To the Congress of the United States:
the last twelve months alone, America's medical bill went up eleven
percent, from $63 to $70 billion. In the last ten years, it has climbed
170 percent, from the $26 billion level in 1960. Then we were spending
5.3 percent of our Gross National Product on health; today we devote
almost 7% of our GNP to health expenditures.
investment in health has been led by the Federal Government. In 1960,
Washington spent $3.5 billion on medical needs--13 percent of the
total. This year it will spend $21 billion--or about 30 percent of the
nation's spending in this area.
But what are we getting for all this money?
most Americans, the result of our expanded investment has been more
medical care and care of higher quality. A profusion of impressive new
techniques, powerful new drugs, and splendid new facilities has
developed over the past decade. During that same time, there has been a
six percent drop in the number of days each year that Americans are
disabled. Clearly there is much that is right with American medicine.
there is also much that is wrong. One of the biggest problems is that
fully 60 percent of the growth in medical expenditures in the last ten
years has gone not for additional services but merely to meet price
inflation. Since 1960, medical costs have gone up twice as fast as the
cost of living. Hospital costs have risen five times as fast as other
prices. For growing numbers of Americans, the cost of care is becoming
prohibitive. And even those who can afford most care may find
themselves impoverished by a catastrophic medical expenditure.
shortcomings of our health care system are manifested in other ways as
well. For some Americans--especially those who live in remote rural
areas or in the inner city--care is simply not available. The quality
of medicine varies widely with geography and income. Primary care
physicians and outpatient facilities are in short supply in many areas,
and most of our people have trouble obtaining medical attention on
short notice. Because we pay so little attention to preventing disease
and treating it early, too many people get sick and need intensive
Our record, then, is not as good as it should be.
Costs have skyrocketed but values have not kept pace. We are investing
more of our nation's resources in the health of our people but we are
not getting a full return on our investment.
BUILDING A NATIONAL HEALTH STRATEGY
do not have to be this way. We can change these conditions--indeed, we
must change them if we are to fulfill our promise as a nation. Good
health care should be readily available to all of our citizens.
will not be easy for our nation to achieve this goal. It will be
impossible to achieve it without a new sense of purpose and a new
spirit of discipline. That is why I am calling today not only for new
programs and not merely for more money but for something more--for a
new approach which is equal to the complexity of our challenges. I am
calling today for a new National Health Strategy that will marshall a
variety of forces in a coordinated assault on a variety of problems.
This new strategy should be built on four basic
Assuring Equal Access. Although the Federal Government should be viewed
as only one of several partners in this reforming effort, it does bear
a special responsibility to help all citizens achieve equal access to
our health care system. Just as our National Government has moved to
provide equal opportunity in areas such as education, employment and
voting, so we must now work to expand the opportunity for all citizens
to obtain a decent standard of medical care. We must do all we can to
remove any racial, economic, social or geographic barriers which now
prevent any of our citizens from obtaining adequate health protection.
For without good health, no man can fully utilize his other
2. Balancing Supply and Demand. It does little
good, however, to increase the demand for care unless we also increase
the supply. Helping more people pay for more care does little good
unless more care is available. This axiom was ignored when Medicaid and
Medicare were created-and the nation paid a high price for that error.
The expectations of many beneficiaries were not met and a severe
inflation in medical costs was compounded.
Rising demand should
not be a source of anxiety in our country. It is, after all, a sign of
our success in achieving equal opportunity, a measure of our
effectiveness in reducing the barriers to care. But since the Federal
Government is helping to remove those barriers, it also has a
responsibility for what happens after they are reduced. We must see to
it that our approach to health problems is a balanced approach. We must
be sure that our health care system is ready and able to welcome its
3. Organizing for Efficiency. As we move toward
these goals, we must recognize that we cannot simply buy our way to
better medicine. We have already been trying that too long. We have
been persuaded, too often, that the plan that costs the most will help
the most--and too often we have been disappointed.
We cannot be
accused of having underfinanced our medical system--not by a long shot.
We have, however, spent this money poorly--re-enforcing inequities and
rewarding inefficiencies and placing the burden of greater new demands
on the same old system which could not meet the old ones.
toughest question we face then is not how much we should spend but how
we should spend it. It must be our goal not merely to finance a more
expensive medical system but to organize a more efficient one.
There are two particularly useful ways of doing
Emphasizing Health Maintenance. In most cases our present medical
system operates episodically--people come to it in moments of
distress--when they require its most expensive services. Yet both the
system, and those it serves would be better off if less expensive
services could be delivered on a more regular basis.
If more of
our resources were invested in preventing sickness and accidents, fewer
would have to be spent on costly cures. If we gave more attention to
treating illness in its early stages, then we would be less troubled by
acute disease. In short, we should build a true "health" system-and not
a "sickness" system alone. We should work to maintain health and not
merely to restore it.
