APPENDIX A Examples of the Impact of Health Care Cost Escalation on Industry 1. IBM 2. TRW 3. Stauffer Chemical: : From 1972 to 1977 the per employee cost of the IBM : more than 70% with no major change in benefits. (Cleveland area employees only) $105.60 monthly In 1977, Stauffer's health benefits equalled 3.8% : (for the New York headquarter's employees) premium : Despite no change in benefits since 1973 and a steady population being served, costs per employee for this primarily rural group rose from $433 to $684 in 1977 26.5% of this increase came between 1974 and 1975. The addition of dental and vision care benefits can be seen by this chart. APPENDIX B INDUSTRY REIMBURSEMENT AND INCENTIVE CHANGES (An incomplete list which is not prioritized) 1. 2nd surgical opinion 2. pre-admission testing 3. concurrent utilization review 4. disability review programs 5. incentive programs for employees to make more informed utilization decisions 6. employee financial participation in the payment for all new benefits 7. health education programs (including nutrition, immunization, fitness, and information to assist in the wise use of their health benefits) behavioral change programs: 8. 9. reimbursement for alternatives to in-patient care: 10. 11. e. hospice programs reimbursement for care rendered by various categories of para-medical personnel restricting reimbursement to those facilities and equipment which have been approved by the local health systems agency 12. expanding the corporate medical facility to a full-service system for employees and dependents EXTERNAL PROGRAMS INDUSTRY SUPPORTS 1. health planning, including strengthening the HSAs by: b. c. d. e. decertification authority (with a buy-back mechanism) including all government health facilities assuring a true consumer majority at all decision-making including all major equipment purchases, regardless of where the equipment is to be located, under Certificate- 2. Health Maintenance Organizations, IPAs and other forms of prepaid practices that place the provider at risk and provide incentives for prevention 3. extending PSROs to all classes of patients while generating data and instruments for monitoring, evaluating, standard-setting and influencing provider behavior 4. state rate regulatory commissions, on a case-by-case basis, with special support for any voluntary program which proves effective 5. capital controls on the growth of medical facilities 6. arbitration systems to resolve medical liability conflicts 7. 8. school and other public health education programs technology assessment to provide an ongoing process for the entry of new equipment and methods into the medical "marketplace" STATEMENT OF DENNIS L. IRISH, VICE PRESIDENT, SMALL BUSINESS SERVICE BUREAU, INC., WORCESTER, MASS. Mr. IRISH. I appear before you today to offer comment on the devastating effect which the high cost of health care has on America's small business community and to endorse this amendments to the Hospital Cost Containment Act of 1977 offered by Senator Nelson. Hopefully these amendments will facilitate the enactment of this most necessary legislation. Capping hospital costs is a positive step toward containment of the most significant segment of health care costs and an essential prerequisite to the enactment of any form of National Health Insurance. The cost of health care is of major concern to small business people. They contribute an ever increasing proportion of their income to health insurance for themselves and their employees as well as to the direct consumption of health care services. A recent survey of small business persons conducted by our association on this subject revealed that although 69 percent of the respondents rated the quality of health care they are now receiving as good to excellent 64 percent felt that the Government should control hospital finances in order to reduce the rate of increase in health care costs. A copy of the small business ballot results on this subject is attached to my written comments. Admittedly, the rising cost of health care is only one of several problems confronting the American health care delivery system. It is however the overriding one as far as small business people are concerned. Total expenditures on health care will exceed $160 billion in fiscal 1977. This amounts to $727 per person or $2,908 for the average family of four. The rate of increase is staggering, in fiscal 1960, $25.9 billion was spent on health care; we have experienced a sixfold increase in 17 years. Of even greater concern however is the fact that health care is gobbling up an ever increasing portion of our gross national product, from 5.9 percent to 8.6 percent only a decade. The most direct manifestation of this situation for many small business persons is the rapidly rising cost of group health insurance premiums. To illustrate this situation I have prepared the chart (No. 1) which you see behind me. The dollar amounts reflect the monthly cost for a typical Blue Cross Blue Shield contract covering an employee and his or her spouse and dependents. In each of these areas as you can see, the cost of this coverage has more than doubled in this 8-year period. I have selected Concord, N.H., Columbus, Ohio, and Worcester, Mass., and I wish to thank Blue Cross and Blue Shield for their cooperation in those respective areas. As you can see in each situation, the cost of health insurance in that 8-year period has more than doubled, going from $24.75 a month to $49.24 for Concord, N.H., from $31.28 to $73.63 for Columbus, Ohio, and for Worcester, Mass., from $45.55 to $103.90 in this 8-year period. Senator NELSON. I take it this is all Blue Cross? Mr. IRISH. This is Blue Cross and Blue Shield together, the comprehensive program such as would be offered by the average small business to its employees. Senator NELSON. And each of them is providing the same protection? Mr. IRISH. Yes; they are roughly comparable. They are providing what I would describe as comprehensive coverage, full semiprivate hospital bed, a generous surgical coverage, and comprehensive type of contract. Senator NELSON. What accounts for the difference? Mr. IRISH. Variations in the cost of health in those respective areas. Massachusetts, for example, is recognized as a world leader, it has a world-wide reputation as being a medical center, and together with the number of teaching institutions in the metropolitan Boston area, it is quite extensive, but the costs are essentially, the differences are essentially due to variations in health care costs in those respective States. A small business in Massachusetts employing a constant 21 persons over this period of time would have remitted $753.05 per month to Blue Cross and Blue Shield in 1970. (This is assuming that 14 of the 21 employees took "family" contracts and 7 "single" contracts.) In 1978 this same small business would have a monthly Blue Cross Blue Shield bill of $1,742.44. The cost of providing that particular benefit would have more than doubled. The actual effect that this doubling of group health insurance premiums has had upon two well managed, growing, small businesses, a retail store, and a small manufacturing plant, is illustrated on the next chart. The results are analogous to the relationship between health care costs and the gross national product which I referred to earlier. Health care costs in the form of insurance premiums are increasing more rapidly than are sales or income. In the case of the small retail business which employs approximately 20 persons, group health insurnace has tripled when expressed as a percentage of sales in the period 1970-1977 and more than doubled when expressed as a percentage of total payroll. This runs from 1.2 percent of sales to 0.6 percent and I would like to note the two examples I am citing, we have two well-managed companies, where the amount of sales has increased reasonably over this period of time. The small manufacturing firm which complied with our request for information fared slightly better; group health premiums have risen 1 to 1.4 percent of sales and from 3.7 percent to 5.9 percent of total payroll. In our relationship between the cost of medical care and gross national product, here we see the cost of group health insurance increasing dramatically in contrast to sales and/or payroll to other constants. Although I have relied heavily upon the cost of group health insurance to illustrate the effect which the rising cost of health care is having upon small businesses I would be remiss if I did not point out. that comprehensive group health insurance is not available to all small businesses. Some small businesses, because of the number of em |