to why not have a volume purchase of materials as, for instance, in the area of drugs? New York State intends to conduct its own pilot study regarding the volume purchase of drugs, and this can certainly relate to other areas of the program also, based on our findings.

The California volume purchase plan, to the best of my knowledge, has been considerably modified from what it was 2 years ago in the development stage.

I do not know if the gentleman from HEW pointed it out, but it is a different program now. We intend to test the concept of the single State agency through the political subdivisions purchasing directly from manufacturers, drugs either prescription drugs or nonprescription drugs for the medicaid population. So that is another thing that we will be looking at, another of the problems that we will be involved in as to cost savings.

Senator NELSON. New York City has procured drugs for city hospitals on bid for years.

Mr. FITZPATRICK. So has our department of mental hygiene.

We are talking about a slightly different order of magnitude as far as program. Our own department of mental hygiene has a total expenditure for drug services for the State institutions of approximately $10 million. We estimate that our cost of drugs, just the cost of the ingredients, is in excess of $80 million.

There are certain things that a potential bidder, manufacturer would look at in dealing with this volume. How does it affect the other areas of his sales, and so on?

Mr. SKERRETT. We would be dealing with a large number of providers; to try and purchase warehouse drugs and supply them to every pharmacy in the State would be very difficult.

We plan on attempting to contract with the current distribution system which is in place, in the pharmacy area, have us pay for the drugs on bid from a manufacturer, and have wholesalers bid for the distribution of those drugs.

In New York City, I believe HHC right now has 17 facilities, which is rather easy to get the manufacturer to drop-ship to 17 locations, but we do not at this time intend to get into the actual acquisition of the drugs, warehousing, and distribution.

Mr. FITZPATRICK. I think that we would also urge the subcommittee and the Congress to take a look at the freedom of choice issue, as HEW did.

I do not agree with them that it is a myth. State programs, State medicaid programs attempt to deal with it every day, and certainly, you know, part of the reason that States and localities are in such fiscal straits is because of the medicaid problem, and part of it can be traced to the fact that we must contend with the complete provider network which is very, very difficult to monitor in terms of fraud and abuse or overutilization.

We feel that a smaller network of providers which would be contracted through the bid process, the competitive bid process, would be much easier to monitor and inay in fact yield a better quality of care than does the present situation; and delivery system.

Senator NELSON. Thank you very much, gentlemen. We appreciate your taking the time to come and testify this morning.

Our final witness today is Mr. Peter Coppola, Chief, Medical Assistance Division, District of Columbia Department of Human Resources.

Your statement will be printed in full in the record.1 You may proceed in whatever fashion you wish.

STATEMENT OF PETER B. COPPOLA, CHIEF, MEDICAL ASSISTANCE DIVISION, D.C. DEPARTMENT OF HUMAN RESOURCES

Mr. COPPOLA. Thank you, Mr. Chairman.

My statement is brief; I prefer to read it.
Senator NELSON. Please proceed.

Mr. COPPOLA. I am pleased to have this opportunity to present testimony to you on the District of Columbia medicaid practices in the procurement of eyewear.

The District of Columbia Department of Human Resources has two programs through which it provides comprehensive medical care to its indigent residents.

Primarily, there is the District of Columbia medicaid program which is funded by 50-percent local and 50-percent Federal funds. The program is administered locally in accordance with Federal legislation, the Code of Federal Regulations, and the District of Columbia medicaid state plan.

During the period that ended June 30, 1976, the District of Columbia medicaid program provided $106 million worth of comprehensive medical care to 153,000 different individuals; 57 percent was paid for inpatient hospital and other institutional care, 33 percent for physician, clinic and pharmacy services, and 10 percent for other ancillary services.

To be eligible to receive services under this program, a District of Columbia resident's income must be under a stipulated amount and he must be categorically related to one of the four public assistance programs; that is, aid to families with dependent children, aid to the aged, aid to the blind, or aid to the permanently and totally disabled.

