably he can turn to Medicaid. Nixon estimates that these measures, if passed, will save Medicare an estimated $ 893 million in FY74. @ MEDICARE BENEFICIARIES RESPONSIBLE FOR COST MONITORING- HR 1 will establish limits for " reasonable " costs of medical services under Medi- care, and the beneficiary, not the provider, will be held liable for costs deter- mined to be in excess of these limits. mM INCREASED COSTS FOR MEDICAID BENEFICIARIES - HR 1 mandates states to charge " medically indigent " persons (those above the welfare level but still eligible for Medicaid) monthly premiums, graduated by income, for Med- icaid coverage. States can also charge " nominal " deductibles and co payments - (not graduated by income) to the medically indigent for all services, and to those below the welfare level for " optional " services. Because both premiums and co deductibles - payment / will be determined by each state, and federal guide- lines have not yet been issued, the impact of these measures is not yet clear. OEOEOE CUTBACKS IN MEDICAID SERVICES - HR 1 also removed the provision that states move toward the provision of comprehensive medical services under Medicaid by 1977. Also dropped was the requirement that states not reduce their aggregate shares in the Medicaid program from year to year. OE LOSS OF ADULT DENTAL SERVICES UNDER MEDICAID - Adult dental services under Medicaid would be dropped by further legislation that Nixon is proposing, saving an estimated $ 75 million a year. 12 step in this direction in its support for HR 1, the amendments to the Social Security Act, passed last year. HR 1 increased deducti- bles under Medicare, allowed states for the first time to charge Medicaid recipients co- payments, deductibles and premiums while reducing the scope of services they are required to offer. Nixon is now propos- ing new legislation which would more than double what the average Medicare patient, undergoing hospitalization, would have to pay in deductibles and co payments - . (In the present climate of Executive - Congres- sional relations, this proposal has little chance of passing, particularly since many Congressmen are loath to go on record vot- ing against the elderly - see box on Medi- care and Medicaid, page 12.) Through HR 1 and his newest proposal, Nixon expects not only to save what bene- ficiaries will now have to pay out pocket - of - , but to create in them a cost " conscious- ness. " If Medicare and Medicaid patients must pay a more substantial portion of their medical costs, presumably they will seek less expensive service. Many, it is hoped (although not stated), will simply be discouraged from seeking services altogether. Interestingly, HR 1 made at least a ges- ture toward instilling " cost consciousness " in institutions as well as in individuals. For example: M@ To reduce hospitalization costs under Medicaid, HR 1 requires states to establish utilization review systems, including pre- admission review and determination pre - of length of stay. As a result the Administra- tion expects to save $ 152 million in FY74. OE In a similar vein, HR 1 also mandated the establishment of a nationwide network of Professional Standards Review Organi- zations (see BULLETIN, February, 1973). which will review institutional services provided under Medicaid and Medicare to assure that they are medically necessary and conform to appropriate professional standards of care. @ HR 1 also gave a boost to Health Maintenance Organizations, a long stand- - ing Administration hope for reducing the costs of health care (see BULLETIN, April, 1971). As a result, the elderly can now use their Medicare coverage to enroll in an HMO if they wish. OE Finally, HR 1 seeks to beef up the al- most non existent - power of Comprehensive Health Planning Agencies by denying Medicare and Medicaid depreciation al- lowances to institutions whose capital im- provements violate state or local health facilities plans. What effect these measures will have on institutions is harder to discern. The Administration is optimistic, however. PSRO's, HMO's and CHP were among the few items in the federal health budget to receive substantial increases (33 $ million, $ 60 million and $ 12 million, respectively.) Significantly, Nixon apparently recognizes that health institutions cannot by them- selves be expected to guard the govern- ment's till. Whether it comes from the hides of individuals or institutions, the Ad- ministration says it is looking forward to saving $ 900 million on Medicaid and $ 1.3 billion on Medicare in FY74. Expiring Health Programs President Nixon picked an opportune year in which to cut health. Legisla- tive authority for the following pro- grams expires on June 30, 1973, and Nixon let it be known that many of these programs will never be renewed under his tenure. Hill Burton - Hospital Construction Allied Health Professions Training Act Professional Public Health Personnel Traineeships Medical Library Assistance Health Services for Migrant Workers Maternal and Child Health and Crippled Children Services Programs under Title V of the Social Security Act Community Mental Health Centers and Mental Retardation Facilities Regional Medical Programs Health Services Research and Development Comprehensive Drug Abuse Prevention and Control Lead based - Poisoning Prevention Federal - State - Local Health Statistical System Authority The Partnership for Health Programs Family Planning Services and Population Research Act Developmental Disabilities Services and Facilities Construction Amendment 13 Megamorphosis In the hustle and bustle of officials coming and going at HEW, it's easy to lose the path the agency is following. Elliott Richardson, former HEW Secretary, did at least establish the terms of the debate and strategic options before departing. He outlined a direction and provided a hint of the administration's thinking in an omnibus plan to reorganize HEW - called by some the Megaproposal, or simply MEGA. MEGA, whose full title is Comprehensive HEW Simplification and Reform, was prepared at Richardson's request by HEW officials, most of whom are still at their posts. It is over two hundred pages long. Among other things, it contains a devastating critique of Nixon's own national health insurance proposal (see BULLETIN, November, 1970 and April, 1971), making its official adoption by the White House unlikely. Still, by and large, little of MEGA is incompatible with expressed Administration policy. MEGA's jumping off point is an attack against the categorical grant - in - aid system. It argues that there is a crisis of complexity, fragmentation and over- promise. OE Complexity- " Since 1961, the number of different HEW programs has tripled, and now exceeds 300; 54 of these programs overlap each other, 36 over- lap programs of other Departments. The Federal Government as a whole had no less than 530 categorical programs of aid to States in 1971. OE Fragmentation - Federal rules and regulations for these myriad programs are narrow, restrictive, conflicting and overlapping; neither Federal nor State and local resources can be shifted from one narrow authority to another when the need arises.... @ Overpromising - We are progressively promising more and delivering less. ... We calculate that HEW's service delivery programs, which now cost $ 9 bil- lion, would cost $ 250 billion if they were actually extended to all who need them. The inequities and the disappointments in the gigantic short - pull are funda- mental to general unhappiness with government. " Reform is needed, MEGA argues, because " the federal program has become so complex that it is unmanageable. Interdepedencies among programs are ignored because they cannot be understood, leaving rational choice difficult, if not impossible. " MEGA's suggested reforms hinge upon these special revenue - sharing pro- posals to be administered by State and local governments. Under special rev- enue sharing - , three programs - education, health and social services - would receive a total of $ 7.5 billion a year. The simplification comes in because 42 State formula grants and six project grants would be reduced to only seven broad funding categories, one of which is health. The thrust of Richardson's MEGA proposal is to give governors, county execu- tives and mayors the power to decide - within very broad guidelines - how money is to be spent. The entrenched bureaucracy in Washington and its suitors would be the big losers. For now, the Nixon Administration cannot, even if it wanted to, implement all of MEGA. Though the Administration talks about, and MEGA strongly argues for, decentralization of decision - making, so far it remains only talk. Even at HEW itself, decentralization is little more than an idea. HEW regional directors, for example, still have virtually no power to make funding decisions. While MEGA sits on the back burner, however, the President continues to streamline and simplify much decision - making under the aegis of his Domestic Council, OMB and the White House Staff itself. 