B. Preserving Cost Consciousness. As we
determine just who should bear the various costs of health care, we
should remember that only as people are aware of those costs will they
be motivated to reduce them. When consumers pay virtually nothing for
services and when, at the same time, those who provide services know
that all their costs will also be met, then neither the consumer nor
the provider has an incentive to use the system efficiently. When that
happens, unnecessary demand can multiply, scarce resources can be
squandered and the shortage of services can become even more acute.
who are hurt the most by such developments are often those whose
medical needs are most pressing. While costs should never be a barrier
to providing needed care, it is important that we preserve some element
of cost consciousness within our medical system.
4. Building on
Strengths. We should also avoid holding the whole of our health care
system responsible for failures in some of its parts. There is a
natural temptation in dealing with any complex problem to say: "Let us
wipe the slate clean and start from scratch." But to do this-to
dismantle our entire health insurance system, for example--would be to
ignore those important parts of the system which have provided useful
service. While it would be wrong to ignore any weaknesses in our
present system, it would be equally wrong to sacrifice its strengths.
of those strengths is the diversity of our system--and the range of
choice it therefore provides to doctors and patients alike. I believe
the public will always be better served by a pluralistic system than by
a monolithic one, by a system which creates many effective centers of
responsibility--both public and private--rather than one that
concentrates authority in a single governmental source.
does not mean that we must allow each part of the system to go its own
independent way, with no sense of common purpose. We must encourage
greater cooperation and build better coordination--but not by fostering
uniformity and eliminating choice. One effective way of influencing the
system is by structuring incentives which reward people for helping to
achieve national goals without forcing their decisions or dictating the
way they are carried out. The American people have always shown a
unique capacity to move toward common goals in varied ways. Our efforts
to reform health care in America will be more effective if they build
on this strength.
These, then, are certain cardinal principles
on which our National Health Strategy should be built. To implement
this strategy, I now propose for the consideration of the Congress the
following six point program. It begins with measures designed to
increase and improve the supply of medical care and concludes with a
program which will help people pay for the care they require.
A. REORGANIZING THE DELIVERY OF SERVICE
recent years, a new method for delivering health services has achieved
growing respect. This new approach has two essential attributes. It
brings together a comprehensive range of medical services in a single
organization so that a patient is assured of convenient access to all
of them. And it provides needed services for a fixed contract fee which
is paid in advance by all subscribers.
Such an organization can
have a variety of forms and names and sponsors. One of the strengths of
this new concept, in fact, is its great flexibility. The general term
which has been applied to all of these units is "HMO"--"Health
The most important advantage of
Health Maintenance Organizations is that they increase the value of the
services a consumer receives for each health dollar. This happens,
first, because such organizations provide a strong financial incentive
for better preventive care and for greater efficiency.
traditional systems, doctors and hospitals are paid, in effect, on a
piece work basis. The more illnesses they treat--and the more service
they render-the more their income rises. This does not mean, of course,
that they do any less than their very best to make people well. But it
does mean that there is no economic incentive for them to concentrate
on keeping people healthy.
A fixed-price contract for
comprehensive care reverses this illogical incentive. Under this
arrangement, income grows not with the number of days a person is sick
but with the number of days he is well. HMO's therefore have a strong
financial interest in preventing illness, or, failing that, in treating
it in its early stages, promoting a thorough recovery, and preventing
any reoccurrence. Like doctors in ancient China, they are paid to keep
their clients healthy. For them, economic interests work to re-enforce
their professional interests.
At the same time, HMO's are
motivated to function more efficiently. When providers are paid
retroactively for each of their services, inefficiencies can often be
subsidized. Sometimes, in fact, inefficiency is rewarded--as when a
patient who does not need to be hospitalized is treated in a hospital
so that he can collect on his insurance. On the other hand, if an HMO
is wasteful of time or talent or facilities, it cannot pass those extra
costs on to the consumer or to an insurance company. Its budget for the
year is determined in advance by the number of its subscribers. From
that point on it is penalized for going over its budget and rewarded
for staying under it.
In an HMO, in other words, cost
consciousness is fostered. Such an organization cannot afford to waste
resources-that costs more money in the short run. But neither can it
afford to economize in ways which hurt patients for that increases
The HMO also organizes medical resources in
a way that is more convenient for patients and more responsive to their
needs. There was a time when every housewife had to go to a variety of
shops and markets and pushcarts to buy her family's groceries. Then
along came the supermarket-- making her shopping chores much easier and
also giving her a wider range of choice and lower prices. The HMO
provides similar advantages in the medical field. Rather than forcing
the consumer to thread his way through a complex maze of separate
services and specialists, it makes a full range of resources available
through a single organization-often at a single stop--and makes it more
likely that the right combination of resources will be utilized.
a team can often work more efficiently than isolated individuals, each
doctor's energies go further in a Health Maintenance
Organization--twice as far according to some studies. At the same time,
each patient retains the freedom to choose his own personal doctor. In
addition, services can more easily be made available at night and on
weekends in an HMO. Because many doctors often use the same facilities
and equipment and can share the expense of medical assistants and
business personnel, overhead costs can be sharply curtailed. Physicians
benefit from the stimulation that comes from working with fellow
professionals who can share their problems, appreciate their
accomplishments and readily offer their counsel and assistance. HMO's
offer doctors other advantages as well, including a more regular work
schedule, better opportunities for continuing education, lesser
financial risks upon first entering practice, and generally lower rates
for malpractice insurance.
