Ask the Scholar
Document scope · 1 page
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory.
For page-specific OCR and visual context, open one of the page chats.
Scholar Source Context
Document identity
localId
1515844
label
Health (1)
core
doc
dtoType
document
citationUrl
pageCount
1
Source metadata
id
1515844
sourceUrl
contentType
document
title
Health (1)
citationUrl
collections
James M. Cannon Files (Ford Administration)
James Cannon's Issues Files
subjects
Drugs
Federal aid
Genetics
Health
Insurance
Legislation
Medicaid
Medicare
National health insurance
Presidential campaign, 1976
iiifBase
thumbnailUrl
largeImageUrl
imageCount
1
hasImages
yes
source
import
hasTranscription
no
Source extras
naId
1515844
coverageEndDate
logicalDate
1976-11-30
month
11
year
1976
coverageStartDate
logicalDate
1975-05-01
month
5
year
1975
levelOfDescription
fileUnit
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
url
mediaId
e6ba92f8acd43003
ocrText
The original documents are located in Box 16, folder "Health (1)" of the James M. Cannon
Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Some items in this folder were not digitized because it contains copyrighted
materials. Please contact the Gerald R. Ford Presidential Library for access to
these materials.
Digitized from Box 16 of the
James M. Cannon Files at the
Questions of Life and Death
51975
Gerald R. Ford
ByCJOHN LACHS
erything possible to nuture, protect and
I want to dissent. I want to say: that the
Presidential
Library
There is something abhorrent to many
cure us.
emphasis is wrong. Life by itself is not a
of us that the best surgeons; the best pro-
This is good abstract thinking; but it is
value; it is only a necessary condition of
AL, THURSDAY, MAY Noremy 8, 1975
GERALD
FORD & LIBRARY
Health Costs-A One-Way Street
By I.D. ROBBINS
and the number of beds increased by or local leaders or fellow hospital adminis-
Call 6/30/75
name/ torey
tig
Darban
-
Lory to Veremen ?
FORD LIBRARY
Jun
THE WHITE HOUSE
WASHINGTON
File
DATE: June 25, 1975
TO:
JIM CANNON
FROM: JIM CAVANAUCH
SUBJ: PLANNING FOR NATIONAL
HEALTH INSURANCE
FYI X
Action
Copies have gone to
Dick Dunham and Art Quern.
and Veneman
GERAL
BRARY
OF THE
PRESIDENT
EXECUTIVE OFFICE OF THE PRESIDENT
UNITED
OFFICE OF MANAGEMENT AND BUDGET
DESIDE
WASHINGTON, D.C. 20503
JUN 20 1975
MEMORANDUM FOR JAMES CANNON
SUBJECT: Planning for National Health Insurance
The attached paper outlines major discussion topics
we have identified as being of highest priority in
development of an Administration national health
insurance proposal. The list does not attempt to
address the full range of significant policy issues
that will need to be resolved, but it can serve as
the basis for developing an agenda for the President's
early guidance.
We would appreciate your reactions to these topics.
At some point in the near future, we believe you will
want to share these formally with HEW, Labor, Commerce,
Defense, VA, HUD, and CEA for their reaction. HEW
could then be directed to prepare options papers to
focus debate on these key issues.
James Ji Lynn
Director
FORD & LIBRARY 078830
Attachment
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
JUN 20 1975
MEMORANDUM FOR JAMES CANNON
SUBJECT: Planning for National Health Insurance
The attached paper outlines major discussion topics
we have identified as being of highest priority in
development of an Administration national health
insurance proposal. The list does not attempt to
address the full range of significant policy issues
that will need to be resolved, but it can serve as
the basis for developing an agenda for the President's
early guidance.
We would appreciate your reactions to these topics.
At some point in the near future, we believe you will
want to share these formally with HEW, Labor, Commerce,
Defense, VA, HUD, and CEA for their reaction. HEW
could then be directed to prepare options papers to
focus debate on these key issues.
(Signed) Jim
James T. Lynn
Director
Attachment
National Health Insurance (NHI) --Major Discussion Topics
I. Objectives
-
Coverage: Should NHI provide universal health insurance
coverage, assure universal availability of
insurance at affordable rates, or cover
specified and identifiable gaps in
coverage?
-
Benefits: Should NHI cover catastrophic expenses
or provide more extensive protection?
- Financing/Administration: To what extent should
government financing and administration of
NHI be a Federal responsibility or a shared
Federal-State function?
Should NHI seek to control national health
costs through stronger government regulation
of the health industry, i.e., setting fees,
hospital reimbursements, insurance
premiums, etc.?
II. Major Data Requirements
- Need and Benefits: To what extent do individuals not
receive needed medical services because of
inadequate insurance coverage?
2
How many individuals incur health costs
they are unable to pay or which impose
serious hardship? How should hardship
be measured? What impact would NHI have
on such problems as low health status,
financial security, and other measures
of social welfare?
- Costs:
What would be the cost impacts of national
health insurance on employers, individuals,
and Federal and State governments?
How will these costs vary, e.g., by State?
What specific estimating assumptions are
used in these cost assessments and what is
the degree of accuracy with which the cost
impacts can be forecast?
FORD
III. Major Policy Issues
- Coverage: Should NHI coverage be voluntary or
mandatory?
- Benefits: Should NHI plans cover a basic or a
comprehensive range of health services?
To what extent should NHI seek to restructure
financial incentives for utilization of
services?
3
Should there be a uniform health insurance
plan or should individuals have a choice
of benefits?
- Financing/Administration: To what extent should NHI
require increased Federal or State regulation
of the health industry?
What are the appropriate Federal and State
roles and responsibilities in NHI financing
and administration?
What share of premium costs should employers
be required to pay?
Should the special Federal tax code provisions
for health expenditures be revised?
What will be the impact of NHI on other
existing major Federal health delivery
programs, e.g., VA medical system, military
medical care, categorieal health grant, and
direct health service delivery programs?
What proposals, if any, should be made
to relate national health insurance to
these other programs?
IV. Structural Design Options
Assuming that there will be Federal or Federal-State
financing programs for low income and aged persons and
4
private employer plans for most full-time employees,
the following major structural design issues must still
be addressed:
- Catastrophic Protection: Should catastrophic benefits
be offered under private employer plans or
be provided by a separate government program?
- High-Risk Persons and Firms: Which high-risk persons
or firms unable to obtain private insurance
at affordable rates, if any, should be
through direct subsidized government insurance
or through government-subsidized private
insurance pools?
- Government Programs: How rapidly and at what income
level should government subsidy of health
insurance be phased out?
Should low wage full-time workers be covered
through employer plans or through the
government program?
How should eligibility, benefits, and cost-
sharing under a government program be
coordinated with welfare reform to assure
equity, adequacy, and appropriate work
incentives?
Should some beneficiary cost-sharing be
required at all income levels?
5
If NHI is State-administered, should
States be permitted flexibility in
determining eligibility and benefit
standards for the Federal-State program?