14 Tightening the Ranks To carry out what is sure to be an unpop- ular policy, President Nixon needs an army of loyal administrators in HEW who can wield an axe without flinching. This means replacing administrators who have exhib- ited loyalty or attachment to their own pro- grams with functionaries, mostly from the Office of Management and Budget (OMB), who are imbued with " mindedness budget - and management capability. " Step one was the replacement of the Secretary of HEW, Elliot Richardson, who had shown himself to be simply too com- mitted to HEW hardly - the kind of man needed when HEW is on the chopping block. Richardson's assistant secretary for health and scientific affairs, Dr. Merlin K. DuVal, was sent packing back to the Uni- versity of Arizona College of Medicine. Though denied on all sides, it's no secret that DuVal was fired. His vigorous backing of RMP earned him the White House's ire. Even worse, perhaps, he tried to prevent the firing of the former director of the Na- tional Institutes of Health (NIH), Dr. Rob- ert G. Marston. NIH is largely recognized as a goldmine for medical schools. As one Nixon HEW spokesman put it- NIH " has mostly been a subsidy for medical schools and we find that objectionable. " Well, Dr. Marston didn't. So he bit the dust as well. Following the first few ousters, health officials leaving Washington turned into a mass exodus. Departing in late December, 1972 were John Veneman, HEW deputy secretary; Dr. Vernon E. Wilson, adminis- trator of the Health Services and Mental Health Administration; John D. Twiname, administrator of the Social and Rehabilita- tion Service; and Dr. Jesse L. Steinfeld, Surgeon General of the US Public Health Service. The only one of the old crowd left was Dr. Charles C. Edwards, head of the Food and Drug Administration. He has since been promoted to HEW assistant sec, retary for health. As a former surgeon, head of the AMA Division of Socio - Eco- nomic Affairs and organizer of a medical program for Cuban refugees, he is a per- fect Nixon appointee. Nixon next set about filling the leader- ship void he created. After the dust had settled, the OMB emerged as the general of the new Nixon army. Previously a small, obscure sapling nurtured by the executive department, OMB has grown in the last year or so into a towering redwood of power. Washington insiders, Nixon people included, admit that domestic policy matters are decided upon by OMB. Roy L. Ash, wheeler - dealer presi- dent of Litton Industries, has been ap- pointed to run the operation. HEW has been snared by OMB. HEW's new head is Caspar (Cap the Knife) Wein- berger, former director of OMB. Wein- berger, a " fiscal Puritan, " has been called upon to tighten the leash on HEW's gal- loping spending. The arch conservative - newsweekly, Human Events, hailed the good tidings: " If anybody can hold down the runaway HEW budget, Weinberger should be the one. " Second in command at HEW is Frank Carlucci, previously the deputy director of OMB. Moreover, no less than five other ma- jor appointees in HEW, including the as- sistant secretaries for Planning and Evalu- ation, and Administration and Manage- ment; the director of Social and Rehabili- tation Service; the director of Medicaid; and the deputy chief of PSRO's, all come from OMB. Men like Weinberger and Carlucci have principles, but they are few and simple. Weinberger himself summed them up in a book review he wrote for Fortune Maga- zine: " No matter how demonstrable it is that extensive government interventions fail to do what they are supposed to do, the standard prescription is more of the same. The time has come to consider a virtually untried alternative: substituting private - sector remedies for ever increasing - and frequently disappointing reliance on the public - sector. " Prior to the Watergate fiasco, Nixon's strategy was to build and consolidate his loyal forces while preventing Congress from interfering with his executive com- mand. He has made unstinting use of his veto power. Last year the President vetoed two HEW appropriations bills because they exceeded his fiscal guidelines. This year, he has promised to veto any bill whose price tag threatens the $ 268 billion level he has set for total federal spending. One of the vetoes, for example, occurred in late March concerning a bill authorizing the spending of $ 2.6 billion for vocational rehabilitation of the disabled. The choice, Nixon said, was a " Congressional spend- ing spree " with a 15 percent increase in personal income tax or holding the spend- ing line even if it meant use of veto power. If the veto does not hold the line, the President will probably use a heavier weapon, impoundment, the refusal to spend money already authorized and / or appropriated by Congress. Impoundment has been used by Presidents throughout 15 "... a virtually untried alternative: substitute private sector remedies for ever increasing - and frequently disappointing reliance on the public sector. " -Caspar Weinberger Secretary of HEW American history, but Richard Nixon has raised the stakes. So far most of the impoundments (esti- mated from $ 8.7 to $ 12.2 billion) have not directly affected health programs with ( the possible exception of $ 159 million for the food stamp program). The largest im- poundments have been in Federal Aid Funds for highway construction (2.5 $ bil- lion), the agriculture department and mili- tary construction and shipbuilding, and water pollution (6 $ billion). Whether or not in the face of Watergate the President can continue to use so heavy a hand, time will tell. What It All Means The decision to cut health programs was dictated by the fiscal crisis of the US econ- omy as well as by irreversible commit- ments by the government to other priori- ties and interest groups. What to cut within health, however, was dictated by Nixon's own political predilections and what he felt was politically possible. Within health he has moved to do three things: diminish the federal role in health care; efficiently and effectively manage such health com- mitments as the federal government will retain; and weaken or dismantle what to him are unfriendly constituencies. He accomplishes many of these objectives in the same moves. OE Diminishing the Federal Role Nixon - believes that health, like other social serv- ices, should be the domain of private en- terprise. Where the government must " in- tervene, " there are two appropriate roles: it should develop " models " which can be adopted by private enterprise so that it can meet the needs (e.g., health mainte- nance organizations); and it should en- hance individual access to the private mar- ket (e.g., national health insurance). In practice, however, it is unclear whether Nixon is serious about these principles, or whether he is using them to simply ration- alize reducing the federal commitment to health care. If the health service delivery programs were intended as " models " for meeting health needs (and there is some doubt), the Administration believes that the time is long since past to decide upon their suc- cess or failure and to get them off the books. So by 1976, the federal government will have ceased " intervening " in commu- nity mental health and neighborhood health centers, maternal and child health and family planning programs, as well as in hospital construction, the production of health manpower, and a host of other endeavors. Nixon has a double pronged - strategy for shedding these federal commitments. First, he would like to turn many of the problems of health care delivery over to private en- terprise. But the task may be a tough one. HMO's, Nixon's first " model " for making health care delivery into a profit making - investment, failed to immediately convince his hard nosed - business cronies. Nixon is still optimistic about the potential of HMO's (to the tune of $ 60 million in the FY74 HEW budget), and the concept is gradually being picked up, particularly by private doctors and insurance companies, but on a longer time scale than Nixon would have hoped. Second, Nixon would like to turn health care delivery over to states and localities in the form of health revenue sharing, if he can get this measure through Congress. This would mean pooling monies from all the categorical programs (or what's left when he gets through cutting) into one lump sum and turning it over to state and local government to spend as they see fit within the broad confines of health. This strategy is consistent with the more gen- eral rubric of Nixon's " New Federalism " in which he would " reverse the flow of money