Some seven million Americans are now
enrolled in HMO's--and the number is growing. Studies show that they
are receiving high quality care at a significantly lower cost--as much
as one-fourth to one-third lower than traditional care in some areas.
They go to hospitals less often and they spend less time there when
they go. Days spent in the hospital each year for those who belong to
HMO's are only three-fourths of the national average.
and practitioners alike are enthusiastic about this organizational
concept. So is this administration. That is why we proposed legislation
last March to enable Medicare recipients to join such programs. That is
why I am now making the following additional recommendations:
We should require public and private health insurance plans to allow
beneficiaries to use their plan to purchase membership in a Health
Maintenance Organization when one is available. When, for example, a
union and an employer negotiate a contract which includes health
insurance for all workers, each worker should have the right to apply
the actuarial value of his coverage toward the purchase of a
fixed-price, health maintenance program. Similarly, both Medicare and
the new Family Health Insurance Plan for the poor which I will set out
later in this message should provide an HMO option.
2. To help
new HMO's get started-an expensive and complicated task--we should
establish a new $23 million program of planning grants to aid potential
sponsors--in both the private and public sector.
3. At the same
time, we should provide additional support to help sponsors raise the
necessary capital, construct needed facilities, and sustain initial
operating deficits until they achieve an enrollment which allows them
to pay their own way. For this purpose, I propose a program of Federal
loan guarantees which will enable private sponsors to raise some $300
million in private loans during the first year of the program.
Other barriers to the development of HMO's include archaic laws in 22
States which prohibit or limit the group practice of medicine and laws
in most States which prevent doctors from delegating certain
responsibilities (like giving injections) to their assistants. To help
remove such barriers, I am instructing the Secretary of Health,
Education, and Welfare to develop a model statute which the States
themselves can adopt to correct these anomalies. In addition, the
Federal Government will facilitate the development of HMO's in all
States by entering into contracts with them to provide service to
Medicare recipients and other Federal beneficiaries who elect such
programs. Under the supremacy clause of the Constitution, these
contracts will operate to preempt any inconsistent State statutes.
program to promote the use of HMO's is only one of the efforts we will
be making to encourage a more efficient organization of our health care
system. We will take other steps in this direction, including stronger
efforts to capitalize on new technological developments.
recent years medical scientists, engineers, industrialists, and
management experts have developed many new techniques for improving the
efficiency and effectiveness of health care. These advances include
automated devices for measuring and recording body functions such as
blood flow and the electrical activity of the heart, for performing
laboratory tests and making the results readily available to the
doctor, and for reducing the time required to obtain a patient's
medical history. Methods have also been devised for using computers in
diagnosing diseases, for monitoring and diagnosing patients from remote
locations, for keeping medical records and generally for restructuring
the layout and administration of hospitals and other care centers. The
results of early tests for such techniques have been most promising. If
new developments can be widely implemented, they :can help us deliver
more effective, more efficient care at lower prices.
hospital and outpatient clinic of tomorrow may well bear little
resemblance to today's facility. We must make every effort to see that
its full promise is realized. I am therefore directing the Secretary of
Health, Education, and Welfare to focus research in the field of health
care services on new techniques for improving the productivity of our
medical system. The Department will establish pilot experiments and
demonstration projects in this area, disseminate the results of this
work, and encourage the health industry and the medical profession to
bring such techniques into full and effective use in the health care
centers of the nation.
B. MEETING THE SPECIAL NEEDS OF SCARCITY AREAS
who live in remote rural areas or in urban poverty neighborhoods often
have special difficulty obtaining adequate medical care. On the
average, them is now one doctor for every 630 persons in America. But
in over one-third of our counties the number of doctors per capita is
less than one-third that high. In over 130 counties, comprising over
eight percent of our land area, there are no private doctors at all and
the number of such counties is growing.
A similar problem
exists in our center cities. In some areas of New York for example,
there is one private doctor for every 200 persons but in other areas
the ratio is one to 12,000. Chicago's inner city neighborhoods have
some 1,700 fewer physicians today than they had ten years ago.
How can we attract more doctors--and better
facilities--into these scarcity areas? I propose the following actions:
We should encourage Health Maintenance Organizations to locate in
scarcity areas. To this end, I propose a $22 million program of direct
Federal grants and loans to help offset the special risks and special
costs which such projects would entail.