The latter three categories constitute the SSI program. The District of Columbia medicaid program encompasses all public assistance recipients. It also includes individuals not on public assistance who meet the criteria for categorical relationship to the public assistance categories, whose income is greater than allowed for public assistance, but less than allowed for medical assistance.

These individuals are known as the medically needy. The medically needy numbered approximately 30,000 of the 153,000 who received services in fiscal year 1976.

The other program through which we provide medical care to the indigent is the medical charities program. Individuals eligible for this program meet the same financial standards as those eligible for medicaid, but do not have a categorical relationship to the public assistance programs. These individuals are sometimes called the medically indigent or the working poor.

1 See prepared statement and supplemental information of Mr. Coppola beginning at

These individuals are entitled to receive medical services through all DHR, public clinics and hospitals, and also through those District of Columbia community hospitals and outpatient departments with which we have a contract whereby they provide services at a rate comparable to one-third their customary charges.

In addition, these eligibles are entitled to the services of an optician with which the Department has a contract who will provide eyeglasses when the patient provides a valid prescription from one of our clinics or participating hospital outpatient departments.

During fiscal year 1976, DHR had a budget of $1,700,000 for provision of medical care to medical charities eligibles, which was in addition to the care provided by the Department's public institutions and clinics. It is estimated that service was provided to 18,000 medical charities patients during fiscal year 1976.

With regard to the provision of eyeglasses under medicaid, eligible patients are entitled to visit an ophthalmologist or optometrist for an eye examination, including refractions. In the event that glasses are required, an ophthalmologist will give the patient a prescription which the patient will take to the medicaid participating optician of his choice to obtain his glasses.

Had the patient elected to go to an optometrist for his eye examination, and eyeglasses were required, the optometrist would nearly always also provide the patient with the eyeglasses.

Mr. GORDON. Is it a requirement that the ophthalmologist give a prescription to a medicaid patient, or is it just a normal procedure? Mr. COPPOLA. It is normal practice that the ophthalmologists here in the District of Columbia provide the prescriptions.

It is also normal practice that optometrists nearly always provide the glasses.

Mr. GORDON. But they never provide a prescription?

Mr. COPPOLA. Sometimes they may. There are one or two in the city who do because they are not set up to distribute glasses, so they do issue a prescription.

However, with regard to freedom of choice that you were discussing before, it is our opinion that if a person selects to go to an optometrist as his option then he also is subjected to receiving glasses through the optometrist, if that is the practice.

If he selects to go to an ophthalmologist, then he would go to an optician.

Mr. GORDON. In other words if he goes to an optometrist he gets the examination and the glasses together?

Mr. COPPOLA. That is right.

We have developed this philosophy, so to speak, in other aspects of the medical assistance program. In other words, if you elect this package, just like you elect to accept services through a health maintenance organization, then you are not entitled to freedom of choice elsewhere.

You have elected the health maintenance organization. You can drop out of the health maintenance organization and go back to your other mode of receiving services.

Senator NELSON. Do you have agreements with optometrists as to price limitations?

Mr. COPPOLA. Yes.

In a few cases an optometrist may choose not to dispense glasses and would give the patient a prescription to be filled by a participating optician.

In accordance with medicaid local policy, a participating optometrist or optician may not dispense eyewear from his own stocks or supplies to a medicaid client. The glasses must be ordered by the optometrist or optician from a wholesale laboratory, individually and especially for the patient. They may use any bonafide wholesale laboratory they choose to provide the eyeglasses. However, the wholesale laboratory may not be participating in the medicaid program as a dispensing optician to medicaid clients.

Only first quality frames and ophthalmic lenses which meet Federal standards may be dispensed in the program.

Mr. GORDON. How do you insure that only first quality frames and lenses are actually dispensed in the medicaid program?

Mr. COPPOLA. Aside from the utilization and review technique which is not fully in operation right now, the method through which we buy glasses, I think, precludes the optometrist or optician from ordering anything other than first quality merchandise because, as I continue in the testimony, we pay his out-of-pocket costs as evidenced by the wholesale laboratory invoice, and it would be of no benefit for anybody for him to order cheaper materials because he would only get paid as evidenced by the invoice and the dispensing fee.