and power from states and locali- ties to the federal government, " primarily through the mechanism of revenue shar- ing. Many suspect revenue sharing is nothing more than a way to reduce ex- penditures and get the federal government out of its involvement in domestic social issues. OE Getting His Money's Worth Because - Nixon feels no obligation to support tradi- tional health constituencies through fed- eral largesse, he would acomplish such commitments as the government has in a 16 single minded -, task oriented - and cost- effective manner. For instance, there is public pressure to increase the production of practicing doctors. So Nixon has re invest- - ed saving from other manpower cuts in medical training and closed off research training funds, the route by which doctors. go into research and super specialties - rather than into general practice. This, combined with research cutbacks, will re- duce greatly the pre clinical - scientific ori- entation of medical education, giving doc- tors what Nixon considers the bare bone essentials, and turning them out as quickly as possible. Likewise, in the area of research, Nixon wants concrete, publicly - salable products. He is through with the old post Sputnik - notion that the more research the better, and with programs whose main function was general support of the medical re- search establishment. OE Dismantling Constituencies - Nixon's use of the cutbacks reveals a clear strategy for dealing with at least three groups in health care. Nixon would use particularly research, research training and health manpower cutbacks to dramatically re- duce the size and power of the liberal, aca- demic sector in health which he considers to be expensive, non productive - and politi- cally unfriendly. He would deal similarly with the poor, whose organization as a constituency he believes depends on programs such as those in health. But to this objective Nixon brings a more complex strategy than sim- ple cutbacks. For example, by forcing NHI: Feldstein's The One? Former HEW Administrator Richardson proposed a new national health insur- ance plan Maximum - Liability Health Insurance (MLHI) -to replace the Admin- istration's existing proposal. MLHI is based upon a plan advanced by Harvard economist Martin S. Feldstein, and set forth in the MEGA proposal. The Feldstein strategem would cover all Americans except the elderly who would remain on Medicare. The costs would be graduated according to income. Families earning more than $ 12,000 a year would pay the full premium while those earning less than 3,000 $ would pay zero. The plan would also feature both deductibles and co insurance - , again grad- uated along the same income scale. No family, however, would have to pay more than $ 1,050 a year for medical expenses regardless of their yearly income. The plan is, therefore, a form of catastrophic illness insurance. It is estimated that a family of four with average health expenses would have to pay about 3 to 5 percent of their income; the maximum amount rarely being more than 10 percent even in the event of a prolonged illness. The cost to the Federal government would be about 20 $ billion per year. Most of the expenses would be paid through compulsory premiums - an anathema to Nixon collected - by the Internal Revenue Service from middle and upper income groups. x Under the Feldstein plan, a family earning $ 5,000 per year could expect ini- tially to pay an average out pocket - of - expense of $ 234 a year and a maximum expense of $ 572. Despite being graduated by income, the expenses are not alto- gether progressive. For example, a family earning $ 3,000 a year could expect a maximum out pocket - of - expense eating up 13 percent of its income; whereas, for a family earning 15,000 $ the bite would be only 7 percent. However, the most serious defect of the Feldstein plan is its almost total lack of cost controls, thus insuring that profits made off health and consequent medical inflation will continue. In fact, the plan's only control cost - mechanisms are deductible and co insurance - provisions which seek to discourage consumers from purchasing health care altogether. Aside from the dubious medical wisdom of this tact, the consumer is not responsible for the escalating cost of health. Neither Richardson's MLHI nor its source, the Feldstein Plan, would do anything to control the profits of the health providers. 17 health service delivery projects to become financially sufficient self - , Nixon will not only force them to exclude many poor and medically - indigent patients while seeking more affluent clientele, he will force them to drop the less orthodox (and less reim- bursable services such as outreach, com- munity education, etc., which have fre- quently played an important community organizing role. Again, Nixon would undercut constitu- encies organized around health service delivery programs by switching from proj- ect grants (which must be specifically ap- plied for and approved) to formula grants. Because formula grants will go automati- cally to all states (on the basis of a popu- lation income - formula), this switch will drastically reduce amounts going to many highly organized, usually urban commu- nities and institutions that applied for and received the bulk of funds in the past. Yet this move is shrewd: no one can argue that the latter group should get an unfair share of the funds. Health revenue sharing would, of course, extend this policy across the boards. But it is even more insidious to the interests of the poor. Because many state and local governments have been unsympathetic to the problems of poor and minority groups in the past, it is hard to believe that now, with health revenue sharing funds, this policy will change. Furthermore, by pool- ing monies, health revenue sharing would also pool constituencies and, Nixon as- sumes, would set constituency fighting against constituency for their particular share of the pool. Finally, Nixon's actions sound a small warning to health care providers, particu- larly institutional providers. The Health New Deal brought them into their heyday of power, prestige and expansionism, and with them the supporting complex of hos- ital suppliers, drug companies, banks, real estate and construction enterprises, man- agement companies and the like. The Great Society helped to deliver health care full- blown into the age of corporate capitalism. But if the health industry is to take its place among other corporate giants, it must learn the ground rules for " responsible " behav- ior, and the first ground rule is not breaking the bank. To reinforce this message to the young industry, the Nixon Administration has begun to set forth some regulations- the extension of Phase III price controls for health (one of only three industries for which it was extended), the creation of PSRO's, the strengthening of CHP, the 18 pushing of HMO's. None of these are ter- ribly strong or effective at the moment, but together they may begin to define the outer limits of how " responsible " capitalists in the health system must act. Nixon may not get away with all his measures for cutting health care programs, particularly in light of the harm Watergate has done his credibility and power. But it is clear that he will leave an indelible mark on the health system for years to come. Those who attribute this to his per- sonal qualities ignore the larger economic and political realities as well as the con- tradictions that were built into the Great Society health programs. For given these, it is unlikely that any president would have acted in a substantially different man- ner. And it is only by incorporating these lessons that the foundations of a viable and adequate health system can be built. -Ronda Kotelchuck Howard Levy Selected Sources 1. The Budget of the United States Government, 1974, U.S. Government Printing Office. Washington, D.C. 20402. 2. The Budget of the United States Government, 1974- Appendix, U.S. Government Printing Office, Washing- ton, D.C. 20402. 3. " Comprehensive HEW Simplification and Reform. " (known as the Megaproposal), Department of Health, Education and Welfare, Washington, D.C. 20201 (un- available). 4. " Distributional Aspects of National Health Insurance Benefits and Finance, " Martin Feldstein, Bernard Fried- man, and Harold Luft, Harvard Institute of Economic Research, Cambridge, Massachusetts, Discussion Paper # 248, August, 1972. 5. " National Health Expenditures, 1929-1972, " Social Se- curity Bulletin, Vol. 36, No. 1, January, 1973. Insurance 6. N1a7t3i0o nMa lS tJroeuertn,a l,N WG,o vWearsnhmienngtt oRne,s eaDr.cCh. 2200003366 .C orporation, 7. " A New Approach to National Health , " M19a7r1t.i n S. Feldstein, Public Interest, No. 23, Spring, 8. The Politics of the Guaranteed Income, Daniel Moyni- han, Random House, New York, 1972. 