:%L'i f 1, I-,DUCATIO-\. A-\ D
          MEMORANDUM                                   DEPART@\IENT OF HI,
                                                                        PUBLIC f!EAL'1'1-1 SERN'ICE

                                                                     liLALTII RESOL7RCES ADNIINIS-.RArC)N

                                                                 BUREAU OF IIEALTli RE-@OL7RCES DE@-FLCPN'EN-1
          TO       Barbara Miller, Management Analyst                          DATE: July 19, 197't
                   Division of Management Policy, 0,11,   HRA

          FROM  : Chief, Planning and Policy Branch,      DCHP

          SUBJECT: FY 1976 Staffing Narrative for Health Resources Planning

                   As you requested on July 15, I have revised and expanded the draft
                   staffing narrative for Health Resources Planning.  Because of the
                   current lack of authorizing legislation, it is impossible to make
                   simple output comparisons based on program history.                   it is
                   absolutely clear from the Congressional testimony of tjl,-- '@di-,Iinistra-
                   tion that vie intend to enlai-c-- Federal technical assist-a!,,,,e, rloni@Lo.-inc,,
                   and construction progra,-.i respoiisib4glitie@. This fact fori-,,,s the  basis
                   for our staffing request.  I certainly hope that @.,hal@,e@,,er inadequacy
                   there may be in the quantitative annual output conipa)-isors provided
                   here is not allo@-,,ed to overshado,,-i the substantive importance of this
                   initiative to our health care delivery sys@Lonland the ecotioriy.

                   There are ti@,,o particularly important matters which il-.us@Ll be Made  clear
                   to each office %..,hicii         this rcr,,,,nc-+        a i       4-1,@ LJ
                   Fon-iai-d Plan calls for an increase of 3'0 Health Resources Planning
                   positions in FY 1976 and no increase  foi-  FY  1975,  this  request  is  l@or
                   an increase of 63 Health Resources Planning positions in F)' 197z')
                   no further increase in FY 1976.      In other @..,,oi-ds, i-tc- do no@L.agree @L- :I
                   all of the i,,orl,,Ioad assti,7@ptions implicit in the H Fo,,-@,:ard Plan. and
                   we believe that the Dep,-irtpie.,it must plan to sta'ff Health Resources
                   Planning adequately in FY 1975 or else fail to meet the @.,oals of the
                   Adniinistration's program.

                   Second, this request  combines  the  requirements  of  4L@ie  proposed  Health
                   Ppr,otiv-rnr, Pl,)nninri At-f- Pneq rise nr;minic@v-.n+irNn ni' C)r)rc-il -Fn%-  -Fn@ili+ir-c
                   construction and modernization as described by Dr. Ed,..,,a),ds  b@,l@ore  the
                                                                                Public
                   Subcommittee on Health, Senate Cornmittee on Labor and               ',-,@elfare
                   on June 14, 1974.

                                                             Howard B. Kelly


                                      Staffin_q Analysis - Narrative Justification
               A)   Organizational location:  Bureau of Health Resources Development,
                                                Loe'a,l th Res,ou,rce's Planning
               B)   Program Title:  Health Resources Planning
               C)   Proqram PurDose:

                    The  Health  Resources  Planning  Act,  as  proposed  by  the  Administration,  calls
                    for  the  organization  and  establishment  of  local  planning  bodies,  called
                    Health Systems /'%gencies,'to s'er-v@'specific qeocrapfiica_l_at-eas across.--thp--cc,-@-1-
                             These areas will--bL- 'establi'shed'by  the-governor  of'each'State,  sul,,-
                    ject to criteria set forth in the statute, and submitted to the Secretary
                    the Department of Health,  Education,  and  I-lelfare  for  approval  as  Health
                    Services Areas.  A Health Service Area           be a geogra
                                                                                 optical. region i-jith'n.
                    which there is available a  comprehensive  range  of  health  services  and  v.,hi,,i
                    is of a  character  suitable  for  the  effective  planning  and  development  of
                    health services.