2. When necessary, the
Federal Government should supplement these efforts by supporting
out-patient clinics in areas which still are underserved. These units
can build on the experience of the Neighborhood Health Centers
experiment which has now been operating for several years. These
facilities would serve as a base on which full HMO's--operating under
other public or private direction-could later be established.
have also asked the Administrator of Veterans Affairs and the Secretary
of Health, Education, and Welfare to develop ways in which the Veterans
Administration medical system can be used to supplement local medical
resources in scarcity areas.
3. A series of new area Health
Education Centers should also be established in places which are
medically underserved-as the Carnegie Commission on Higher Education
has recommended. These centers would be satellites of existing medical
and other health science schools; typically, they could be built around
a community hospital, a clinic or an HMO which is already in existence.
Each would provide a valuable teaching center for new health
professionals, a focal point for the continuing education of
experienced personnel, and a base for providing sophisticated medical
services which would not otherwise be available in these areas. I am
requesting that up to $40 million be made available for this program in
Fiscal Year 1972.
4. We should also find ways of
compensating-and even rewarding--doctors and nurses who move to
scarcity areas, despite disadvantages such as lower income and poorer
As one important step in this direction, I am
proposing that our expanding loan programs for medical students include
a new forgiveness provision for graduates who practice in a scarcity
area, especially those who specialize in primary care skills that are
in short supply.
In addition, I will request $10 million to
implement the Emergency Health Personnel Act. Such funds will enable us
to mobilize a new National Health Service Corps, made up largely of
dedicated and public-spirited young health professionals who will serve
in areas which are now plagued by critical manpower shortages.
C. MEETING THE PERSONNEL NEEDS OF OUR GROWING
proposals for encouraging HMO's and for serving scarcity areas will
help us use medical manpower more effectively. But it is also important
that we produce more health professionals and that we educate more of
them to perform critically needed services. I am recommending a number
of measures to accomplish these purposes.
1. First, we must use
new methods for helping to finance medical education. In the past year,
over half of the nation's medical schools have declared that they are
in "financial distress" and have applied for special Federal assistance
to meet operating deficits.
More money is needed--but it is
also important that this money be spent in new ways. Rather than
treating the symptoms of distress in a piecemeal and erratic fashion,
we must rationalize our system of financial aid for medical education
so that the schools can make intelligent plans for regaining a sound
I am recommending, therefore, that much of
our present aid to schools of medicine, dentistry and osteopathy-along
with $60 million in new money-be provided in the form of so-called
"capitation grants," the size of which would be determined by the
number of students the school graduates. I recommend that the
capitation grant level be set at $6,000 per graduate.
capitation grant system would mean that a school would know in advance
how much Federal money it could count on. It would allow an institution
to make its own long-range plans as to how it would use these monies.
It would mean that we could eventually phase out our emergency
By rewarding output--rather than
subsidizing input--this new aid system would encourage schools to
educate more students and to educate them more efficiently. Unlike
formulas which are geared to the annual number of enrollees, capitation
grants would provide a strong incentive for schools to shorten their
curriculum from four years to three--in line with another sound
recommendation of the Carnegie Commission on Higher Education. For
then, the same sized school would qualify for as much as one-third more
money each year, since each of its graduating classes would be
This capitation grant program should be
supplemented by a program of special project grants to help achieve
special goals. These grants would support efforts such as improving
planning and management, shortening curriculums, expanding enrollments,
team training of physicians and allied health personnel, and starting
HMO's for local populations.
In addition, I believe that
Federal support dollars for the construction of medical education
facilities can be used more effectively. I recommend that the five
current programs in this area be consolidated into a single, more
flexible grant authority and that a new program of guaranteed loans and
other financial aids be made available to generate over $500 million in
private construction loans in the coming Fiscal Year five times the
level of our current construction grant program.
these efforts to encourage and facilitate the expansion of our medical
schools should produce a 50 percent increase in medical school
graduates by 1975. We must set that as our goal and we must see that it
2. The Federal Government should also
establish special support programs to help low income students enter
medical and dental schools. I propose that our scholarship grant
program for these students be almost doubled---from $15 to $29 million.
At the same time, this administration would modify its proposed student
loan programs to meet better the needs of medical students. To help
alleviate the concern of low income students that such a loan might
become an impossible burden if they fail to graduate from medical
school, we will request authority to forgive loans where such action is
3. One of the most promising ways to expand the
supply of medical care and to reduce its costs is through a greater use
of allied health personnel, especially those who work as physicians'
and dentists' assistants, nurse pediatric practitioners, and nurse
midwives. Such persons are trained to perform tasks which must
otherwise be performed by doctors themselves, even though they do not
require the skills of a doctor. Such assistance frees a physician to
focus his skills where they are most needed and often allows him to
treat many additional patients.