9. Public Law 92-603, 92nd Congress (HR 1. Amendments to the Social Security Act). October 30, 1972, Govern- ment Printing Office, Washington, D.C. 20402. 10. The Rape of the Taxpayer, Philip M. Stern, Random House, New York, 1973. 11. " Report 1: 1972 Changes in Medicare and Medicaid, ' National Health Insurance Reports, 2814 Pennsylvania Avenue, NW, Washington, D.C. 20007. 12. " Responsibility and Responsiveness: A Report on the HEW Potential for the Seventies, I and II. " Elliot L. Richardson, Secretary, Department of Health, Educa- tion and Welfare, January 15, 1972 and January 18, 1973, Washington, D.C. 20201. 13. Setting National Priorities: The 1973 Budget, Schultze, et. al., Brookings Institution, 1972. 14. Speech to the Annual Meeting of the American Hospi- tal Association by Frank Carlucci, Undersecretary, Department of Health. Education and Welfare, Febru- ary 5, 1973, Washington, D.C. 20201. 15. Statement of Caspar Weinberger, Secretary, Depart- ment of Health, Education and Welfare, before the Subcommittee on Public Health and Environment, Com- mittee on Interstate and Foreign Commerce, March 1, 1973, Washington, D.C. 20201. 16. " Toward a Comprehensive Health Policy for the 1970's, A White Paper, " Department of Health, Education and Welfare, May, 1971, U.S. Government Printing Office, Washington, D.C. 20402. 17. The United States Budget in Brief: Fiscal Year 1974, U.S. Government Printing Office, Washington, D.C. 20402. 18. " U.S. Department of Health, Education and Welfare, Fiscal Year 1974 Budget, " Washington, D.C. 20201. 19. The Washington Report on Medicine and Health, Mc- Graw - Hill, National Press Building, Washington, D.C. 20004. Whatever Happened to NHI? Interviews with key Congressional health policy movers indicate beyond a doubt that national health insurance (NHI) has been " put on the back burner. " Passage is minimally two years off and may well be as long as six years away. Old NHI proposals, including Kennedy's, Nixon's, AMA Medicredit and Rep. Ullman's xerox - copy of the American Hospital Association's Ameriplan, have been, with slight modifications, re introduced - into Congress this year. The re- introductions are, however, a perfunctory exercise. The conversion of the " bright promise " of NHI into a shadowy mirage is due to many factors: @ Health in general, and NHI in particular, did not create any sparks on the 1972 presidential campaign trail. OE Congressmen have become wary that NHI might further fuel existing medi- cal care inflation. OE The disappointment over the ineffectiveness of Medicaid is rampant. OE Savvy Congressmen, in particular key figure Wilbur Mills of the House Ways and Means Committee (not to mention Richard Nixon, himself), worry about federal spending in light of the severe constraints in the larger economy. Every NHI proposal would insure an enormous additional outlay of federal dollars. Mills, in fact, has indicated his strong desire to tackle tax reform and trade regu- lation prior to any consideration of NHI, thus delaying action on it by a year at least. More striking than the waning interest in NHI is the turnaround on support for the Kennedy bill. There is growing opinion on Capitol Hill that the proposal is economically unfeasible at best and conceptually naive at worst. Although the AFL - CIO labor leaders still formally support the Kennedy bill, dollars and cents manifestations of their support appears to be dwindling. Most revealing, perhaps, is the rumor that a group of ex Johnson - Administration officials, many of them connected to the National Institute of Medicine, are busy at work drawing up plans for yet another NHI proposal. Details are not available, but if true this development is an indication of the depths of distrust of the Kennedy proposal. Meanwhile two other developments bear watching: @ Many fear that, in the lull, Senator Russell Long's (La D -.) catastrophic health insurance proposal will pass Congress, thus pre empting - for many years a more comprehensive health insurance bill. OE In April, a ribbon blue -p anel of business leaders (including former officials of the Johnson Administration) offered a new NHI proposal which is striking in its similarity to the Nixon proposal. The 105 page - plan by the Committee of Economic Development would include mandatory insurance for all employed people and their dependents, Medicare for the aged and disabled, and federally financed " community trusteeships " for everyone else not covered. Its cost is esti- mated at $ 5 billion for the first year with increases implicit as additions are made in subsequent years. Prominence is given in the report to presumed cost saving - measures like health maintenance organizations. All in all, prospects for the immediate passage of any NHI proposal are poor. With the new entry of the prestigious and powerful Committee for Economic Development's proposal, chances of passage of a remotely progressive - NHI bill seem dismal. 19 THE CUTS IN A MICROCOSM The Bronx is one of New York City's five boroughs. It defies comparison. Those who live there love it or hate it. Those who don't live there are generally glad. The Bronx will probably always get a few laughs in a stand - up comic's routine. While the Bronx is home to rich and poor, black and white, and young and old, the Bronx is not typical of anything. Why then does the Bronx keep popping up in Health / PAC BULLETINS (see April, 1969; September, 1969; September, 1970; October, 1970; January, 1971; November, 1971)? And why is yet another article be- ing written about the Bronx? For reasons which no one has bothered to figure out, the Bronx, while typical in no area, includ- ing health, has been home territory for a number of health institutions and pro- grams which are prototypical. This article is going to examine the repercussions of the Nixon Administration's health budget and cutbacks on three such institutions: a model neighborhood health center, the Martin Luther King, Jr. Health Center; the renowned TV serial - type medical school and research center, Albert Einstein Col- lege of Medicine; and the classically wretched and chronically underfinanced four public hospitals of the Bronx. The cri- sis facing these institutions is the same facing these types of institutions through- out the country. The effects of the Nixon budget will not be confined to these organizations. In an informal survey Health / PAC has counted at least 20 programs which will be termi- nated, cut back or otherwise negatively affected. Nor, of course, are the effects lim- ited to organizations. Up to 100,000 pa- tients are served in these programs. At best, they will be inconvenienced; at worst, they will lose their health care. As always, most of these people are poor; some have given up and some are still trying to get 20 out of the borough's slums. For them, living conditions which are now barely tolerable will get less tolerable. They don't laugh at jokes about the Bronx. The Martin Luther King, Jr. Health Center The Martin Luther King, Jr. Health Cen- ter (MLK) was created in 1966 with a dem- onstration grant from the Office of Eco- nomic Opportunity (OEO). MLK was run by Montefiore Hospital and quickly be- came a national showplace for community- oriented, comprehensive family health care. With patient advocates, family health workers, nurse practitioners and multi- disciplinary team delivery, the Center of- fered enviable care at a cost some esti- mated as high as $ 100 per patient visit. In the last year or so, MLK has been " trim- ming its fat " in anticipation of a federal crackdown on health spending and on OEO. Now that the crackdown has come, MLK and centers like it are not sure where they stand. MLK's Fiscal Year 1973 budget request of $ 4.3 million was down $ 1 million from the previous year. This unusual decrease contradicts the Parkinson Law of bureau- cracy that dictates that programs must keep on spending more and more money ad infinitum. MLK took the step in order to ingratiate itself to OEO as an efficient cost cutting - operation. (The strategy worked and MLK's full request was ap- proved in March on a month month - to - basis.) MLK pulled down its costs through job attrition (not replacing workers who leave) and by cutting out duplicative jobs. For example, MLK administrators observed that pediatric nurse practitioners duplicate doctors'work and yet don't increase doc- tors'productivity (i.e., the number of pa- tients seen). As a result no more pediatric nurse practitioners are being trained at the Center and those who leave will, presum- ably, not be replaced. In addition to cutting costs MLK is look- ing to other sources of revenue in order to sandbag its budget. The Center has turned to Medicaid as the most obvious other source. Since MLK has been up until