                    The Health Systems Agency  will  be  a  private,  nonprofit  organization,  leqal'i,,-
                    indeoendent  of  all  other  organizations.  It  will  be  required  to  have  a  ov-
                                                                                                   9
                    erning grouD composed of leaders from among thle      five sectors  of  the  health
                    care system    One-half of the members are to be      representatives of  consum=--r-s

                                                                                                         -i-
                    and government, and half are to represent providers, health educational ins7'
                    tutions, and third-party payers.
                    The HRP  program  will  provide  financial  support  for  the  development  and  ope%
                    of  Health  Systems  Agencies.  In  addition,  technical  assistance  funds   are
                    authorized to  enable  agencies  to  assist  the  implementation  of@  actions  recc--
                    mended  in  their  comprehensive  health  plan.  No  matching  funds  are  required
                    obtain Federal funds.

                    A companion part of  the  HRP  program  is  authorization  and  support  for  State
                    regulation  of  selected  aspects  of  the  health  care  enterprise.  Grants   would
                    be available  to  support  state  efforts  to  regulate  the  reimbursement  for
                    health services and the  extent  of  capital  inves7uienL  in  tne  nealth  care
                    industry (through carrying out the requirements of Sec.       1122).  If  a   State
                    chooses to administer both regulatory functions through       one  agency,   that
                    is eligible for a one-time bonus payment of 25 percent of its Federal pay:-n-.---.


                                                                                         2

                        The Administration's overall approach to facility construction
                        is one that focuses on targeted assistance to residual areas
                        of need beyond new hospital construction.  The original Hill-
                        Burton program was focused on increasing the number and iniprov-
                        ing the distribution of hospital beds.  Today, the supply is
                        adequate and the imbalance in distribution largely corrected.
                        The need now is not for additional beds and hospitals, but for
                        the modernization, including replacement of existing hospitals,
                        and for increased ambulatory care facilities.  Such assistance
                        will take the form of direct project arants available to
                        public and private nonprofit health care facilities that, among
                        other requirements, serve large numbers of poor patients and
                        are unable tTi obtain a loan through the private capital
                        market without Federal capital assistance.  The size of the
                        Federal share would be limited and the grantee institutions
                        would be enabled to participate in normal debt servicing
                        arrangements.  Project grants would be directed toward the
                        construction of ambulatory care facilities and the moderniza-
                        tion of health facilities.  No new Federal loans and loan
                        guarantees with interest subsidies will be made, because interest
                        subsidies are generally disproportionately expensive in relation
                        to the benefits received.
                    D)  Explanation of 1974/1975 Staffing Levels and Activities

                        1.  FY 1974
                            During FY 1974, the Federal Government provided support
                            for four different programs which had established agencies
                            at the State or areawide level to carry out specific
                            planning activities within the health care system:  C'ompre-
                            hensive Health Planning (CtiP), Regional Medical Programs (RMP),
                            Hill-Burton, and the Experimental Health Services Delivery Systems
                            (EHSDS). Legislative authority for three of these four programs expired


                                                                                               3

                      June 30, 1974, and there is no specific authority for the  other  program,
                      Recognition of the continuing need to bring the undesirable conseque nces
                      of the health services marketplace under control, along with the experience
                      gained through these proarams, led t--@the,.",rc-pos2l of a new Fede@@al
                      initiative (,represented -@y the Healt,, Reso'Lirces Planning Act) combining
                      the development of effective localized health resources planning capability
                      with encouragement for State-level regulation of capital expenditures and
                      fees.  The long-term goal of this new intervention is to plan and
                      develoo an adequate and equitably distributed Supply of high quality
                      health care resources and services at reasonable cost.

