Senator PELL. It is my pleasure to welcome here the Governor of my own State, and an old friend, and an individual who has been long interested in the problems connected with health when he was a member of the State legislature, when he was a Lieutenant Governor, and now that he is the Governor, and also in great part responsible for the leading role in advanced health care planning Rhode Island plays both in connection with the maintenance of health, preventive medicine, the direction and distribution of medical care in our State. We believe that he has some very innovative ideas in Rhode Island that are setting a pattern for the Nation. It is for these reasons that it is a particularly personal pleasure to welcome Governor Garrahy, Governor of the State of Rhode Island.

STATEMENT OF J. JOSEPH GARRAHY, GOVERNOR OF RHODE ISLAND, CHAIRMAN OF THE NATIONAL GOVERNORS' ASSOCIATION SUBCOMMITTEE ON HEALTH POLICY

Governor GARRAHY. Senator, thank you very much.

I would like to say that I am honored to be with you this morning because it is my pleasure to report to you on the implementation of the National Health Planning and Resources Development Act of 1974, Public Law 93-641, for the National Governors' Association and for the State of Rhode Island.

I would like to point out to any casual observers in the room that it is not unusual to have a number of Rhode Islanders working on the same problem. Senator Pell, Senator Chafee and I may disagree from time to time on some details but we are unanimous in our willingness to work for the health of our constituents. I pledge my continued support to the Senators as they try to bring the benefits of the Rhode Island experience to the Nation.

It will not be possible, Senator, to review in my oral testimony all of the recommendations which the Nation's Governors would make to you for improving this vital and controversial statute. With your permission, I would like to emphasize several of our major findings and to submit a lengthier written statement for the record.

I can assure you that neither Governor Herschler, who is going to be with us this morning, nor I would presume to appear before you on behalf of the National Governors' Association if we were uncertain. that a consensus existed among our colleagues on the changes necessary to make the national health planning law work.

There is a consensus and it is based upon our belief that the law cannot work without the active participation of State government in partnership with responsible Federal officials. We are certain that access to medical care at reasonable cost cannot be assured unless regulatory and resource development decisions at the national and the State level are coordinated through an effective State health planning system. It is our belief that this law and your hearings have the potential for moving the Nation one step closer to that goal.

Since the debates on health planning began in the Congress in 1973, the Governors have expressed their concern that any health planning system must be accountable to the citizens to whom you and I must respond. We remain concerned and each of our recommendations is designed to bring the health planning system envisoned by Public

Law 93-641 into a closer working relationship with the existing processes of State and local government.

I am pleased that many of the changes which have been proposed in the bill introduced by members of this subcommittee, S. 2410, are addressed to our concerns. Specifically, I think that your suggested change in the role of the Governor in the development of the State health plan is a step in the right direction. Our concern is simply that the plan required by Federal statute not duplicate or conflict with similar documents developed for State purposes.

In addition, I am happy that you propose to increase the autonomy of public health systems agencies and that your bill recognizes the potentially difficult situation in which an interstate health systems agency can find itself. Finally, I am pleased that you propose to allow a longer review period for major certificate-of-need decisions. For the record, I would like to review a few of our major recommendations for you.

First, the Governors feel that a State health plan could be a useful policy tool in State government. However, we do not feel that the document of that name which is now required by Public Law 93-641 can be asked to serve that purpose. To be used as a policy tool, the State health plan must be a product of State government. We therefore recommend that the Governor be allowed to amend and to approve the plan before it is viewed as final.

The Governors feel that public agencies should be encouraged to seek designation as health systems agencies. We recommend revision of the requirement that such public health systems agencies delegate much of their authority to separate governing bodies. The law, as presently written and interpreted, works against an active role for local government and regional councils which has been able to secure designation as health systems agencies.