now a well funded - federal program, it has not had to bother with the hassle of Medicaid. Furthermore, since Medicaid requires that the City and State kick in a combined 50 percent of Medicaid reimbursements, there has been no local incentive or pressure to get programs like MLK involved with Med- icaid. Not surprisingly then as one MLK doctor says, " The Center never really got serious about Medicaid until a year and a half ago. " Now, it's trying to increase its enrollment of Medicaid eligible families and increase its Medicaid collections. As one staff member said, " We are zeroing in on the poor and the near poor. " Large - scale registration efforts are aimed at getting new enrollees and, for the first time, the Center is assisting patients in obtaining Medicaid coverage. In 1969, 112,000 pa- tients were enrolled; now the figure is closer to 195,000. Approximately 55 percent of the Center's total enrollment is covered by Medicaid. Since the Martin Luther King, Jr. Health Center is getting more serious about Med- icaid it is inevitable that it also get more " business like " in its approach to patients, staff and program. As the emphasis changes from getting grants to getting re- imbursements or fees, productivity be- comes the name of the game. Productivity at MLK, as well as at other health pro- grams, means: increasing both the total patient enrollment and the number of pa- tient visits while actually decreasing the size of the staff. In the " business world " this would automatically: threaten the quality of care; result in an employee speed - up; and certainly risk turning MLK into a Medicaid Mill (where patients are given the least expensive care, by the smallest staff, over repeated visits, each of which is reimbursed by Medicaid). Ad- ministrators at MLK do not believe that these disasters will befall the Center, im- plying naivet on their part or that MLK has been awfully " unproductive " in the past. MLK's push for more reimbursable pa- tients has pushed it beyond its neighbor- hood. The Center is straying from its initial objective of being primary family doctor for all people in its defined neighborhood. MLK is attempting to " package " its serv- ices and is trying to interest the City in a Health Maintenance Organization deal. MLK would guarantee services to City em- ployees whose medical costs would be paid for through some sort of pre paid - in- surance plan. The package would guaran- tee a steady and dependable income for MLK. The Center is even doing " market research. " For instance, what private in- surance carriers do people use, and can MLK make a deal with them to provide " packages " of service? The Center is instituting other " business- like " practices. It has recently adopted a sliding scale fee structure (from $ 3 to $ 25 a visit). This policy is in keeping with overall Nixon health policy; HEW funded - centers are now under orders to establish sliding scale fee systems. In theory, this will enable MLK to receive some income from patients while not closing its doors to the uninsured. In practice, however, centers must still have grants to make up the defi- cit between the fee and the cost of service. Moreover, it is unclear whether MLK will actually make money on the arrangement. The director of a Manhattan health center estimates that the cost of implementing a fee schedule at her center will be $ 16,000 while the income produced from the fees will only amount to $ 10,000. Furthermore, some administrators at MLK are thinking the unthinkable; the day may come when MLK will have to turn away patients who cannot pay and have no medical insur- ance or Medicaid. The next few months will be critical for MLK. First there is the obvious disruption caused by OEO's demise. According to Bill Lloyd, MLK's retiring project director, " As long as OEO's in business, we're OK. " Now that OEO is going out of business, the Center will probably be transferred to HEW. This will mean a loss in flexibility and a likely 10 to 20 percent cut in grant funds. MLK obviously must strive to become independent of the federal government. Delores Smith, who will take over the proj- ect director's job soon, is tentative: " We can become sufficient self - in a year or two, but not by 1974. " Thus far, MLK is doing exactly what the Nixon Administration would hope for. It is getting more efficient (it's even using a computer for billings). It's cutting back on staff and dropping large parts of its training programs. While self sufficiency - may even be an obtain- 21 able goal, in the present health system good, comprehensive, quality care must be sacrificed in its pursuit. The Martin Luther King, Jr. Health Center will never look the same. In fact, in another few years, it is doubtful that MLK and its counterparts in other cities will look all that different from most run of the mill health centers and clinics. Albert Einstein College of Medicine In health, as in most federally supported domestic affairs, much political mileage can be made from attacking " hand outs ". to the poor while fistfuls are being given away to the big guys. In the Bronx, Albert Einstein College of Medicine (AECOM) is a big guy. When one turns from the cuts in health delivery programs in the South Bronx to cuts in the federal research and training funds which go to the Albert Einstein Col- lege of Medicine, one realizes where the really big money has been going all along. As of March 9, AECOM was estimating that it would lose over $ 3.5 million in Fiscal Year 1974 in research and training grants alone. (Its total research and training money being $ 34 million - mostly from federal sources.) While 3.5 $ million may not seem overly important out of a $ 77 mil- lion annual college budget, the nature of the cuts is a stunning blow to Einstein. Even at that, some observers at Einstein believe that the administration hasn't even begun to fully appreciate the impact of the blow. Einstein is a young medical school - it is celebrating its twentieth birthday this year. The research and research training funds that the Nixon Administration is now cutting have also been growing steadily since their birth some years earlier. These federal funds, though marked for research, have been used by Einstein and every other medical school to supplement their teach- ing programs. The reason for this diversion Lor double use of funds is simple: thirty years ago the American Medical Associa- tion would not tolerate direct federal sub- sidy of medical education. So this objec- tive was accomplished indirectly through research subsidies. The government and the schools were partners in this indirect subsidy of medical education, the by- product of which was an emphasis on bio- medical research rather than on clinical practice. Another by product - has been that medi- cal schools, like hospitals, have become dependent on federal support, despite their frequent posture as elite private institu- tions. Rosemary Stevens, author of Ameri- can Medicine and the Public Interest notes that " At least 50 percent, and perhaps as high as 75 percent, of current medical school expenditures - taking the private and state medical schools together - is de- rived from the federal government. The federal government has become the medi- cal schools'new proprietor. " As proprietor, the federal government poured its money into research, largely basic research (which would not interfere with the practice of medicine). In the 1940's, the budget of the National Institute of Health (the dispenser of funds) was around $ 2.5 million (less than Einstein's cut this year); the budget is now $ 1.6 bil lion. Medical school full time - faculty, paid for by these research funds, also grew by leaps and bounds. In 1950 there was an average of 70 faculty members per school and now there is an average of 250. Prac- tically half of the faculty at most medical schools receive all, or large portions, of their salaries from the federal government research grants. Teaching is the part time - diversion of most of these faculty. Research is their pre occupation - and that's what they are paid to do. Einstein has been dependent upon re- search funds to develop its teaching ca- pacities. It has, in its youth, less support from other sources namely - , endowment. Einstein's major philanthropic bequests have gone to its buildings (paid for at higher interest rates than older institu- tions), so it has less of an endowment sit- ting in the bank churning out interest to be used for operating expenses. Einstein made an upwardly mobile living for itself on federal funds and now the money is being withdrawn. It has little to fall back on. Einstein is going to have to lower its standard of living: the General Research Support Grant is one grant made to the college. It is used to supplement more re- stricted