GERALD
BRARY
THE WHITE HOUSE
WASHINGTON
July 17, 1975
MEMORANDUM FOR:
JIM CANNON
THROUGH:
DICK DUNHAM
FROM:
ART QUERN
JIM CAVANAUGH Add
FORD & LIBRARY GERALD
SARAH MASSENGALE Scm
SUBJECT:
Concern about the Maximum Allowable
Cost Proposal
This memo is to apprise you of our concern about HEW's
Maximum Allowable Cost (MAC) proposal and to request a
meeting with you to discuss possible action before publica-
tion of any MAC regulations.
Issue
Briefly, the MAC program proposes to cut Medicaid costs by
requiring substitution of generic drugs for brand name drugs
and by reorganizing the system of reimbursement to pharmacists.
Response to the proposal has been overwhelmingly critical.
Background
The publication of the proposed regulations elicited a very
large response --- over 2600 comments to HEW, 95% of which
were critical of MAC. The President, the Domestic Council,
and Donald Rumsfeld are also receiving many letters against
MAC. The basic criticisms and HEW responses are as follows:
1. Therapeutic Interchangeability of Drugs. Critics charge
that FDA does not know enough to assure the therapeutic
interchangeability of drugs (that is, that drug B will have
the same medicinal effect as drug A). They point to the
recent request of Dr. Crout, Director of the Bureau of
Drugs, for Federal funds to investigate the therapeutic
interchangeability of 150 drugs.
- 2 -
FDA admits that its knowledge is incomplete, but says
that the regulations will apply initially to a limited
number of tested drugs (10-15) and will finally include
only 40-50 multi-source drugs. Also, the Department
has proposed new regulations requiring evidence of bio-
equivalence on some products to assure therapeutic
effectiveness.
2. Drug Quality. Critics charge that FDA does not maintain
good quality control over all manufacturers and therefore
is not able to assure the quality of drugs manufactured
by second or third-rate "drug mills". Opponents of MAC
say that the Government is willing to let the poor have
"second-rate medicine". It is charged that some drug
makers have not been inspected since 1971. The large
pharmaceutical companies say that part of the higher cost
of brand name drugs is due to self-administered inspection
programs necessary for quality control.
FDA maintains that its quality control inspections are
adequate, although Commissioner Schmidt has conceded
that FDA is not adequately monitoring drug testing.
3. Costs and Benefits of MAC. It is charged that HEW has
grossly miscalculated the economics of MAC. Evidence is
cited of other unsuccessful programs which cost more and
save less than estimated.
FDA replies that "[in all the comments], the Department
is not aware of any data showing that programs of this
kind have resulted in a net loss to the reimbursing
program". The Social Security Administration is pre-
paring an economic impact statement which should examine
this question.
4. Research. The question of research has not been as
widely discussed as the above issues, but it is nonetheless
important. The major drug manufacturers maintain that
part of the higher price of their brand name drugs pays
for in-house research which is a major source of drug
advances. Dr. Jonas Salk, the developer of the polio
vaccine, supports them and argues that the drug companies'
"research capacity for the development of products for
human use is necessary for the application of the results
GERALD R. LIBRARY FORD
- 3 -
of the fundamental research which is carried out in our
universities and institutes
"
Salk has telegraphed
to Alan Greenspan his opposition to the proposed MAC
regulations because of the effect they will have on
"those companies that make so essential a contribution
to our
research efforts".
5. Other criticims of MAC include charges of new government
intrusions into private industry and of government meddling
with a doctor's professional judgment and integrity, and
concerns about fair reimbursement for pharmacists.
Status of the Issue
HEW will not issue the final MAC regulations until OMB has
analyzed and cleared the SSA economic impact statement. OMB
hopes to receive the statement this week.
Our approach has been to concentrate on the cost effectiveness
of the program. The issues of quality and therapeutic inter-
changeability are ones best left to the experts. The economic
arguments advanced by FDA and by critics are so widely at
variance that no reasonable conclusions may be drawn. In
this regard we will have to rely on OMB's analysis of the
impact statement.
Possible Course of Action
A possible course of action would be to ask a third party
to examine the issues of interchangeability, drug quality
and research. Perhaps the National Science Foundation or
the National Institutes of Health could review such matters
as the state of the art in the sciences to determine inter-
changeability and the question of the impact on research.
As you know, the MAC program is an attempt to cut drug costs.
The real effects of the program, however, are very important
because the success or failure of MAC will have a bearing on
the formulation and workings of the potential cost control
elements of any National Health Insurance program.
Problems
Two possible problems arise with any White House action.
We must be careful to avoid raising the issue of White House
interference with the Secretary's rulemaking powers. And,
we must avoid the appearance of "giving in" to the drug
companies and "sacrificing the taxpayers interests" for the
sake of industry profits.
FORD & LIBRARY GERALD
- 4 -
Comments
We would like to discuss this with you at your earliest
convenience to determine:
1. Whether we should continue to base our position solely
on the judgment of the cost effectiveness of the
program; or
2. Whether we should also engage some third party to
review the issues of interchangeability, drug quality
and research.
FORD is LIBRARY
Sabj
THE WHITE HOUSE
WASHINGTON
July 18, 1975
MEMORANDUM FOR:
JACK MARSH
MAX FRIEDERSDORF
PHIL BUCHEN
BILL SEIDMAN
ALAN GREENSPAN
FROM:
1
JIM CANNON
SUBJECT:
HEW Proposed Amendments to Physician
Bonus Regulation
Attached for your review and comment is a draft decision
memorandum on HEW's proposed amendments to the Physician
Bonus Regulation.
I would appreciate your comments and suggestions by 2:00 p.m.,
Monday, July 21.
Thank you.
FORD is LIBRARY GERALD
Attachment
THE WHITE HOUSE
ACTION
WASHINGTON
July 18, 1975
MEMORANDUM FOR:
THE PRESIDENT
FROM:
JIM CANNON
SUBJECT:
HEW AMENDMENTS TO PHYSICIAN BONUS
REGULATION
This is to present for your decision amendments to the
Physician Bonus Regulation from Secretary Weinberger.
Memoranda from James Lynn and Casper Weinberger are
attached at Tab A.
BACKGROUND
P.L. 93-274 authorized annual bonus payments of up to
$13,500 in addition to any other pay or allowances for
military and Public Health Service (PHS) physicians. You
approved the implementing regulations last October, as
required by the law.
ISSUE
HEW is now proposing three amendments to the regulations
to correct three problem areas:
1. Bonus Repayments. Physicians who do not serve a full
year are generally required by current regulations to
repay the entire bonus. This amendment will allow
officers leaving PHS for residency training in June,
1975, or retiring in September, 1975, to keep a pro-
rata portion of the bonus.
2. Prohibition of Bonuses for Certain Physicians. Current
regulations prohibit bonus payments to certain physicians
with service commitments, usually those who had deferments
to allow completion of residency training. The amendment
would prohibit bonus payments to any of these physicians
who resign from the PHS while still under an obligation
and then reapply to PHS solely to be eligible for a bonus.
FORD
- 2 -.
3. Bonuses for Physicians Who Received Federal Support
for Residency Training. Current regulations permit the
payment of a smaller bonus to physicians who received
Federal salaries during residency training in return
for service commitments. These physicians are normally
commissioned in the PHS while in residency training.
HEW proposes to enable this group of physicians to
receive the full bonus while serving their period of
obligation.