Mr. GORDON. Something just occurred to me. You were talking about this tie-in where you go to an optometrist, and you definitely have to get the glasses from him. Now, would this not be to the great disadvantage of the opticians, though, because if you need an examination you cannot go to an optician. You are going to have to go to an optometrist or an ophthalmologist.

An ophthalmologist generally does not dispense glasses, so you go to an optometrist for an examination, and you can be sure that that person is not going to be getting his glasses at an optician's place.

Mr. COPPOLA. If he goes to an ophthalomologist, he will get them at an optician's. If he goes to an optometrist, the odds are that the optometrist will furnish them himself.

Mr. GORDON. Most people who go for examinations go to optometrists rather than ophthalmologists.

Mr. COPPOLA. I would say that, at least in the medicaid program, it is 50/50. It is almost split right down the middle.

I would suspect that normal practice is the same also. There are many people who prefer to go to an ophthalmologist for an eye examination or a refraction.

Medical charities patients, however, are required to take their prescriptions for glasses to the single optician with which DHR has a contract which was awarded on a competitive basis. The optician is required to provide good quality merchandise which may be provided from his own stock previously purchased in bulk.

The medicaid eyeglass payment to the optometrist or optician, not including the examination fee for the optometrist, is in two parts. There is a dispensing fee which includes assisting with the selection of frames, ordering the glasses from the wholesale lab, notifying the patient his eyeglasses have been received, checking the correctness

adjustment thereafter. There is presently a payment of $13.60 for the dispensing of a pair of single vision eyeglasses.

In addition to the dispensing fee, we also pay the optometrist or optician his out-of-pocket cost for the glasses ordered from the wholesaler. The amount is evidenced by the original wholesale lab invoice which must be presented for payment.

During fiscal year 1976 the medicaid program paid $194,064 for 32,074 pairs of spectacles for an average of $15.40 each. In addition, we also paid an average dispensing fee of $14.35 for each.

Therefore, each individualized pair of glasses for a medicaid client from the provider of his choice cost the medicaid program on the average of $29.75 each.

Mr. GORDON. What is the price now of the eyeglasses only?

Mr. COPPOLA. On the average, $15.40 is the wholesale cost of the glasses that we pay.

That is an average.

A simple survey indicated that the medicaid program paid on the average, including dispensing fees, $28.65 for a pair of single vision. glasses and $38.70 for bifocals.

On the average, $15.40 is what we pay for the eyeglasses themselves. Mr. GORDON. The eyeglasses themselves?

Mr. COPPOLA. Right.

Mr. GORDON. Thank you.

Mr. COPPOLA. It is $28.65 for a pair of single vision glasses and $38.70 for bifocals.

I believe this amount compares favorably to the $15 to $75 you or I would have to pay if we took our prescription to an optician for the same services.

In addition, I read the report that was issued by HEW, and I believe the District of Columbia falls favorably with the lowest in that study of those five States.

A review of the payments made to the contract optician for medical charities patients indicated that on the average we pay approximately $21 for each pair of single vision eyeglasses and $36 for bifocals.

Mr. GORDON. Are you talking exclusive of the examination?

Mr. COPPOLA. Yes; exclusive of the examination, but with the contract optician there is no dispensing fee as such. We just pay for the merchandise, and therefore the merchandise is more expensive.

Mr. GORDON. I want to go back to what we were talking about once before.

The average cost of glasses plus the dispensing fee was $29.75.
Is that correct?

Mr. COPPOLA. That is correct.

Mr. GORDON. I have seen advertised, for example, at People's Drug Store, say, for $14.88, or let's say $15-that includes dispensing also, of course. Now, how do you justify paying $29.75 if you can get it within the District of Columbia for $14 and $15?

Mr. COPPOLA. As a matter of fact, I was in People's Drug Store the other morning, and there was a sign, $16.88 for an all-inclusive pair of glasses.

I happened to ask the optician, and he said, yes, that is for those glasses right there, and he pointed to a table that had maybe 35 pairs of glasses on it. Most of them resembled dated frames. They did not