grants made to individuals or de- partments for specific research projects. Einstein had expected to get 350,000 $ to $ 400,000, but only received 134,000 $ for the calendar year 1973. Because research support money is more flexible than most other funds, its loss amounts to more than these dollars would indicate. This money is used for a wide variety of purposes: it can pay anything from a newly - hired re- searcher's moving expenses to start - up costs before other grant payments arrive from Washington. General Research Sup- 22 port Grant money is just the kind of money that Nixon is most suspicious of - it is un- accountable, free wheeling - , and not prod- uct oriented - . For Einstein, it is just the kind of money it needs to lure scientists away from other medical centers and pick up the costs that fall through the cracks. Research Training Grants pay for the post graduate - students and fellows who work in the labs- " the lifeblood of the sci- entific part of the community. " The training grant program is being phased out over the next three years and no new trainees have been accepted since January. Einstein's 1972-73 training grants amounted to 3.7 $ million. It is anticipated that this year's grants will be down by $ 1.5 million - lost will be $ 660,000 in trainee stipends; $ 349, - 000 in faculty salaries; and $ 518,000 in other salaries, equipment and so on. Research Grants Einstein - has been ex- periencing a 10 percent cut in all its re- search awards since the end of January. An anticipated $ 1.75 million will be lost in faculty and staff salaries due to these cuts. In all, Einstein has a $ 13 million research payroll in its clinical departments. Over the long haul, Einstein must come up with ways to finance itself. It has not given up altogether on the federal govern- ment, by any means. Thus far the cuts have only taken a small piece of the fed- eral pie. The Nixon Administration is not cutting, but increasing, research in cancer and stroke. Asked whether medical scien- tists wouldn't just re write - their basic re- search project in terms of cancer and stroke, one Einstein staff member replied: " You'd be wrong to think that everybody's not thinking of ways to survive and go underground. " While the crassly manipulative and " po- litical " nature of Nixon's " War On Cancer " Medical schools, like hos- pitals, have become depend- ent on federal support, despite their posture as elite private institutions. is rightly deplored, the manipulative and " political " basis of earlier research cannot be overlooked. Einstein scientists have long been involved in putting together im- probable research proposals which cap- italize on their access to research material (i.e., poor patients) and federal funds, but have had little connection to demonstrated health needs or the usefulness of their re- search findings. Einstein scientists have al- ways had to define their skills and their projects to win research contracts- " going underground, " if you will. The funding cuts and the switch to can- cer are not the only significant aspects of Nixon's policy for Einstein. Among others is the fact that faculty at Einstein and their friendly competitors at other research cen- ters are losing control of decisions about research priorities, about the distribution of remaining research funds, and about what constitutes useful research findings. Nowhere is this more clear than in the de- pression and dilemma that confront the school's staff when they see the emerging favor that contracts, rather than grants, are receiving around HEW. Einstein and institutions like it can try, but are having difficulty, getting federal gov- ernment " contracts " instead of " grants. " Contracts are not nearly so easy to get, nor are they as lucrative as grants. Grants- manship involves broad competition among institutions for loosely defined proj- ect purposes and funds. Grant applications are received by " peer review study ses- sions of colleagues from other institutions " Loften, one hears, with the applicants and members of the study session coming and going from the room as their grants are approved. Grants involve a standard over- head payment, one which is determined by the federal government and is based on the institution's programs, facilities and costs. Einstein's overhead rate is 60 percent La typical figure for institutions like it. Contracts are more difficult. The govern- ment requests proposals for bids, usually on such a narrowly defined set of require- ments that few candidates need apply. Short notice is given for the bids to be re- ceived and then decisions are made not by peer review but by internal federal government staff. Contracts have cost- sharing provisions (i.e., the institutions must absorb some of the cost of doing the job) and while outfits like Texas Instru- ment and Grumman Aircraft will be al- lowed payments for profit, educational institutions fear they will not be allowed generous overhead costs. 23 Now that research doesn't seem to be the easy trick it used to be, Einstein can look with new favor on its many affilia- tion arrangements. When Einstein's clini- cal faculty is not supported by research grants, it is supported by affiliation con- tracts, which pay the college to staff health delivery programs in the Bronx, including 2 municipal hospitals; 2 community men- tal health centers; at least one drug pro- gram; the Neighborhood Maternity Center; Bronx State Hospital; and others. Affilia- tions provide full or part time - salary for Einstein faculty (as well as interns and residents), administrators, and overhead costs which can go as high as 30 percent. While Einstein claims it can't save any money on affiliations (because it must hire staff to fulfill the terms of the affilia- tion contracts) it is an open secret that affiliation arrangements are universally used to defray medical school costs. An example: equipment purchased by Bronx Municipal Hospital Center is actually used for the institutional training and research purposes of Einstein. If Einstein had its way, no doubt its affiliation payments would increase substantially. Already it is clear that untenured staff (like former research trainees) must get themselves on the affili- ation payroll or be terminated. Further- more, while the New York City Health and Hospital Corporation is beginning to make noises about cracking down on the affilia- tion contracts it lets, and tightening up on the overhead payments, Einstein will be pushing " now more than ever " for latitude and abundance in its affiliation arrange- ments. In the meantime, Einstein must meet its payroll, pay its suppliers and somehow keep its institutional head above water. Einstein's fiscal troubles have been appar- ent for some time; only last fall, the federal government turned down its application for a Financial Distress Grant. These are difficult times. Last year the dean was dis- missed and with no new dean yet ap- pointed, strong leadership is absent. Since January, a Task Force on Fiscal Stability (composed of students, adminis- tration and faculty) has been meeting to chart Einstein's fiscal course. The Task Force has largely addressed itself to the use of " university funds, " which consist of philanthropic gifts, tuition, overhead pay- ments. It recommends, for a starter, that all departments take a five percent cut in university funds. (This will hit hardest those preclinical basic science depart- ments which have the most university funds.) There will be no cost living - of - sal- ary increases for faculty; tuition will be raised to $ 3,000 and class size will be in- creased. Departments may be merged, duplication eliminated and Program Plan- ning and Budgetary Systems, the over- rated savior of management disasters, may be instituted. None of these measures, as well as oth- ers which have been suggested, appears to come close to filling the hole left by the Terminations and Cutbacks Type of Program Mental Health Centers Child Health Centers Women's Health Centers Comprehensive Family Health Centers Health Manpower Training Selected Community Health Program Cuts in the Bronx Neighborhood Lincoln Hospital Sound View Throggs - Neck Tremont Hunt's Point . Morrisania Hospital Bronx Municipal Hospital Source of Funding HEW HEW N.Y. State HEW (administered by N.Y. City) HEW HEW Outcome Terminates in 3 years Terminates in 2 years No funds cut Uncertain Terminated Terminated Bronx Maternity Neighborhood Maternity Family Planning (7 centers) Hunt's Point Morrisania North Haven Bronx Ad Hoc Manpower Comm. Lincoln Non Professional - Mental Health Workers MLK Comm. Health Workers South Bronx Health Careers Training OEO HEW HEW HEW Medicaid Medicaid HEW HEW OEO HUD Terminated Terminated (City will take over) No funds cut Uncertain No funds cut No funds cut Terminated