RECOMMENDATIONS
Weinberger - Approve 1, 2, and 3.
Lynn
- Approve 1 and 2
- Disapprove 3 because it would:
-- be contrary to the purposes of Federal
support of residency training, i.e., to
obtain service commitments in return for
salary support;
-- be inequitable to those physicians who freely
accepted a Federal appointment in return for
a full bonus, without having a prior service
commitment. Under the HEW proposal, physicians
would receive $13,500 regardless of whether
or not they had prior service commitments;
-- result in' the Federal Government paying both
â salary and a full bonus for the same commit-
ment period. DOD is not proposing a similar
amendment.
DECISION
1. Amendment 1 - Bonus Repayments
Approve
Disapprove
2. Amendment 2 - Prohibition of Bonus for Certain Physicians
Approve
Disapprove
3. Amendment 3 - Bonuses for Physicians who received Federal
Support for Residency Training
Approve
Disapprove
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
DECISION
JUL 15 1975
MEMORANDUM FOR THE PRESIDENT
FROM: JAMES T/ LYNN
SUBJECT: HEW Amendments to Physician Bonus Regulations
P.L. 93-274 authorized bonus payments of up to $13,500
annually for military and Public Health Service (PHS)
physicians. P.L. 93-274 requires that you approve the
implementing regulations. You did so last October, but
HEW is proposing three amendments for your approval:
1. Bonus Repayments. Physicians who do not serve a
full year are generally required by current regulations
to repay the entire bonus. An exception was made for
physicians leaving the PHS on June 30, 1975. Since the
implementing regulations were not issued until October
1974 and departing PHS physicians normally begin resi-
dency programs on July 1, physicians leaving on June 30
were allowed to retain a pro rata amount of the bonus
rather than repaying the entire amount. HEW is now pro-
posing to change the June 30, 1975, date to any date
from June 20, 1975, to the first anniversary of each
physician's bonus contract. This change will provide
time for physicians departing for residency training to
travel to new locations before June 30. It will also
allow those who plan to retire in September to retain a
pro rata bonus, rather than repaying the entire amount.
2. Prohibition of Bonuses for Certain Physicians.
Current regulations prohibit bonus payments to certain
physicians with service commitments. Generally, these
are physicians who received deferments to enable them
to complete their residency training.
The proposed HEW regulations would prohibit bonus pay-
ments to any of these physicians who resign from the PHS
while still under an obligation and then reapply to PHS
solely to be eligible for a bonus.
2
3. Bonuses for Physicians Who Received Federal Support
for Residency Training. Current regulations permit the
payment of a limited bonus of $9,000, rather than the
full $13,500, to physicians who received Federal salaries
during residency training in return for service commit-
ments. These physicians are normally commissioned in the
PHS while in residency training.
HEW proposes to enable this group of physicians to receive
the full bonus while serving their period of obligation.
HEW believes that these physicians should receive the same
bonus as other physicians who have completed residency
training.
Recommendation. We recommend that you approve the first
two amendments, but disapprove the third. We recommend
against the third amendment because it would:
be contrary to the purposes of Federal support
of residency training, i.e., to obtain service
commitments in return for salary support.
be inequitable to those physicians who freely
accepted a Federal appointment in return for
a full bonus, without having a prior service
commitment. Under the HEW proposal, physicians
would receive $13,500 regardless of whether or
not they had prior service commitments.
result in the Federal Government paying both a
salary and a full bonus for the same commitment
period. DOD is not proposing a similar amendment.
Decision
Approve the first two amendments, but disapprove
the third amendment (OMB position).
Approve all three amendments (HEW position).
See me.
Attachment
THE
DEPARTMENT or
THE SECRETARY OF HEALTH, EDUCATION. AND WELFARE
WASHINGTON, D.C.20201
RESERVED
JUN ID
9 11 AH '75
JUN 6 1975
MANAGENENTAGUOGET
Honorable James T. Lynn
Director, Office of Management and
Budget
Washington, D. C. 20503
Dear Mr Jane is
Reference made to Public Law 93-274 which
authorized the payment of Variable Incentive
Pay for medical officers of the Public Health
Service.
Since the implementation of the Variable Incen-
tive Pay program in September 1974, some problem
areas have been identified which require remedial
changes to the Regulations.
Enclosed are three amendments to the Regulations
which we propose to issue subject to the approval
of the President.
Sincerely,
Sup
Secretary
3 Enclosures
GERALD R. LIBRARY FORD
ISSUE NO. 1
To authorize cancellation of certain Variable Incentive Pay service
agreements after June 20, 1975.
DISCUSSION
The Regulations governing the payment of Variable Incentive Pay
generally provide that if medical officers voluntarily leave the
Service before completing one year of active duty under the requisite
agreement to remain on active duty for one, two, three, or four years,
they must refund the entire amount of the lump-sum payment they had
received for that year.
Because of the four-month delay in the initial implementation of the
Variable Incentive Pay statute, special one-time provisions were
included in the Regulations allowing medical officers to cancel their
initial agreement on June 30, 1975, and to repay the unearned portion
of the lump-sum payment previously received. This was designed to do
two things:
1. For those medical officers who will leave the Service on or
about July 1, 1975, it permitted them to receive some Variable
Incentive Pay for their last full year of active duty
following enactment of the law; and
2. For those medical officers who entered the Service on or about
July 1, 1974, it would permit them to receive some Variable
Incentive Pay during their first year of service, and to sign
a new agreement on July 1 to receive Variable Incentive Pay
for each full year of service thereafter.
The General Counsel's office has advised that under the exacting terms
of the Regulations, any medical officer who leaves the Service even one
day before June 30, 1975, will be liable for repayment of the entire
amount of their initial payment of Variable Incentive Pay. Moreover,
any medical officer who leaves the Service after June 30, and before
completing one full year of active duty under their agreement, they too
must cancel their agreement on June 30. Failing to do so will make them
liable for repayment of the entire amount of Variable Incentive Pay.
As in the past, there will be a number of medical officers leaving the
Service in June to pursue residency training in non-Government hospitals.
Since they are normally required to commence such training on July 1,
they must commence travel to the training hospital during the last part
of June. As a result, many of these officers must request release from
GEEATE FORD VIBRARY
Page 2 - - ISSUE NO. 1
active duty a few days before June 30 and will be ineligible to retain
the earned portion of their initial payment of Variable Incentive Pay.
The existing Regulations also adversely affect several career medical
officers who may be compelled to retire on September 1, 1975, to avoid
a substantial loss of retired pay. The Regulations also require these
officers to cancel their active duty service agreement on June 30 in
order that they will not forfeit the entire amount of the lump-sum
payment previously received. Like those separating from the Service in
June, these officers will be only eligible to retain the earned portion
of their initial payment through June 30, and they must refund the
prorata balance even though they will complete an additional two months
of the initial service agreement. As an end result, some of these
officers will complete all but about 10-20 days of their one-year
service agreement but will be required to refund up to over $2,100.