                                                     dards
                      In previous years health planning agencies operated with little substan-
                      tive guidance -from the Department, causing confusion on purpose and
                      function among the agencies.  During those years, certain common functional
                      elements were identified which, if performed, have a positive impact on
                      the agency's effectiveness. At the same time there has been  increasing
                      emphasis to focus the broad mission of he&lth planning on controlling
                      unnecessary duplication of services and facilities thus impacting on
                      rising health care costs and helping to develop a more rational  system
                      for healthcare deliverv.  During FY 1974, performance standards for
                      health planning agencies were developed and promulgated.
                      Assessment of CHP Agencies
                      By FY 1974, fifty-six (a) agencies and 150 (b) agencies'had achieved the
                      planning stage, and were fully operational.  'Little indeptli evaluation had
                      been conducted to identify major problems. Similarly, little  direction
                      or assistance had been provided by the Department to enable agencies to
                      more effectively deal with and solve problems which confront them.
                      To correct this lack of assistance, a management study was conducted to
                      inventory the capability of agencies nation-wide.  The results of the
                      study were used to (1) develop regional priorities and sequence for
                      indepth assessment; (2) identify major categories of technical assistance
                      required; and, (3) provide a basis for legislative recommendations.
                      The Regions assessed 206 agencies using a standard methodology.  This
                      assessment involved team site visits composed of Federal staff and (a)
                      and (b) agency personnel.  Ilajor ageiicy problems %%,ere identified and
                      recommendations made on their solutions. Each assessor participated  in
                      a training workshop to fully understand the performance standards and
                      assessment methodology.  The use Of MLilti-discipiinary teams, composed
                      of practitioners in health planning as well as Federal staff, added
                      objectivity to the process and provided cross transfer of knowledge


                                                                                             4

                   within the health planning field.
                   Finally, in conjunction with the steps above, a technical assistar:e
                   strategy was developed and implemented.  Such assistance consisted
                   of both one-on-one and generic assitance (training, manuals, elu-c.).
                   An evaluation protocol was also developed to measure the impact of
                   this process on the performance of the agencies.


                                                                                          5

                    .Capital Expenditures Review
                    In 1973, the Secretary of the Department of Health, Education, and Welfare
                    transferred full responsibility for administration of Section 1122 to the
                    Comprehensive Health Planning Service.    Its successful operation der,-,an,@-d
                    that Regions, agencies and providers get good guidance for all aspec ts
                    frD-@? procedures to evaluation.
                    All participating and affected groups were given an  opportunity to shape
                    the nature of the regulations, procedures, criteria  statements, guidelines,
                    training programs, monitoring systems, and evaluation.
                    'ithese participating groups included (to varying degrees) SSA, AACHP, pro-
                    viders, Regions, SRS, MCH, 314(a) and 314(b) Agencies, Hill-Burton Agencies,
                    and other selected Federal units.
                    During-FY 1974, regulations were developed and published, and agreements
                    were negotiated-with 39 States.
                    Regional Medical Pro ram
                    During FY 1974, staff efforts of the Division of RMP were principally directed
                    towards the
                       1.  Allocation  and Award of Grant Funds to RMPS:
                           This entailed two quarterly allocations, made essentially on an
                           entitlement basis, and award of grant funds to the 53 Ri",IPs in
                           first half of the fiscal year.  Subsequent to release of the
                           pounded FY 1973 funds and the remaining unapportioned 1974 fur--'s,
                           which totalled roughly $114 million', this involved a full-scal-2
                           review, 'using an outside peer group, of applications for both na-,;
                           and continuation activities that will permit the Ri'@'lPs to contii-.ue
                           through June 30, 1975,
                      2.   Pilot Arthritis Center Program:
                           A special program initiative was undertaken pursuant to a Congress-
                           ional appropriations earmark with respect to the planning and daVn@OD-
                                                                                             i
                           ment, through the Ri'lPs, of such centers.  Grants totalling $4.
                           lion were awarded late in the fiscal vear, which permitted the
                           funding of pilot arthritis center programs in 27 Regions.
                      3.   Program Monitoring and Assistance:
                           DW4P staff continued to monitor activities of the 53 Ri',IPs durino
                           the year and to provide such management, technical and other as@i:-z-L-
                                                                                         e_
                           ance as was requested or diminished staff made it possible to
                      4.   Policy Development and Communication:
                           Considerable time was spent in shifting from phase-out to in@Leri,-


                                                                                                  6

                               continuation.  Earlier polici  .es had  to  be  rescinded  or  modified,
                               previously  existing  policies  reinstituted,  and  new   guidelines
                               developed, particularly as it  related  to  the  use  of  the  released
                               FY 1973 and 1974 funds.