I recommend that our allied
health personnel training programs be expanded by 50% over 1971 levels,
to $29 million, and that $15 million of this amount be devoted to
training physicians' assistants. We will also encourage medical schools
to train future doctors in the proper use of such assistants and we
will take the steps I described earlier to eliminate barriers to their
use in the laws of certain States.
In addition, this
administration will expand nationwide the current MEDIHC program--an
experimental effort to encourage servicemen and women with medical
training to enter civilian medical professions when they leave military
duty. Of the more than 30,000 such persons who leave military service
each year, two-thirds express an interest in staying in the health
field but only about one-third finally do so. Our goal is to increase
the number who enter civilian health employment by 2,500 per year for
the next five years. At the same time, the Veterans Administration will
expand the number of health trainees in VA facilities from 49,000 in
1970 to over 53,000 in 1972.
D. A SPECIAL PROBLEM: MALPRACTICE SUITS AND
reason consumers must pay more for health care and health insurance
these days is the fact that most doctors are paying much more for the
insurance they must buy to protect themselves against claims of
malpractice. For the past five years, malpractice insurance rates have
gone up an average of I o percent a year-a fact which reflects both the
growing number of malpractice claims and the growing size of
settlements. Many doctors are having trouble obtaining any malpractice
The climate of fear which is created by the
menace of malpractice suits also affects the quality of medical
treatment. Often it forces doctors to practice inefficient, defensive
medicine--ordering unnecessary tests and treatments solely for the sake
of appearance. It discourages the use of physicians' assistants,
inhibits that free discussion of cases which can contribute so much to
better care, and makes it harder to establish a relationship of trust
between doctors and patients.
The consequences of the
malpractice problem are profound. It must be confronted soon and it
must be confronted effectively--but that will be no simple matter. For
one thing, we need to know far more than we presently do about this
I am therefore directing--as a first step in
dealing with this danger--that the Secretary of Health, Education, and
Welfare promptly appoint and convene a Commission on Medical
Malpractice to undertake an intensive program of research and analysis
in this area. The Commission membership should represent the health
professions and health institutions, the legal profession, the
insurance industry, and the general public. Its report--which should
include specific recommendations for dealing with this problem--should
be submitted by March 1, 1972.
E. NEW ACTIONS TO PREVENT ILLNESSES AND ACCIDENTS
often invest our medical resources as if an ounce of cure were worth a
pound of prevention. We spend vast sums to treat illnesses and
accidents that could be avoided for a fraction of those expenditures.
We focus our attention on making people well rather than keeping people
well, and--as a result both our health and our pocketbooks are poorer.
A new National Health Strategy should assign a much higher priority to
the work of prevention.
As we have already seen, Health
Maintenance Organizations can do a great deal to help in this effort.
In addition to encouraging their growth, I am also recommending a
number of further measures through which we can take the offensive
against the long-range causes of illnesses and accidents.
begin with, we must reaffirm-and expand--the Federal commitment to
biomedical research. Our approach to research support should be
balanced--with strong efforts in a variety of fields. Two critical
areas, however, deserve special attention.
The first of these
is cancer. In the next year alone, 650,000 new cases of cancer will be
diagnosed in this country and 340,000 of our people will die of this
disease. Incredible as it may seem, one out of every four Americans who
are now alive will someday develop cancer unless we can reduce the
present rates of incidence.
In the last seven years we spent
more than 30 billion dollars on space research and technology and about
one-twenty-fifth of that amount to find a cure for cancer. The time has
now come to put more of our resources into cancer research
and--learning an important lesson from our space program--to organize
those resources as effectively as possible.
When we began our
space program we were fairly confident that our goals could be reached
if only we made a great enough effort. The challenge was technological;
it did not require new theoretical breakthroughs. Unfortunately, this
is not the case in most biomedical research at the present time;
scientific breakthroughs are still required and they often cannot be
forced--no matter how much money and energy is expended.
should not forget this caution. At the same time, we should recognize
that of all our research endeavors, cancer research may now be in the
best position to benefit from a great infusion of resources. For there
are moments in biomedical research when problems begin to break open
and results begin to pour in, opening many new lines of inquiry and
many new opportunities for breakthrough.
We believe that cancer
research has reached such a point. This administration is therefore
requesting an additional $100 million for cancer research in its new
budget. And--as I said in my State of the Union Message--"I will ask
later for whatever additional funds can effectively be used" in this
Because this project will require the coordination
scientists in many fields-drawing on many projects now in existence but
cutting across established organizational lines--I am directing the
Secretary of Health, Education, and Welfare to establish a new Cancer
Conquest Program in the Office of the Director of the National
Institutes of Health. This program will operate under its own Director
who will be appointed by the Secretary and supported by a new
management group. To advise that group in establishing priorities and
allocating funds-and to advise other officials, including me,
concerning this effort--I will also establish a new Advisory Committee
on the Conquest of Cancer.
A second targeted disease for
concentrated research should be sickle cell anemia--a most serious
childhood disease which almost always occurs in the black population.