RECOMMENDATION
That Section E of the Variable Incentive Pay Regulations be amended to
read as follows:
2. As an exception to Section D, 11(a) and 12, a medical officer
who enters into a one or two year active duty agreement under
these regulations on or before December 31, 1974, may, with the
approval of the Assistant Secretary for Health, or his designee,
terminate that agreement at any time after June 20, 1975 and
before the first anniversary of the agreement. In this situation,
officers shall be entitled to be paid only for the proportionate
part of the period of active duty that they served under the
agreement and shall refund on a prorated basis any amount
received in excess of that entitlement. (Revised text Underscored.)
an
APPROVED
DISAPPROVED
IUN 6 1975
DATE
ISSUE NO. 2
To prohibit payment of Variable Incentive Pay to certain medical
officers who resigned from the Commissioned Corps prior to the
commencement, or completion, of a period of obligatory service, and
applied for reentry in the Service at a later date.
DISCUSSION
The statute prohibits payment of Variable Incentive Pay while medical
officers are serving an initial active duty obligation. This
restriction is applicable to medical officers who were enrolled in
the Commissioned Officer Residency Deferment (CORD) Program and the
Senior Commissioned Officer Student Training (COSTEP) (early commissioning)
Program to the extent that they are not eligible for Variable Incentive
Pay during their first two years of active duty. This restriction also
applies to medical officers who incurred a service obligation following
their participation in the Public Health-National Health Service Corps
Scholarship programs.
Before and after the passage of the Variable Incentive Pay statute,
there were several medical officers who refused to honor their agreement
to serve on active duty after completion of training under the CORD and
Senior COSTEP programs and resigned their appointment. Subsequently,
several of these physicians have applied for reappointment and call to
active duty in the Commissioned Corps. In at least some instances,
this course of action was deliberately taken in an effort to qualify
for Variable Incentive Pay immediately after entry on active duty.
Informally, the Office of the General Counsel has advised us that when
we accepted the resignation and terminated the appointment of CORD and
COSTEP officers, it (1) cancelled their obligation to serve on active
duty, and (2) may have made them eligible for Variable Incentive Pay,
under the present Regulations, if the Service later accepted their
application for reappointment and entry on active duty.
While we realize that the statutory provisions in this connection are
overly restrictive, particularly for CORD officers who received no
Federal support while in residency training, the law should be equitably
applied to the extent possible. Failing this, officers who resigned and
reentered the Service may be eligible for Variable Incentive Pay during
the same time period that this additional compensation is denied to
others who are honoring their active duty commitment.
Page 2 - ISSUE NO. 2
RECOMMENDATION
That Section D 4 of the Variable Incentive Pay Regulations be amended
to add the following:
"No medical officer shall receive Variable Incentive Pay earlier
than the date they would have become eligible for such pay if they
had entered on active duty immediately after an initial active duty
obligation was incurred, and they had served on active duty
continuously until completion of the obligatory service."
APPROVED
W
DISAPPROVED
JUN 6 1975
DATE
FORD LIBRARY dr GERALD
ISSUE NO. 3
LIBRARY GERALD R. FORD
To authorize full payment of Variable Incentive Pay to medical
officers who remain on active duty following completion of residency
or other training.
DISCUSSION
With the present restriction in the law prohibiting payment of Variable
Incentive Pay during initial residency training, a medical officer in
such training for four years, as an example, may receive up to $54,000
less in career earnings than a General Medical Officer who has only
completed internship training. This disparity exists in spite of the
fact that medical residents also render patient care in the training
hospital during all or most of the period of their specialty training,
and with a progressing level of professional responsibility as the
training is completed. In addition to the payment restriction during
initial residency training, the Regulations (1) prohibit the payment of
Variable Incentive Pay while an officer is in other training outside the
Service for more than 100 days, and (2) limit payment of Variable
Incentive Pay to $9,000 per year during a period of obligatory service
following training.
The $9,000 Variable Incentive Pay limitation applies in varying ways,
depending upon the kind of training and the manner in which it may be
provided by the Service. For example, in some medical specialties,
residency training is conducted entirely in a Public Health Service
Hospital, in which case residents incur no service obligation and are
eligible for full payment of Variable Incentive Pay immediately after
training. Whereas, in other specialties, affiliated training programs
are involved with part of the training in a Public Health Service
Hospital and the remainder on rotation through one or more non-PHS
hospitals. In this situation, an officer may incur a service obligation
up to two years and is subject to the $9,000 limitation during that
period. This is also true of residencies in which some academic training
is a requisite for specialty board eligibility.
Ideally, Variable Incentive Pay should be an inducement to retain medical
specialists in the Public Health Service after they have completed
residency or other training. Unfortunately, it does not accomplish this
purpose when medical officers must incur an additional loss of career
earnings while they are serving obligatory service following such training.
Since the Public Health Service may not legally enforce any service
obligation, the $9,000 Variable Incentive Pay rate during obligatory
service is, in reality, a penalty imposed on those who voluntarily remain
in the Service following training. In other words, it is viewed by some
medical officers as an inducement to leave the Service to pursue their
professional careers in the private sector.
Page 2 - - ISSUE NO. 3
There is an alternative solution of this problem, i.e., to revise the
Commissioned Corps Personnel Manual to eliminate the requirement of any
obligatory service following medical training. This is not a desirable
course of action, however, for two reasons. First, there are some
medical officers who remain in the Service following training merely
because they consider that they are morally responsible to fulfill
their service obligation. Secondly, any commissioned officer who leaves
the Service prior to the completion of a training obligation is subject
to two sanctions. Normally, they are not authorized travel and
transportation benefits to their home and they forfeit their entitlement
to payment for accrued annual leave. These benefits would thus be
provided to all medical officers leaving the Service immediately after
training if no obligatory service is required.
RECOMMENDATION
That the Variable Incentive Pay Regulations be amended to delete the
text of Section D 6(a) which presently requires payment of such pay at
the $9,000 rate.
APPROVED
w
DISAPPROVED
DATE JUN 6 1975
file
health
THE WHITE HOUSE
WASHINGTON
July 23, 1975
ADMINISTRATIVELY CONFIDENTIAL
MEMORANDUM FOR:
JIM CANNON
FROM:
JIM CONNOR fl
SUBJECT:
HEW Amendments to Physician Bonus
Regulations
The President has reviewed your memorandum of July 21st on
the above subject and indicated the following decisions:
1. Amendment 1 - Bonus Repayments -- approved
2. Amendment 2 - Prohibition of Bonus for Certain Physicians --
approved
3. Amendment 3 - - Bonuses for Physicians who received Federal
Support for Residency Training --
disapproved
Please follow-up with appropriate action.
CC. Don Rumsfeld
11
FORD & LIBRARY GERALD
THE WHITE HOUSE
ACTION
WASHINGTON
July 21, 1975
MEMORANDUM FOR:
THE PRESIDENT
LIBRARY
FROM:
JIM CANNON
SUBJECT:
Hew Amendments to Physician Bonus
Regulation
This is to present for your decision amendments to the
Physician Bonus Regulation from Secretary Weinberger.
Memoranda from Jim Lynn and Cap Weinberger are
attached at Tab A.
BACKGROUND
P. L. 93-274 authorized annual bonus payments of up to
$13,500 in addition to any other pay or allowances for
military and Public Health Service (PHS) physicians.
You approved the implementing regulations last October,
as required by the law.