                          5.   HRP Implementation:

                               DRMP staff participated with  the  staff  from  the  CHP  and  Hill"
                               Burton programs in various working groups concerned with plan-
                               ning for the new program.

                      Hill-Btjrton Program

                      The Division  of  Facilities  Utilization  administered  the  award  of  previously
                      impounded FY 1973 funds  in  addition  to  amounts  appropriated  for  FY  1974.
                      These included the Ilill-Burton grants for construction or modernization
                      of  public  and  voluntary  non-profit  facilities.  These  grants  were  Watched
                      from local sources, usually  non-govern..-.iental.  In  addition,  DFU  staff
                      operated the  new  Hill-Burton  loan  and  loan  guarantee  program.  This  pro-
                      graiii provided loan guarantees  with  interest  subsidies  to  private  non-
                      profit agencies, and  direct  loans  to  public  agencies,  for  modernizing  or
                      constructing health care facilities.

                      2.  FY 1975

                      During FY 1975,  considerable  effort  will  be  devoted  to  developing  the
                      national  network  of  locally-based  planning  agencies  and  statewide  renula-
                      tion programs as well as providing transitional technical assistance to
                      existing planning agencies and supporting the continued operation of
                      existing State regulatory agencies (Sec@L-ion 1122).  The specific materials
                      required for  designation  of  geographic  areas,  selection  of  agencies,  pro-
                      vision of technical assistance, development of an automated management
                      information system, and adininist-.--@L-.ioti of existing Federal  responsi6ilities
                      during transition  period  will  be  developed.  in  addi-cion,  guidance  to
                      regional offices will be provided.

                      Program  activities  during  FY  1975  will  be  largely  organizational.  Health
                      service areas will be designated in all areas of the country, and a majority
                      of the  Health  Systems  Agencies  will  be  selected.  Performance  standards  and
                      program guidelines will be promulgated, and considerable technical assistance
                      will be provided to agencies seeking to become Health Systems Agencies.

                      As a result of various projects begun in FY 1974, major gaps in health
                      planning technology will havebeencleai,ly identified by the middle of FY1975.
                      A program of targeted research aimed at closing gaps in tile state of the art
                      will be initiated through a small number of  %.,@ell  defined  projects  which  are
                      vigorously  monitored.  Technical  Assistance  projects  will  be  implemented   to


                                                                                              7

                     raise health planning and  regulatory  practice  to-standards  limited  only  by
                     the state of the art and available resources.

                     In addition, substantial efforts will  be  required  to  administer  grants  and
                     contracts made under FY 1974 and earlier authorities for each of the expir-
                     ing programs. This  includes  frequent  program  interaction  with  274  State
                     and areawide Co:iiprehensive Health Planning  agencies,  53  Regional  Medical
                     Programs, 19 Experimental Health Services Delivery Systems, each State Hill-
                     Burton agency, and with the multitude of indivi-,4uals  and  Federal  ,  State
                     local, and private organizations which are affected by these agencies.  These
                     efforts will extend into FY 1976 in  the  case  of  certain  projects  initiated
                     by local Regional Medical Programs; and, in the case of Hill-Burton,
                     .residual construction grant efforts will be needed through FY 1980, and resi-
                     dual loan guarantee efforts will be  required  for  many  years  beyond  that.
                     During FY 1975, final plans will be developed and first steps will be
                     initiated for the orderly phaseout of  these  agencies  and  the  transition  to
                     the new planning agency network of  those  agencies  which  meet  the  required
                     qualifications.
                     E)  @x lanation of 1976 Staffing-l-evel and Activities
                     By FY 1976, some form of national health  insurance  is  likely  to  have  been
                     enacted.  It is critical to the national interest and the interests of
                     the Federal government that  an  adequate  Health  Resources  Planning  progrFm
                     be in place to serve as the foundation for eiiiiiit,,ating unnecessary  dup-ii-
                     cation, providing improved access to care, controlling costs, and targ@,ing
                     assistance to health care facilities and  services  which  meet  real  needs
                    .in local corp..munities.