In a similar vein, the Governors feel that the statewide health coordinating council should be allowed to assume a more active role in a State's health policymaking system. Unless this council is responsive to appropriate State officials it is unlikely that it can be integrated into State government. We recommend that the Federal statute be changed to allow the Governor to appoint the chairperson and a majority of the members of the statewide health coordinating council. This change in the law would allow the Governor to assign the council a much more active role in the State's policymaking system.

The Governors believe that if health systems agencies are designated within a State they should be integrated into the States's policymaking system. A local health planning agency which views itself as an outpost. of the sponsoring Federal agency is less effective than an agency which considers itself an integral part of the State health policymaking system in which it must operate. We recommend several changes which would encourage more effective participation by health systems agencies in every State where they exist. We feel that Governors should be permitted a more active role in the designation of health service areas and of health systems agencies to serve in them; we feel that Governors should be permitted to evaluate the performance of health systems agencies and to be more active in the approval of their work plans and budgets.

In order to facilitate close working relationships between health systems agencies and the States in which they exist, we recommend that no interstate health service area be designated without the approval of each Governor involved. In order to facilitate policy coordination within a State, we recommend that the annual implementation plans of each health systems agency be consistent with the State health plan which is prepared by the statewide health coordinating council and approved by the Governor.

Governor Herschler has agreed to discuss with you this morning the unique problems in States which have a single statewide health systems agency within them. I cannot, however, resist the temptation to tell you a little bit about the success in Rhode Island of a health planning system without a health system agency. In Rhode Island we have been able to establish a health planning network under the terms of section 156 and with the guidance of my office and the appropriate State government agencies.

Section 1536 has permitted us to organize our health planning efforts on a functional basis. We have five distinct staff units for administration, data, planning, resource development and regulation. This functional organization helps to insure that all health planning functions receive appropriate professional attention. Further, the fact that all five functional units operate within the same agency, the department of health, enhances the development of a well coordinated health system management mechanism in Rhode Island. Under this arrangement, we have integrated planning, resource development and regulation in such a way that the whole is greater than the sum of its parts.

Our planning unit, the office of health system planning, is responsible for production of the preliminary health system plan, annual implementation plan, and the State medical facility plan. Our resource development unit, the office of health system development, is responsible for the criteria and procedures associated with: proposed use of Federal funds, area health service development funds, and the State medical facility construction funds. Our regulatory unit, the division of medical care standards. is responsible for the criteria and procedures associated with our State certificate-of-need law, and with the appropriateness review process.

The associate director for health planning and resources development is responsible for meshing these three main functions and the data function in a mutually reinforcing manner. Under the terms of section 1536, we have been able to organize our health planning responsibilities in a logical effective manner.

In terms of citizen participation, I have appointed an outstanding statewide health cordinating council in Rhode Island. Our SHCC consists of 35 active members with a majority of those members fulfilling the definition of a consumer. The Rhode Island council must approve the plans required by Public Law 93-641, and certain formula grants. We look upon the SHCC as a major health policy body in the State.

We can assure you that the Governors support the goals of the National Health Planning and Resource Development Act of 1974. Our recommendations are each aimed at making the law work.

We thank you for your attention to our recommendations.

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Senator KENNEDY [presiding]. Governor Garrahy, we want to thank you for your excellent statement. We value very much the input that the Governors have had in fashioning this legislation. I think it has been and will be a very substantial improvement over the existing planning proposal, and I think Rhode Island has had a rather special consideration in the fashioning of the legislation in the past because I think Senator Pell has pointed out to us the very unique aspects of the State, which is unique in many aspects in terms of its people, its beauty, its industry and also in some of the planning on issues and questions. I apologize for not being here for your opening statement. I will review your testimony with great interest. I have heard that you spent a lot of time on this issue and have many useful ideas and suggestions. I want to thank you very much for your appearance here. I look forward to working closely with you and it is nice to see you as a friend. Governor GARRAHY. Thank you, Senator. It is good to see you this morning.