ISSUE
HEW is now proposing three amendments to the regulations
to correct three problem areas:
1. Bonus Repayments. Physicians who do not serve a
full year are generally required by current
regulations to repay the entire bonus. This
amendment will allow officers leaving PHS for
residency training in June, 1975, or retiring in
September, 1975, to keep a pro rata portion of the
bonus.
2. Prohibition of Bonuses for Certain Physicians.
Current regulations prohibit bonus payments to
certain physicians with service commitments,
usually those who had deferments to allow completion
of residency training. The amendment would prohibit
bonus payments to any of these physicians who resign
from the PHS while still under an obligation and
then reapply to PHS solely to be eligible for a bonus.
- 2 -
3. Bonuses for Physicians Who Received Federal Support
for Residency Training. Current regulations permit the
payment of a smaller bonus to physicians who received
Federal salaries during residency training in return
for service commitments. These physicians are normally
commissioned in the PHS while in residency training.
HEW proposes to enable this group of physicians to
receive the full bonus while serving their period of
obligation.
RECOMMENDATIONS
Weinberger
- Approve 1, 2, and 3.
Lynn
- Approve 1 and 2
- Disapprove 3 because it would:
-- be contrary to the purposes of Federal
support of residency training, i.e., to
obtain service commitments in return for
salary support;
-- be inequitable to those physicians who
freely accepted a Federal appointment
in return for a full bonus, without
having a prior service commitment.
Under the HEW proposal, physicians
would receive $13,500 regardless of
whether or not they had prior service
commitments;
-- result in the Federal Government paying
both a salary and a full bonus for the
same commitment period. DOD is not
proposing a similar amendment.
Cannon
- Approve 1 and 2
- Disapprove 3
Greenspan
- Approve 1 and 2
- Disapprove 3
(additional comments at Tab B)
Marsh
- Approve 1 and 2
- Disapprove 3
FORD CIBRARY
- 3 -
Seidman
- Approve 1 and 2
- Disapprove 3
Friedersdorf - No comment
Buchen
- No comment
DECISION
1. Amendment 1 - Bonus Repayments
Approve
Disapprove
(Weinberger, Lynn, Cannon,
Greenspan, Marsh, Seidman)
2. Amendment 2 - Prohibition of Bonus for Certain Physicians
Approve
Disapprove
(Weinberger, Lynn, Cannon,
Greenspan, Marsh, Seidman)
3. Amendment 3 - Bonuses for Physicians who received Federal
Support for Residency Training
Approve
Disapprove
(Weinberger)
(Lynn, Cannon, Greenspan,
Marsh, Seidman)
LIBRARY
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
DECISION
JUL 1 5 1975
MEMORANDUM FOR THE PRESIDENT
FROM: JAMES T LYNN
SUBJECT: HEW Amendments to Physician Bonus Regulations
P.L. 93-274 authorized bonus payments of up to $13,500
annually for military and Public Health Service (PHS)
physicians. P.L. 93-274 requires that you approve the
implementing regulations. You did so last October, but
HEW is proposing three amendments for your approval:
1. Bonus Repayments. Physicians who do not serve a
full year are generally required by current regulations
to repay the entire bonus. An exception was made for
physicians leaving the PHS on June 30, 1975. Since the
implementing regulations were not issued until October
1974 and departing PHS physicians normally begin resi-
dency programs on July 1, physicians leaving on June 30
were allowed to retain a pro rata amount of the bonus
rather than repaying the entire amount. HEW is now pro-
posing to change the June 30, 1975, date to any date
from June 20, 1975, to the first anniversary of each
physician's bonus contract. This change will provide
time for physicians departing for residency training to
travel to new locations before June 30. It will also
allow those who plan to retire in September to retain a
pro rata bonus, rather than repaying the entire amount.
2. Prohibition of Bonuses for Certain Physicians.
Current regulations prohibit bonus payments to certain
physicians with service commitments. Generally, these
are physicians who received deferments to enable them
to complete their residency training.
The proposed HEW regulations would prohibit bonus pay-
ments to any of these physicians who resign from the PHS
while still under an obligation and then reapply to PHS
solely to be eligible for a bonus.
2
3. Bonuses for Physicians Who Received Federal Support
for Residency Training. Current regulations permit the
payment of a limited bonus of $9,000, rather than the
full $13,500, to physicians who received Federal salaries
during residency training in return for service commit-
ments. These physicians are normally commissioned in the
PHS while in residency training.
HEW proposes to enable this group of physicians to receive
the full bonus while serving their period of obligation.
HEW believes that these physicians should receive the same
bonus as other physicians who have completed residency
training.
Recommendation. We recommend that you approve the first
two amendments, but disapprove the third. We recommend
against the third amendment because it would:
be contrary to the purposes of Federal support
of residency training, i.e., to obtain service
commitments in return for salary support.
be inequitable to those physicians who freely
accepted a Federal appointment in return for
a full bonus, without having a prior service
commitment. Under the HEW proposal, physicians
would receive $13,500 regardless of whether or
not they had prior service commitments.
result in the Federal Government paying both a
salary and a full bonus for the same commitment
period. DOD is not proposing a similar amendment.
Decision
Approve the first two amendments, but disapprove
the third amendment (OMB position).
Approve all three amendments (HEW position).
See me.
Attachment
HEALTH
HE
DEPARTMENT
EDUCATION
OF AND
THE SECRETARY OF HEALTH. EDUCATION. AND WELFARE
WASHINGTON, D.C. 20201
RESEIVED
U.S.A.
'75
JUN 6 1975
PH
MANAGEMENTRESUDGET
Honorable James T. Lynn
Director, Office of Management and
Budget
Washington, D. C. 20503
Dear Mr June Lynn.
Reference is made to Public Law 93-274 which
authorized the payment of Variable Incentive
Pay for medical officers of the Public Health
Service.
Since the implementation of the Variable Incen-
tive Pay program in September 1974, some problem
areas have been identified which require remedial
changes to the Regulations.
Enclosed are three amendments to the Regulations
which we propose to issue subject to the approval
of the President.
Sincerely,
Sup
Secretary
3 Enclosures
FORD LIBRARY & OFFALD
INSURANCE EDUCATION
HEALTH
OF
THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE
USA
WASHINGTON, D.C. 20201
JUN 6 1975
honorable James T. Lynn
Director, Office of Management and
Budget
Washington, D. C. 20503
Dear Mr. Lynn:
Reference is made to Public Law 93-274 which
authorized the payment of Variable Incentive
Pay for medical officers of the Public Health
Service.
Since the implementation of the Variable Incen-
tive Pay program in September 1974, some problem
areas have been identified which require remedial
changes to the Regulations.
Enclosed are three amendments to the Regulations
which we propose to issue subject to the approval
of the President.
Sincerely,
/s/Cap
Secretary
3 Enclosures
FORD LIBRARY & GERALD
ISSUE NO. 1
To authorize cancellation of certain Variable Incentive Pay service
agreements after June 20, 1975.
DISCUSSION
The Regulations governing the payment of Variable Incentive Pay
generally provide that if medical officers voluntarily leave the
Service before completing one year of active duty under the requisite
agreement to remain on active duty for one, two, three, or four years,
they must refund the entire amount of the lump-sum payment they had
received for that year.