It is estimated that one out of every 500 black babies actually
develops sickle cell disease.
It is a sad and shameful fact
that the causes of this disease have been largely neglected throughout
our history. We cannot rewrite this record of neglect, but we can
reverse it. To this end, this administration is increasing its budget
for research and treatment of sickle cell disease fivefold, to a new
total of $6 million.
2. A second major area of emphasis should be that
of health education.
the final analysis, each individual bears the major responsibility for
his own health. Unfortunately, too many of us fail to meet that
responsibility. Too many Americans eat too much, drink too much, work
too hard, and exercise too little. Too many are careless drivers.
are personal questions, to be sure, but they are also public questions.
For the whole society has a stake in the health of the individual.
Ultimately, everyone shares in the cost of his illnesses or accidents.
Through tax payments and through insurance premiums, the careful
subsidize the careless, the nonsmokers subsidize those who smoke, the
physically fit subsidize the rundown and the overweight, the
knowledgeable subsidize the ignorant and vulnerable.
It is in
the interest of our entire country, therefore, to educate and encourage
each of our citizens to develop sensible health practices. Yet we have
given remarkably little attention to the health education of our
people. Most of our current efforts in this area are fragmented and
haphazard-a public service advertisement one week, a newspaper article
another, a short lecture now and then from the doctor. There is no
national instrument, no central force to stimulate and coordinate a
comprehensive health education program.
I have therefore been
working to create such an instrument. It will be called the National
Health Education Foundation. It will be a private, non-profit group
which will receive no Federal money. Its membership will include
representatives of business, labor, the medical profession, the
insurance industry, health and welfare organizations, and various
governmental units. Leaders from these fields have already agreed to
proceed with such an organization and are well on the way toward
reaching an initial goal of $1 million in pledges for its budget.
independent project will be complemented by other Federal efforts to
promote health education. For example, expenditures to provide family
planning assistance have been increased, rising fourfold since 1969.
And I am asking that the great potential of our nation's day care
centers to provide health education be better utilized.
should also expand Federal programs to help prevent accidents--the
leading cause of death between the ages of one and 37 and the fourth
leading cause of death for persons of all ages.
death toll--50,000 fatalities last year--is a tragedy and an outrage of
unspeakable proportions. It is all the more shameful since half these
deaths involved drivers or pedestrians under the influence of alcohol.
We have therefore increased funding for the Department of
Transportation's auto accident and alcohol program from $8 million in
Fiscal Year 1971 to $35 million in Fiscal Year 1972. I am also
requesting that the budget for alcoholism programs be doubled, from $7
million to $14 million. This will permit an expansion of our research
efforts into better ways of treating this disease.
I am also
requesting a supplemental appropriation of $5 million this year and an
addition of $8 million over amounts already in the 1972 budget to
implement aggressively the new Occupational Safety and Health Act I
signed last December. We must begin immediately to cut down on the
14,000 deaths and more than two million disabling injuries which result
each year from occupational illnesses and accidents.
conditions which affect health are almost unlimited. A man's income,
his daily diet, the place he lives, the quality of his air and
water--all of these factors have a greater impact on his physical well
being than does the family doctor. When we talk about our health
program, therefore, we should not forget our efforts to protect the
nation's food and drug supply, to control narcotics, to restore and
renew the environment, to build better housing and transportation
systems, to end hunger in America, and--above all---to place a floor
under the income of every family with children. In a sense this special
message on health is one of many health messages which this
administration is sending to the Congress.
F. A NATIONAL HEALTH INSURANCE PARTNERS HIP
my State of the Union Message, I pledged to present a program "to
ensure that no American family will be prevented from obtaining basic
medical care by inability to pay." I am announcing that program today.
It is a comprehensive national health insurance program, one in which
the public and the private sectors would join in a new partnership to
provide adequate health insurance for the American people.
the last twenty years, the segment of our population owning health
insurance has grown from 50 percent to 87 percent and the portion of
medical bills paid for by insurance has gone from 35 percent to 60
percent. But despite this impressive growth, there are still serious
gaps in present health insurance coverage. Four such gaps deserve
First--too many health insurance policies
focus on hospital and surgical costs and leave critical outpatient
services uncovered. While some 80 percent of our people have some
hospitalization insurance, for example, only about half are covered for
outpatient and laboratory services and less than half are insured for
treatment in the physician's office or the home. Because demand goes
where the dollars are, the result is an unnecessary--and expensive---
overutilization of acute care facilities. The average hospital stay
today is a full day longer than it was eight years ago. Studies show
that over one-fourth of hospital beds in some areas are occupied by
patients who do not really need them and could have received equivalent
or better care outside the hospital.