Terminated Severely cut Terminated 24 federal cutbacks. Not (to mention the $ 6 to $ 7 million deficit AECOM faced before fund raising - started this year.) Einstein is in such bad straits right now that it is hav- ing difficulty making its payroll and has been trying to ignore its creditors for sev- eral months. It may be surprising that in all this fiscal analysis, nothing has been said about medical students, whose education is, pre- sumably, the central purpose of the insti- tution. The reasons are complex, but Ein- stein, maybe even more than other insti- tutions, has found itself going far afield from education to finance itself. In the A REMINDER This is the last issue of the Health / PAC Bulletin until September. Before the end of the year you will receive three special reports. words of Malcolm X: " The chickens have come home to roost! " One can only specu- late on the long term - effects of this fiscal crisis on medical education at Einstein. Municipal Hospitals There are four municipal (public) hos- pitals in the Bronx. Two, Lincoln and Mor- risania, are not merely obsolete facilities, but are among the most decayed of New York's 18 municipal hospitals. The third, Fordham, was spared the wrecking ball last year, not because it is a good hospital, but because it would not be replaced soon. The fourth hospital, Bronx Municipal Hos- pital Center (BMHC), is actually two hospitals Jacobi and Van Etten. BMHC is located away from the slums of the Bronx and is, in comparison to the others, a mod- ern hospital. This is because it was built across the street from Albert Einstein Col- lege of Medicine (see above) for the teaching and research convenience of that institution rather than for the convenience of its patients. There are two more munici- pal hospitals nearing completion in the Bronx. One is the new Lincoln, a replace- ment for the old hospital which has been on the drawing boards for more than a generation. The second is North Central Bronx Hospital, on the drawing boards less than ten years, and next door to Montefiore Hospital and Medical Center - again at a great distance from the Bronx's poorest pa- tients and again for the convenience of Montefiore, another teaching and research center. Patients know some of these institutions as " butcher shops "; administrators and planners call them " hospitals of last re- sort "; the executive director of Morrisania even referred to that hospital recently as a " colony. " The two hospitals were built ex- pressly for the convenience of the private medical centers, their services are organ- ized around the teaching and research needs of their affiliates; and they receive those patients who are of no medical or economic interest to the private hospitals. Because of their colonial status, while first- class institutions like Einstein and Monte- fiore grew and prospered from federal health expenditures, the second - class mu- nicipals possibly even lost ground. Paradoxically, however, now that fed- eral money is getting tight, the munici pals, not the voluntary hospitals, are going to be hurt most severely. Not only will they be called upon to pick up out patients - for- merly served in neighborhood programs being cut and terminated, they will also be receiving in patients - who will not be wel- come at the voluntaries anymore. In addi- tion, they will in all likelihood come under increasing pressure from Einstein and Montefiore to compensate them for the cuts they've received in the research, training and teaching areas. Just as the poor pa- tients of the city will shoulder the burden of the Nixon health budget, so will the poor hospitals. The New York City Health and Hospitals Corporation has management authority over the municipal hospitals. Observers are virtually unanimous in the opinion that the Corporation is at least bungling and incompetent. Many also agree that Corpo- ration officials are unresponsive, lie, mis- lead and are generally not to be trusted with the hospitals. " Establishment " groups, like the City Hospital Visiting Committee, are " convinced that the Corporation is not directing its energies toward [its] primary goal of good patient care. " There is a cred- ibility gap. The president of the Corpora- tion recently tendered his resignation rather than face the threat of dismissal. The municipal hospitals must rely on this 25 organization to get them through the diffi- cult times they face. Meanwhile, the Cor- poration staff have been secretly cooking up the West Bronx Health System Plan to cede half of the health services in the Bronx over to Montefiore Hospital. The Corporation seems determined to lead the municipal hospitals down the drain. More Cuts Bronx Municipal Hospital Center OE If the Neighborhood Maternity Center closes, BMHC will pick up 5,000 pre natal - , visits a year. M@ The Children and Youth Project run by Einstein at BMHC has 13,500 patient vis- its per year. The children will now have to be seen in Jacobi's ordinary pediatrics clinics. M-- Included in BMHC's cutbacks are 36 fellowship / residency " lines " and $ 75,000 in faculty support for these positions. While these are cuts actually suffered by Einstein (see above), the 36 fellows presumably were involved in some patient care at BMHC. Einstein will undoubtedly attempt to get these positions covered through its affiliation contract with the Corporation. OE Also listed as a cutback for BMHC is a three person - pediatric neuro audio - testing program, which again is an Ein- stein program. The program is being cut so that only the research component remains! Lincoln Hospital OE Lincoln is losing a $ 160,000 child- screening program in which 350 nurses ' aides would have been trained by Model Cities. OE The Lincoln Community Mental Health Center has also lost a two year - training program for 40 para professionals - . @ With the future of both the Martin Luther King, Jr. Health Center and the Hunts Point Multi Service - Center also in jeopardy, Lincoln could receive up to 65,000 patients. Morrisania OE A 132,000 $ ambulatory drug detoxi- fication program funded by Model Cities is in jeopardy. @ A $ 1.22 million children and youth project run by Montefiore at Morrisania is being terminated. It is not surprising, then, to discover that the Corporation has not made an assess- ment of the effects of the Nixon health budget on its hospitals. Even though it di- rected the hospital directors to submit their own surveys of the effects on indi- vidual hospital operations, the Corpora- tion after many months has still not heard from two of its four Bronx hospitals. Fur- thermore, most of the cuts they've reported refer to programs which are administered by Montefiore and Einstein, and from which the Corporation receives no income or remuneration. No one doubts that the City hospitals will be called upon to serve more patients. However, the hospitals are completely un- prepared for this new stress, not only be- cause of their leadership void, but also because of the Corporation's employment policies over the last several years. For many months the Corporation pursued an attrition policy. Hospital staff were not re- placed as they retired or quit, unless they were RN's or doctors. Not only did this not save the Corporation from fiscal disaster, it resulted in employee speed - ups and staff shortages which jeopardized patient care throughout the municipal system. The attrition policy was lifted in Sep- tember, 1972 and by November the Cor- poration was publicly assuring that, " The effects of attrition have been wiped out. " This hasn't fooled many people, especially hospital staff and patients. Although natu- rally many jobs have been refilled, many others were simply " wiped out. " Wards have been closed down and " job lines " have been removed so that on paper at least, it appears that the hospitals are going full steam ahead with a full comple- ment of staff. The Corporation also claims to have made significant progress in hir- ing a complete nursing staff, but since nurses assume so many patient non - duties in municipal hospitals due to the shortage of other health workers, little time is left for actual patient care. All this has resulted in a pathetic situation at Lincoln Hospital where one general medicine ward has been labeled a " Self Help Ward. " As soon as patients are able to be minimally self- sufficient, they are put together on an un- staffed ward to take care of themselves and each other. Few are deceived by the hospital's promotion of the ward as a pro- gressive concept in patient care. Into this desperate situation come the Nixon budget cuts and the anti inflation - health budget. How could things be worse? The Corporation has long been preoccu- 26 pied with its third party - collections (re- imbursements from Medicare and Med- icaid), which have