Because of the four-month delay in the initial implementation of the
Variable Incentive Pay statute, special one-time provisions were
included in the Regulations allowing medical officers to cancel their
initial agreement on June 30, 1975, and to repay the unearned portion
of the lump-sum payment previously received. This was designed to do
two things:
1. For those medical officers who will leave the Service on or
about July 1, 1975, it permitted them to receive some Variable
Incentive Pay for their last full year of active duty
following enactment of the law; and
2. For those medical officers who entered the Service on or about
July 1, 1974, it would permit them to receive some Variable
Incentive Pay during their first year of service, and to sign
a new agreement on July 1 to receive Variable Incentive Pay
for each full year of service thereafter.
The General Counsel's office has advised that under the exacting terms
of the Regulations, any medical officer who leaves the Service even one
day before June 30, 1975, will be liable for repayment of the entire
amount of their initial payment of Variable Incentive Pay. Moreover,
any medical officer who leaves the Service after June 30, and before
completing one full year of active duty under their agreement, they too
must cancel their agreement on June 30. Failing to do so will make them
liable for repayment of the entire amount of Variable Incentive Pay.
As in the past, there will be a number of medical officers leaving the
Service in June to pursue residency training in non-Government hospitals.
Since they are normally required to commence such training on July 1,
they must commence travel to the training hospital during the last part
of June. As a result, many of these officers must request release from
Page 2 - - ISSUE NO. 1
active duty a few days before June 30 and will be ineligible to retain
the earned portion of their initial payment of Variable Incentive Pay.
The existing Regulations also adversely affect several career medical
officers who may be compelled to retire on September 1, 1975, to avoid
a substantial loss of retired pay. The Regulations also require these
officers to cancel their active duty service agreement on June 30 in
order that they will not forfeit the entire amount of the lump-sum
payment previously received. Like those separating from the Service in
June, these officers will be only eligible to retain the earned portion
of their initial payment through June 30, and they must refund the
prorata balance even though they will complete an additional two months
of the initial service agreement. As an end result, some of these
officers will complete all but about 10-20 days of their one-year
service agreement but will be required to refund up to over $2,100.
RECOMMENDATION
That Section E of the Variable Incentive Pay Regulations be amended to
read as follows:
2. As an exception to Section D, 11 (a) and 12, a medical officer
who enters into a one or two year active duty agreement under
these regulations on or before December 31, 1974, may, with the
approval of the Assistant Secretary for Health, or his designee,
terminate that agreement at any time after June 20, 1975 and
before the first anniversary of the agreement. In this situation,
officers shall be entitled to be paid only for the proportionate
part of the period of active duty that they served under the
agreement and shall refund on a prorated basis any amount
received in excess of that entitlement. (Revised text Underscored.)
on
APPROVED
DISAPPROVED
HIN 6 1975
DATE
ISSUE NO. 2
To prohibit payment of Variable Incentive Pay to certain medical
officers who resigned from the Commissioned Corps prior to the
commencement, or completion, of a period of obligatory service, and
applied for reentry in the Service at a later date.
DISCUSSION
The statute prohibits payment of Variable Incentive Pay while medical
officers are serving an initial active duty obligation. This
restriction is applicable to medical officers who were enrolled in
the Commissioned Officer Residency Deferment (CORD) Program and the
Senior Commissioned Officer Student Training (COSTEP) (early commissioning)
Program to the extent that they are not eligible for Variable Incentive
Pay during their first two years of active duty. This restriction also
applies to medical officers who incurred a service obligation following
their participation in the Public Health-National Health Service Corps
Scholarship programs.
Before and after the passage of the Variable Incentive Pay statute,
there were several medical officers who refused to honor their agreement
to serve on active duty after completion of training under the CORD and
Senior COSTEP programs and resigned their appointment. Subsequently,
several of these physicians have applied for reappointment and call to
active duty in the Commissioned Corps. In at least some instances,
this course of action was deliberately taken in an effort to qualify
for Variable Incentive Pay immediately after entry on active duty.
Informally, the Office of the General Counsel has advised us that when
we accepted the resignation and terminated the appointment of CORD and
COSTEP officers, it (1) cancelled their obligation to serve on active
duty, and (2) may have made them eligible for Variable Incentive Pay,
under the present Regulations, if the Service later accepted their
application for reappointment and entry on active duty.
While we realize that the statutory provisions in this connection are
overly restrictive, particularly for CORD officers who received no
Federal support while in residency training, the law should be equitably
applied to the extent possible. Failing this, officers who resigned and
reentered the Service may be eligible for Variable Incentive Pay during
the same time period that this additional compensation is denied to
others who are honoring their active duty commitment.
Page 2 - ISSUE NO. 2
RECOMMENDATION
That Section D 4 of the Variable Incentive Pay Regulations be amended
to add the following:
"No medical officer shall receive Variable Incentive Pay earlier
than the date they would have become eligible for such pay if they
had entered on active duty immediately after an initial active duty
obligation was incurred, and they had served on active duty
continuously until completion of the obligatory service."
APPROVED
W
DISAPPROVED
JUN 6 1975
DATE
ISSUE NO. 3
To authorize full payment of Variable Incentive Pay to medical
officers who remain on active duty following completion of residency
or other training.
DISCUSSION
With the present restriction in the law prohibiting payment of Variable
Incentive Pay during initial residency training, a medical officer in
such training for four years, as an example, may receive up to $54,000
less in career earnings than a General Medical Officer who has only
completed internship training. This disparity exists in spite of the
fact that medical residents also render patient care in the training
hospital during all or most of the period of their specialty training,
and with a progressing level of professional responsibility as the
training is completed. In addition to the payment restriction during
initial residency training, the Regulations (1) prohibit the payment of
Variable Incentive Pay while an officer is in other training outside the
Service for more than 100 days, and (2) limit payment of Variable
Incentive Pay to $9,000 per year during a period of obligatory service
following training.
The $9,000 Variable Incentive Pay limitation applies in varying ways,
depending upon the kind of training and the manner in which it may be
provided by the Service. For example, in some medical specialties,
residency training is conducted entirely in a Public Health Service
Hospital, in which case residents incur no service obligation and are
eligible for full payment of Variable Incentive Pay immediately after
training. Whereas, in other specialties, affiliated training programs
are involved with part of the training in a Public Health Service
Hospital and the remainder on rotation through one or more non-PHS
hospitals. In this situation, an officer may incur a service obligation
up to two years and is subject to the $9,000 limitation during that
period. This is also true of residencies in which some academic training
is a requisite for specialty board eligibility.
Ideally, Variable Incentive Pay should be an inducement to retain medical
specialists in the Public Health Service after they have completed
residency or other training. Unfortunately, it does not accomplish this
purpose when medical officers must incur an additional loss of career
earnings while they are serving obligatory service following such training.
Since the Public Health Service may not legally enforce any service
obligation, the $9,000 Variable Incentive Pay rate during obligatory
service is, in reality, a penalty imposed on those who voluntarily remain
in the Service following training. In other words, it is viewed by some
medical officers as an inducement to leave the Service to pursue their
professional careers in the private sector.