A second problem is the
failure of most private insurance policies to protect against the
catastrophic costs of major illnesses and accidents. Only 40 percent of
our people have catastrophic cost insurance of any sort and most of
that insurance has upper limits of $10,000 or $15,000. This means that
insurance often runs out while expenses are still mounting. For many of
our families, the anguish of a serious illness is thus compounded by
acute financial anxiety. Even the joy of recovery can often be clouded
by the burden of debt--and even by the threat of bankruptcy.
third problem with much of our insurance at the present time is that it
cannot be applied to membership in a Health Maintenance
Organization--and thus effectively precludes such membership. No
employee will pay to join such a plan, no matter how attractive it
might seem to him, when deductions from his paycheck--along with
contributions from his employer--are being used to purchase another
health insurance policy.
The fourth deficiency we must correct
in present insurance coverage is its failure to help the poor gain
sufficient access to our medical system. Just one index of this failure
is the fact that fifty percent of poor children are not even immunized
against common childhood diseases. The disability rate for families
below the poverty line is at least 50 percent higher than for families
with incomes above $10,000.
Those who need care most often get
care least. And even when the poor do get service, it is often second
rate. A vicious cycle is thus reinforced--poverty breeds illness and
illness breeds greater poverty. This situation will be corrected only
when the poor have sufficient purchasing power to enter the medical
marketplace on equal terms with those who are more affluent.
National Health Insurance Partnership is designed to correct these
inadequacies--not by destroying our present insurance system but by
improving it. Rather than giving up on a system which has been
developing impressively, we should work to bring about further growth
which will fill in the gaps we have identified. To this end, I am
recommending the following combination of public and private efforts.
I am proposing that a National Health Insurance Standards Act be
adopted which will require employers to provide basic health insurance
coverage for their employees.
In the past, we have taken
similar actions to assure workers a minimum wage, to provide them with
disability and retirement benefits, and to set occupational health and
safety standards. Now we should go one step further and guarantee that
all workers will receive adequate health insurance protection.
minimum program we would require under this law would pay for hospital
services, for physicians' services-both in the hospital and outside of
it, for full maternity care, well-baby care (including immunizations),
laboratory services and certain other medical expenses. To protect
against catastrophic costs, benefits would have to include not less
than $50,000 in coverage for each family member during the life of the
policy contract. The minimum package would include certain deductible
and coinsurance features. As an alternative to paying separate fees for
separate services, workers could use this program to purchase
membership in a Health Maintenance Organization.
Government would pay nothing for this program; the costs would be
shared by employers and employees, much as they are today under most
collective bargaining agreements. A ceiling on how much employees could
be asked to contribute would be set at 35 percent during the first two
and one-half years of operation and 25 percent thereafter. To give each
employer time to plan for this additional cost of doing business--a
cost which would be shared, of course, by all of his competitors--this
program would not go into effect until July 1, 1973. This schedule
would also allow time for expanding and reorganizing our health system
to handle the new requirements.
As the number of enrollees
rises under this plan, the costs per enrollee can be expected to fall.
The fact that employers and unions will have an even higher stake in
the system will add additional pressures to keep quality up and costs
down. And since the range within which benefits can vary will be
somewhat narrower than it has been, competition between insurance
companies will be more likely to focus on the overall price at which
the contract is offered. This means that insurance companies will
themselves have a greater motivation to keep medical costs from
I am still considering what further legislative
may be desirable for regulating private health insurance, including the
introduction of sufficient disincentive measures to reinforce the
objective of creating cost consciousness on the part of consumers and
providers. I will make such recommendations to the Congress at a later
2. I am also proposing that a new Family Health
Plan be established to meet the special needs of poor families who
would not be covered by the proposed National Health Insurance
Standards Act--those that are headed by unemployed, intermittently
employed or self-employed persons.
The Medicaid program was
designed to help these people, but for many reasons--it has not
accomplished its goals. Because it is not a truly national program, its
benefits vary widely from State to State. Sixteen States now get 80
percent of all Medicaid money and two States, California and New York,
get 30 percent of Federal funds though they have only 20 percent of the
poverty population. Two States have no Medicaid program at all.
addition, Medicaid suffers from other defects that now plague our
failing welfare system. It largely excludes the working poor--which
means that all benefits can suddenly be cut off when family income
rises ever so slightly--from just under the eligibility barrier to just
over it. Coverage is provided when husbands desert their families, but
is often eliminated when they come back home and work. The program thus
provides an incentive for poor families to stay on the welfare rolls.
of these problems would be corrected by my proposal to require
employers to offer adequate insurance coverage to their employees. No
longer, for example, would a workingman receive poorer insurance
coverage than a welfare client--a condition which exists today in many
States. But we also need an additional program for much of the welfare
Accordingly, I propose that the part of Medicaid
which covers most welfare families be eliminated. The new Family Health
Insurance Plan that takes its place would be fully financed and
administered by the Federal Government. It would provide health
insurance to all poor families with children headed by self-employed or
unemployed persons whose income is below a certain level. For a family
of four persons, the eligibility ceiling would be $5,000.
the poorest of eligible families, this program would make no charges
and would pay for bade medical costs. As family income increased beyond
a certain level ($3,000 in the case of a four-person family) the family
itself would begin to assume a greater share of the costs-through a
graduated schedule of premium charges, deductibles, and coinsurance
payments. This provision would induce some cost consciousness as income
rises. But unlike Medicaid--with its abrupt cutoff of benefits when
family income reaches a certain point--this arrangement would provide
an incentive for families to improve their economic position.