been inefficient and wasteful. The prospect of further changes in Medicaid and Medicare, in addition to those already accomplished through HR 1 (sse previous article, page 12), presents a dismal future for the municipals. Nixon proposes that Medicare patients pay the total cost of their first day in the hospital plus ten percent of each succes- sive day. While Caspar Weinberger, Nix- on's chief of HEW, says that the elderly would pay $ 192 for an average hospitali- zation, in New York average costs can run almost that high per day! At Montefiore Hospital, administrators have figured that elderly patients would pay 360 $ for an av- erage 15 day - visit, if Nixon's proposals are approved. Obviously, many older people simply cannot afford to pay 360 $ for care which now only costs them the $ 72 deductible fee. Private voluntary hospitals are aware of this and will be looking closely into an older person's ability to pay before ad- mission. Some, if not many, will be forced to go to the municipal hospitals, where ability to pay is not a requirement for ad- mission. The municipal hospitals, for their part, have plenty of room. Occupancy rates have been so low that 1,000 beds have been closed down over the last year. Nor- mally an increase in patient load would mean that municipal hospitals could oper- ate more efficiently. However, very little is normal in municipal hospitals. They do not have the personnel for even their pres- ent low patient load, as the " Self Help Ward " at Lincoln indicates. In addition, these new patients coming to the munici- pals will not be bringing more money. In fact, they will bring less money, decreased Medicare income and more unpaid hos- pital bills. The Nixon proposals would not only throw the public hospitals into an imme- diate fiscal crisis greater than their present one, but would also undermine these pub- lic hospitals over the long haul. Paul Kerz, powerful and controversial Senior Vice President for Fiscal Affairs at the Corpo- ration, points out that if municipal hospi- tals do not receive a proportional increase in income to match the larger patient load, then the hospitals will actually be spend- ing less per patient than they are now. If they spend even less per patient, their rates (determined in part by Blue Cross, friend of the voluntaries) will drop further. It is questionable whether Nixon's pro- posed Medicare changes will get their needed Congressional approval. Last year, however, many changes were approved in Medicare and Medicaid by HR 1. While no one knows for sure how the states will implement HR l's co insurance - provisions, there is no doubt that these provisions will make Medicaid more restrictive. This means that Medicaid will pay for less and perhaps will cover even fewer people. The municipal hospitals, as well as the Med- icaid patients, will be hurt. Nixon calls this " sharing the responsibility for one's med- ical care. " Not only will voluntary hospitals shuttle their more expensive patients to municipal hospitals, nursing homes will also join in the patient passing routine. Under changes enacted in HR 1, the federal government is refusing to reimburse nursing homes at more than 105 percent of last year's rates -an obvious way to curb nursing home rates which have risen astronomically on Medicare reimbursements. Now the pa- tients will be penalized for nursing homes ' runaway costs. For example, Montefiore Hospital owns a nursing home in the Bronx. Beth Abraham claims a seven per- cent inflationary increase over last year's budget. It also claims that it cannot limit its costs and will incur three quarters - of a million dollar deficit as a result of the changed reimbursement policies. It has al- ready laid off 20 employees. Nursing homes will take the natural steps to avoid losses. They will not take the sicker and poorer patients. These chronic care patients will be forced to re- main in the acute care hospitals. For Nix- Correction: Please note the follow- ing corrections in the key to map on page 9 of last month's BULLETIN (Dismantling " California's County Hospitals, " No. 51, April 1973). San Mateo's county hospital is closing. " Contracting out " at Los Angeles County is only under discussion at the present time. Nothing has hap- pened to the private takeover plans for Merced County Hospital. Fresno is not closing down but may opt for tighter billing, and Orange County's university takeover is still only in the discussion stage. 27 on's own purposes this will be extremely inefficient, because it is far more costly to News Briefs care for a chronic patient in an acute care facility than it is in a nursing home. Vol- untary hospitals do not wish to maintain chronic patients and will attempt to dis- Another We Told You So charge them whether or not adequate ar- rangements for their care have been made. They will also be more cautious about ad- mitting patients who may become " dispo- sition problems " later on stroke - victims, for example. These patients will end up at municipal hospitals. If the new Medicare changes go through, even more chronic care patients will be dumped on municipal wards. Iron- ically, this comes at a time when the mu- nicipal hospitals have managed to finally get most of the chronic patients they've been carrying for years transferred out to nursing homes. No one can determine with confidence Comprehensive health care is certainly not where it's at, according to the administra- tors of university medical centers. In a sur- vey of the administrators on the topic. " The 1980 University Medical Center: Its Mis- sions and Administration, " the respondents were asked to rank the missions of their centers. The top two missions are: 1. Train physicians and dentists to meet the needs of a given area. 2. Deliver patient care of the types need- ed in the teaching programs of the Univer- sity Medical Center's (UMC) schools. The administrators also agreed that the missions of their centers did not include: exactly how much these Medicare - Med- icaid changes will cost the municipal hos- pitals. However, the impact of the cuts and 1. Maintain a balance of racial, ethnic and socio economic - backgrounds in the student populations of UMC schools, repre- terminations in other delivery programs sentative of the area served by the UMC. can be estimated in three of the four City hospitals in the Bronx. (No information is available on Fordham.) While it is difficult to judge the actual value of these pro- grams, there is no question that the recipi- ents of their services will now go to the municipal hospitals. Not only do the municipal hospitals pro- vide poor service in their OPD's, in many instances the programs that are being cut or completely dismantled provided serv- ices that the City health system didn't pro- vide. Many of the programs weren't 2. Deliver comprehensive health care to meet the needs of the community immedi- ately surrounding the UMC. 3. Perform general social service not di- rectly related to health care to meet the needs of the community immediately sur- rounding the UMC. Owen C. Elder, Jr. from " The 1980 University Medical Center: Its Missions and Administration, " Journal of Medical Education March 1973 merely alternatives to already existing city - run programs. They were the only place to get the kind of care they provided. As a result, the City health care system will be under pressure not only to expand the services it already provides but also to fill the vacuum left by the Nixon cuts. How- ever, it will not be able to fill the vacuum. In New York, the municipal hospitals are being backed up against the wall. Their disastrous fiscal predicament has al- ready prompted the Health and Hospitals Corporation to sue the City for $ 78 million. Even if the Corporation wins the suit, the City isn't rolling in clover itself. While Boston Loses Control If New York and California are doing it, can Boston be far behind? No. So Mayor Kevin White of Boston has transferred con- trol of all medical services at Boston City Hospital (BCH), the only full service - mu- nicipal hospital in the city, to Boston Uni- versity and its medical school. To make BCH, in the words of the agreement, a community " hospital focused on provision of high quality - family care, " the City has cut the BCH budget by $ 12 million this year and is cutting the number of patient beds from 850 to 500. There have been scattered Richard Nixon succeeds in cutting the fed- community and worker protests, but so far eral health budget, his policies will put the half dozen unions representing the hos- even greater strains on state and local pital workers and the various community health budgets. groups have been pulling in separate di- -Constance Bloomfield and rections. A fall BULLETIN will examine this 1 A. Sandra Abramson development in detail. 28