Senator PELL. I, too, am delighted that you can be here because Rhode Island can stand out like a beacon as an example to many larger States, many less innovative States. I think it is only Hawaii and the District of Columbia that have taken advantage of 1536. I would hope that the example that we have laid will be followed by others.

I would like to ask you one question in connection with health maintenance organization, our HMO in Rhode Island. Do you see any ways that we should be helping these HMO's along in our new bill? Would you favor any additional amendments to let HMO's start up on their own, have their own new hospitals without the present pretty rigorous HSA and State health coordinating council approval?

Governor GARRAHY. As I understand it, Senator, the present statute is very stringent as it relates to the expansion of HMO's and that some flexibility in dealing with them would allow, I think, for some desirable growth in the number of HMO's. As you know, in our own State we have one of the first federally recognized HMO's in the country.

Senator PELL. The first?

Governor GARRAHY. The first.

Senator PELL. From a political viewpoint, do you find greater acceptability of our HMO now? You may recall, a few years ago the AMA and many others were resentful. Do you find that those have improved, or do you have any recommendations for other States to follow?

Governor GARRAHY. I see the HMO as a much more acceptable. form of health care delivery now. Of course, I think ours in Rhode Island and many other HMO's were pioneering for a number of years and when you are moving onto new ground for the delivery system that you can expect some difficult times. But I think it is much more accepted now and I think we find it an excellent alternative to the present health care system.

Senator PELL. Do you have any recommendations on the Federal level for how we can better help in the way of distribution, the neighborhood health centers, because we all know the terrific headaches and very real problems we had there, and they are really not going the way we originally envisaged. What could we do on the Federal level to give them a little vitality and life, besides money?

Governor GARRAHY. Besides money? I think you could really have a more adequate effort in State health planning which would integrate them into the system. We should have a State health system that will provide support to all of the aspects of a health delivery system, including MO's, neighborhood health clinics, and so forth.

I would like to point out that the bill here in the Senate specifies a relationship between the delivery of mental health services and community mental health clinics. I think that is very important that they be part of the total integrated planning and health system in the State.

Senator PELL. Mental health and regular physical health should all be in the same ball of wax?

Governor GARRAHY. That is correct. That is the way I feel about it, Senator.

Senator PELL. But we have done a very good job in Rhode Island in the fact that we reduced some of our custodial population and gotten more and more people out in the mainstream.

Governor GARRAHY. 1 hat is right, and we are moving very strongly toward the deinstitutionalization of many people while trying to strengthen our community mental clinics and community mental health facilities so that there is not an overreliance on long-term institutionalized care.

Senator PELL. Thank you.

Senator KENNEDY. One thing is that we have been woefully behind in terms of the development of the HMO's. I think one of the problems has been in terms of this existing planning law with a very strong role for the providers and for those within the profession there has been considerable reluctance. I think there is a variety of different problems in the fashioning of the bill itself. We have had a lot of difficulty in getting that moving.

The regs have been slow in developing, but also, even within the planning. I can't speak in terms of Rhode Island, where you have had a good program, but generally, in other parts there has been a lot of reluctance and with the mechanism established in the planning legislation, it has been exceedingly difficult for them to move ahead, which has been part of the problem as well, plus an administration that never believed in them.

We passed, 5 years ago, an authorization for $2 billion for HMO. We had $18 million. I think it was $18.5 million last year appropriated. We just had to compromise the thing down so much and we had an administration that fiddled around with it for such a period of time we had a very difficult time.

But I am glad to get your own strong commitment in terms of the HMO's, and the practical experience.

Yours is a prepaid program, too?

Governor GARRAHY. Yes; it is.

Senator KENNEDY. Is it complete prepaid?

Governor GARRAHY. Yes; it is complete prepaid.

Senator KENNEDY. Have they done any assessments in terms of comparison to, for example, welfare averages under the prepaid program versus those that are not covered?

Governor GARRAHY. I am not sure if we have done that or not.

Senator KENNEDY. We have seen in our own State-which is a prepaid program-they have reduced the welfare by about a third