Page 2 - ISSUE NO. 3
There is an alternative solution of this problem, i.e., to revise the
Commissioned Corps Personnel Manual to eliminate the requirement of any
obligatory service following medical training. This is not a desirable
course of action, however, for two reasons. First, there are some
medical officers who remain in the Service following training merely
because they consider that they are morally responsible to fulfill
their service obligation. Secondly, any commissioned officer who leaves
the Service prior to the completion of a training obligation is subject
to two sanctions. Normally, they are not authorized travel and
transportation benefits to their home and they forfeit their entitlement
to payment for accrued annual leave. These benefits would thus be
provided to all medical officers leaving the Service immediately after
training if no obligatory service is required.
RECOMMENDATION
That the Variable Incentive Pay Regulations be amended to delete the
text of Section D 6(a) which presently requires payment of such pay at
the $9,000 rate.
APPROVED
w
DISAPPROVED
DATE JUN 6 1975
CARD
LIBUARY
THE CHAIRMAN OF THE
COUNCIL OF ECONOMIC ADVISERS
WASHINGTON
July 21, 1975
MEMORANDUM FOR JIM CANNON
This is in response to your request for my comments and
suggestions on the draft decision memo for the President on
HEW' S proposed amendments to the Physician Bonus Regulations.
I support the HEW proposal number (1) that a physician
leaving the PHS before the end of his contract year be required
to return only the pro-rata amount of the bonus, rather than
the entire bonus for the year. Rather than focusing exclusively
on those leaving the PHS for residency programs or retirement,
the discussion of the issue should be broadened. The bonus is
a means of paying a higher salary than allowed under the current
civilian and military Government pay schedules SO that the
military and PHS can compete effectively for the services of
experienced physicians. The denial of the annual bonus for a
person who leaves before the end of his contract year will induce
some to leave earlier and will unnecessrily penalize persons who
unexpectedly decide to leave the PHS within the year. There
appears to be no particular loss to the PHS from those who leave
before the expiration of the year.
I also endorse HEW proposal (2) that physicians with
service obligations to the PHS and who are therefore not entitled
to the bonus, should be denied a bonus if they resign and then
reapply. The proposed regulation means that those with a
service commitment, presumably because of Government subsidies
for their education, receive a lower salary in the PHS until
they fulfil this obligation. It should be made clearer for the
President, however, under what circumstances a physician with
a service obligation is allowed to resign.
Proposal (3) would raise the current limited bonus of
$9,000 to the full bonus of $13,500 to those who received
Federal salaries during their residency training in return for
the subsequent service commitment. I share the OMB objection
to this proposal. Those who voluntarily receive federally
subsidized training should be obligated to compensate the
Government in some form, such as through a smaller bonus.
REVOLUTION
AMERICAN
BICENTENNIAL
1776-1976
-2-
These proposals touch on the relation between the
Federal Government and the subsidization of medical education.
It is ironic that we provide large subsidies to the training of
persons who are very wealthy -- the present value of the future
earnings of physicians is very high! Many youths may have
difficulty financing their own medical schooling without
assistance, but this problem could be solved by cash loans to
medical students that they are required to repay in cash. This
policy would avoid the gross inequities that now exist and the
numerous problems that arise from attempts to require specific
performance, in terms of job or location, on the part of
physicians, or persons in any occupation.
R R
sithy
Health
THE WHITE HOUSE
WASHINGTON
July 24, 1975
MEMORANDUM FOR:
JIM LYNN
FROM:
SUBJECT:
JIM CANNON Jun
HEW Amendments to Physician
Bonus Regulations
The President has reviewed Secretary Weinberger's
memo of June 6 which you recently sent to him on
HEW proposed amendments to physician bonus
regulations.
The President has approved Amendment 1, Bonus
Repayments, and Amendment 2, Prohibition of Bonus
for Certain Physicians, and disapproved Amendment 3,
Bonuses for Physicians Who Received Federal Support
for Residency Training.
FORD LIBRARY & GERALD
THE WHITE HOUSE
WASHINGTON
August 4, 1975
MEMORANDUM FOR:
JIM CANNON
FROM:
PHILIP BUCHEN
T.W.B.
SUBJECT:
Interpretation of Health
Maintenance Organization
Statute
After reviewing your memorandum of July 31, 1975,
and the attachments, we support the DOL position.
In my opinion, it is consistent with the
applicable provisions of the HMO Act of 1973
(P.L. 93-222) and represents the better policy.
CC: Art Quern
ARY
chron
Health
THE WHITE HOUSE
WASHINGTON
August 26, 1975
MEMORANDUM FOR:
JACK MARSH
MAX FRIEDERSDORF
PHIL BUCHEN
BILL SEIDMAN
ALAN GREENSPAN
FROM:
JIM CANNON
SUBJECT:
Proposed HEW and DOD Amendments to
the Physician Bonus Regulations
Attached for your review and comment is a draft decision
memorandum on the proposed HEW and DOD amendments to the
Physician Bonus Regulation.
Please send your comments and suggestions to Sarah
Massengale by 2:00 p.m., Wednesday, August 27.
Thank you.
Attachment
FORD LIBRARY & GERALD
THE WHITE HOUSE
ACTION
WASHINGTON
FORD & LIBRARY OFRALD
MEMORANDUM FOR:
THE PRESIDENT
FROM:
JIM CANNON
SUBJECT:
Proposed HEW and DOD Amendments to the
Physician Bonus Regulations
This is to present for your decision amendments to the
Physician Bonus Regulations proposed by HEW and DOD. A
memorandum from Jim Lynn is attached at Tab A.
BACKGROUND
As you know, Members of the Military and Public Health
Service (PHS) have a financial incentive to retire before
October 1, 1975 because of the retired pay inversion
problem. Under current law, they receive a year's worth
of cost of living annuity adjustments -- up to $2,500 per
year -- which they would not receive if they retire after
October. HEW requested an amendment to the PHS physician
bonus regulations to remove the bonus repayment penalty if
a physician retires before completing the full year of service
required by the bonus contract.
The decision you made in early August on our recommendation
to approve the HEW amendments has not yet been communicated
to HEW. Two developments have occurred since your decision:
-- Defense has proposed a similar amendment;
---- Congress has agreed to legislation -- in an
amendment to the Defense Procurement Authorization
Bill -- to remove the pre-October 1 retirement
incentive.
The Defense Procurement Authorization Bill is almost certain
to be enacted soon after the Congressional recess.
- 2 -
ISSUE
The issue is whether to approve or disapprove the HEW and
DOD amendments. The pending legislation will remove the need
for the proposed HEW and DOD amendments since retiring military
and PHS physicians will no longer have to choose between a
lower retirement annuity and repaying their full annual
bonuses.
RECOMMENDATIONS
Lynn
Disapprove the HEW and DOD amendments
"the legislation will encourage.
officers to
remain
approval of the amendments now would
be undesirable since it would
[encourage] early
retirements.
"
Cannon
Disapprove the HEW and DOD amendments
DECISION
1. Approve HEW and DOD amendments
APPROVE
DISAPPROVE
2. Disapprove HEW and DOD amendments
APPROVE
DISAPPROVE
FORD LIBRARY
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
AUG 15
1975
ACTION
MEMORANDUM FOR:
THE PRESIDENT
FROM:
JAMES T. LYNN
Ohine
SUBJECT:
Proposed DOD and HEW Amendments to
the Physician Bonus Regulations
Members of the military and Public Health Service (PHS)
have a financial incentive to retire before October 1,
1975 because of the retired pay inversion problem. Under
current law, they receive a year's worth of cost of living
annuity adjustments -- up to $2,500 per year -- which they
would not receive if they retire after October 1.