Family Health Insurance Plan would also go into effect on July I, 1973.
In its first full year of operation, it would cost approximately $1.2
billion in additional Federal funds--assuming that all eligible
families participate. Since States would no longer bear any share of
this cost, they would be relieved of a considerable burden. In order to
encourage States to use part of these savings to supplement Federal
benefits, the Federal Government would agree to bear the costs of
administering a consolidated Federal-State benefit package. The Federal
Government would also contract with local committees--to review local
practices and to ensure that adequate care is being provided in
exchange for Federal payments. Private insurers, unions and employers
would be invited to use these same committees to review the utilization
of their benefits if they wished to do so.
This, then, is how
the National Health Insurance Partnership would work: The Family Health
Insurance Plan would meet the needs of most welfare families-though
Medicaid would continue for the aged poor, the blind and the disabled.
The National Health Insurance Standards Act would help the working
population. Members of the Armed Forces and civilian Federal employees
would continue to have their own insurance programs and our older
citizens would continue to have Medicare.
Our program would
also require the establishment in each State of special insurance pools
which would offer insurance at reasonable group rates to people who did
not qualify for other programs: the self-employed, for example, and
poor risk individuals who often cannot get insurance.
urge the Congress to take further steps to improve Medicare. For one
thing, beneficiaries should be allowed to use the program to join
Health Maintenance Organizations. In addition, we should consolidate
the financing of Part A of Medicare-which pays for hospital care--and
Part B--which pays for outpatient services, provided the elderly person
himself pays a monthly fee to qualify for this protection. I propose
that this charge--which is scheduled to rise to $5.60 per month in July
of this year be paid for instead by increasing the Social Security wage
base. Removing this admission cost will save our older citizens some
$1.3 billion annually and will give them greater access to preventive
and ambulatory services.
WHY Is A NATIONAL HEALTH INSURANCE PARTNERSHIP
BETTER THAN NATIONALIZED HEALTH INSURANCE?
believe that our government and our people, business and labor, the
insurance industry and the health profession can work together in a
national partnership to achieve our health objectives. I do not believe
that the achievement of these objectives requires the nationalization
of our health insurance industry.
To begin with, there simply
is no need to eliminate an entire segment of our private economy and at
the same time add a multibillion dollar responsibility to the Federal
budget. Such a step should not be taken unless all other steps have
More than that, such action would be dangerous. It
would deny people the right to choose how they will pay for their
health care. It would remove competition from the insurance system--and
with it an incentive to experiment and innovate.
nationalized system, only the Federal Government would lose when
inefficiency crept in or when prices escalated; neither the consumer
himself, nor his employer, nor his union, nor his insurance company
would have any, further stake in controlling prices. The only way that
utilization could be effectively regulated and costs effectively
restrained, therefore, would be if the Federal Government made a
forceful, tenacious effort to do so. This would mean--as proponents of
a nationalized insurance program have admitted--that Federal personnel
would inevitably be approving the budgets of local hospitals, setting
fee schedules for local doctors, and taking other steps which could
easily lead to the complete Federal domination of all of American
medicine. That is an enormous risk--and there is no need for us to take
it. There is a better way--a more practical, more effective, less
expensive, and less dangerous way--to reform and renew our nation's
CONFRONTING A DEEPENING CRISIS
health which is real wealth," said Gandhi, "and not pieces of gold and
silver." That statement applies not only to the lives of men but also
to the life of nations. And nations, like men, are judged in the end by
the things they hold most valuable.
Not only is health more
important than economic wealth, it is also its foundation. It has been
estimated, for example, that ten percent of our country's economic
growth in the past half century has come because a declining death rate
has produced an expanded labor force.
Our entire society, then,
has a direct stake in the health of every member. In carrying out its
responsibilities in this field, a nation serves its own best interests,
even as it demonstrates the breadth of its spirit and the depth of its
Yet we cannot truly carry out these
responsibilities unless the ultimate focus of our concern is the
personal health of the individual human being. We dare not get so
caught up in our systems and our strategies that we lose sight of his
needs or compromise his interests. We can build an effective National
Health Strategy only if we remember the central truth that the only way
to serve our people well is to better serve each person.
months ago I said that America's medical system faced a "massive
crisis." Since that statement was made, that crisis has deepened. All
of us must now join together in a common effort to meet this
crisis--each doing his own part to mobilize more effectively the
enormous potential of our health care system.
The White House
February 18, 1971