As you know, HEW requested an amendment to the PHS physi-
cian bonus regulations to remove the bonus repayment
penalty if a physician retires before completing the full
year of service required by the bonus contract. Normally,
military and PHS physicians must repay their entire annual
bonus if they serve less than one year. Since the bonus
plan began last October, no physician would have completed
a full year of service before a pre-October 1, 1975 retire-
ment. Initial implementation of the bonus was delayed
several months before last October by administrative prob-
lems.
On our recommendation, you approved the HEW amendment last
week. We have not yet communicated your decision to HEW,
however, and two developments have occurred since we sub-
mitted the amendment for your consideration:
Defense has proposed a similar amendment, and
Congress has agreed to legislation -- in an
amendment to the Defense Procurement Authorization
Bill -- to remove the pre-October 1 retirement in-
centive.
2
The Defense Procurement Authorization Bill is almost
certain to be enacted soon after the Congressional recess.
The pending legislation will remove the need for the proposed
HEW and DOD amendments since retiring military and PHS
physicians will no longer have to choose between a lower
retirement annuity and repaying their full annual bonuses.
In effect, the legislation will encourage military and PHS
officers to remain on board. Moreover, approval of the
amendment now would be undesirable since it would have the
effect of encouraging early retirements, i.e., the physicians
could break their bonus contracts without penalty. In view
of the need for physicians in DOD and HEW, it would not seem
sensible to encourage any of the physicians now on board to
retire.
Accordingly, we recommend that you disapprove the proposed
DOD amendment and reconsider and disapprove the proposed
HEW amendment, on the grounds of the expected Congressional
action.
Decision
Approve the DOD and HEW amendments
Disapprove the DOD and HEW amendments (OMB
recommendation)
THE WHITE HOUSE
WASHINGTON
SMC Trip bedy
September 3, 1975
Ant
MEMORANDUM FOR:
JIM CAVANAUGH
Thanks
FROM:
ART QUERN
Art
SUBJECT:
Medicaid Funds to States
Secretary Mathews' Position on Jun Reducing
This is in reply to your inquiry about the UPI story which
reports that Secretary Mathews is refusing to enforce
regulations requiring a reduction of medicaid matching
funds to states if certain utilization control require-
ments are not met.
The Secretary's position as given in testimony this morning
is as follows:
1.
Section 1903 (g) of the Social Security Act provides
for a reduction in Federal medicaid matching to
states if certain utilization control requirements
are not met; it does not mandate a date when the
reduction must be imposed.
2.
The Secretary is concerned that extensive confusion
over a court case brought by the AMA leading to a
preliminary injunction of portions of the utilization
control sections -- but not the portion in question --
has had a serious effect on the states' ability to
proceed with utilization review surveys.
3.
He, therefore, has directed an intensive study of
this issue and possible alternatives which would
better accomplish the purposes of the reduction
provisions.
4.
While this study is proceeding, imposition of the
reductions has been suspended.
5.
If it is ultimately decided to make reductions they
will be made back to the effective date provided
for in the statute.
UP-029
(MEDICAID)
WASHINGTON (UPI) -- HEW SECRETARY DAVID MATHEWS HAS TOLD CONGRESS
HE WILL REFUSE AT LEAST TEMPORARILY TO ENFORCE A LAW REQURING HIM TO
REDUCE FEDERAL MEDICAID FUNDS TO CERTAIN STATES, UPI HAS LEARNED.
IT WAS THE FIRST TIME MATHEWS HAS PUBLICLY ANNOUNCED HIS REFUSAL
TO ENFORCE A LAW SINCE HE TESTIFIED AT CONGRESSIONAL HEARINGS THIS
SUMMER, BEFORE HIS CONFIRMATION, THAT HE WOULD ENFORCE COURT RULINGS
AND LAWS EVEN WHERE HE PERSONALLY DISAGREED WITH THEM.
MATHEWS SAID IN A LETTER TO REP. JOHN MOSS, D-CALIF., THAT
AMENDMENTS TO THE SOCIAL SECURITY ACT REQUIRE HIM TO REDUCE FEDERAL
MEDICAID PAYMENTS TO STATES THAT FAIL TO PROVIDE SPECIFIC CONTROLS
OVER THE USE OF HOSPITAL AND NURSING HOME SERVICES.
THE LETTER WAS TO BE RELEASED TODAY AT A HEARING BY MOSS' HOUSE
OVERSIGHT AND INVESTIGATIONS SUBCOMMITTEE. A COPY WAS MADE AVAILABLE
TO UPI BY AN HEW SOURCE.
IN THE AUG. 29 LETTER MATHEWS SAID HE IS CONCERNED THAT REDUCING
MEDICRID PAYMENTS "WILL BE COUNTERPRODUCTIVE TO THE END RESULTS THAT
YOU AND I SEEK."
THE REQUIRED REDUCTION OF FEDERAL AID "IS SO SEVERE THAT IT HAS
THE FEDERAL-STATE MEDICAID PROGRAM PROVIDES MEDICAL SERVICES WROTHEYN30
THE POTENTIAL FOR CRIPPLING A STATE'S MEDICAID PROGRAM," HE
NEEDY. MATHEWS TOLD MOSS THAT THE ULTIMATE LOSER IF FEDERAL PAYMENTS
TO STATES WERE CUT COULD BE MEDICAID RECEIPIENTS.
"SUCH LARGE REDUCTIONS, AS A RESULT, DEFEAT THE OBJECTIVES OF THE
LAW AND CAUSE UNDUE HARDSHIP TO THE VERY PEOPLE THE ACT WAS
ESTABLISHED TO HELP," HE WROTE.
UPI 09-03 09:58 AED
UP-A
THE NEW YORK TIMES, Tuesday, September 16, 1975
ciency through r
By Harry Schwartz.
ical system.
Unfortunately
Vice President Rockefeller has cre-
permissive United
ated a ministorm by asserting' that
evidence that h
government cannot afford to give
done very much
everyone first class medical care. Mr.
of disease as Si
Rockefeller's critics feel particularly
alcoholism and di
betrayed because as governor of New
don't have any B
York he was an outspoken advocate
they find demar
of national health insurance and a
care outstrips th
decade ago sponsored the most gen-
over, Washington
Rationing
erous state Medicaid law in the nation.
two years to pus
The Vice President's critics seem un-
organizations as
aware that his present position almost
medical care ha
Medical Care
echoes the official stand of the British
pointing results. :
Labor Government toward the de-
pushed this solut
mands on the National Health Service,
There can, of
Britain's generation-old "free" - that
and improvement
is, tax-supported-medical system.
icine but there i
The Wilson Government's position
-
HEALTH LEGISLATION MEETING
w/Cavanaugh, Quern, O'Neill,
Loffler, Meagher
Friday, September 19, 1975
12:15 p.m.
Mr. Cannon's Office
FORD LIBRARY j GERALD