                     At the local level, many planning  agencies  will  have  published  official
                     areai,jide plans and they will have begun to  approve  technical  assistance
                     awards which foster the implementation of those plans.  At the State
                     level, regulatory activity will be increased considerably with the
                     application of controls enviisoned as  part  of  the  various  national  health
                     insurance proposals, and the  extension  of  State  regulatory  legislation.
                     At the Federal level, it is essential  that  an  adequate  staff  be  assembled
                     to provide the leadership and management necessary to insure the effective-
                     ness of this program.  The health care industry         be  consuming   approxi-
                     rotely $100 billion per year from our economy; and  it  is  clear  that  the
                     Federal government cannot hope to  improve,  regulate  or  change  this  system
                     without providing the minimum staff necessary to cope  with  tile  size  and
                     complexity of the issues involved.

                     The requested staffing level of  355  permanent  positions  does  not  include
                     approximately 40 Regional  Office  positions  funded  under  other  authorities
                     which have been assigned major  responsibilities  for  health  planning  and
                     facilities construction programs.  Those 40 positions must continue to
                     be so assigned in addition to the positions described here.


                                                                                               8

                      During FY 1971, when the three major predecessor    programs (CHP, RR.IP,
                      and Hill-Burton) were administering programs similar in complexity to
                      thos'e proposed for HRP, they had  a  combined  authorization  of  589  positions,
                      of which 449 were filled.  For FY 1972, the comparable figures are 460
                      authorized and 417 filled.  Even in FY 1971, when funds were impounded
                      and the programs were to be phased out, the,-e wer;-- @49 authorized posi-
                      tions, of which 304 were occupied at yQar-ei-id.
                      The above comparisons provide a useful perspective    to the  current  request
                      for 355 positions.  He cannot successfully meet the increased Federal
                      responsibilities required by the  proposed  legislation  with  the  same  staffina
                      level required to administer the predecessor programs during what was intenied
                      to be the final year of operation for both Regional @ledical Programs and
                      Hill-Burton. 'In fact, this request is far below the combined level authorized
                      when those two were fully operational, and it only exceeds the level authorized
                      when f-unds were first impounded by 6 positions (2 percent of the total aut@-horl-
                      zation).
                      In our preliminary planning, in preparation  for  the  enactment  of  legislation,
                      various working groups have outlined the major activities to be undertaken.
                      These activities or subprograms are  descri@ed  in  Table  I,  below.  Natul-@  ly
                      these estimates will be refined once legislation is enacted.

                      State and Local Planninq Proqrani
                      During FY 1975, the thirty-three headquarters staff will be heavily engaged
                      in the development of policy, guidelines, and regtilations@related to agency
                      selection, board composition, agency functions, and performance standards
                      The thirty-six Regional office staff will be focusing  their  efforts  on  the
                      designation of geographic areas, the selection of agencies, and the neqo-
                      tiation of agreements with both State and local agencies.    Regional   office
                      and headquarters staff will also be sharing the responsibility for assisting
                      existing agencies in their efforts to make  the  transition  from  their  previous
                      operations to those required under Heaith Resources Planning.
                      In FY 1976 many of the policy formulation  and  agency  selection  functions  will
                      continue, and there will be additional program demands placed on Federal staff.
                      For the forty-tvio headquarters staff this will include the operation of a
                      national monitoring system designed to provide  the  information  feedback  essen-
                      tial to program evaluation, planning,  and  control.  The  sixty  regional  office
                      staff will be conducting site visits, agency budget revie,,,is, grants mianacll-
                      ment, and regional technical assistance programs to  insure  that  the  operations
                      of individual agencies in the State and  local  planning  program  are  consistent
                      with program objectives and regional requirements.


                                                                                            8a

                                            Table I._Major Activities

                                                                           Central           Reqio,-,al
                                                                           Office             Office
                                                                        FY 75  FY 76       FY 75    r@Y 76
                  State and Local Planning                               33      36          42       60
                  Regulatory Activities                                  24      26          28       40
                  Planning Technology/Technical Assistance               36      39            0        0
                  Facilities Construction/Modernization                  43      43          65       55
                  Residual Functions                                     20      12          20         0
                  Program Direction and Administration                   24      24          20       20

                                                                         180     180         175      175


                                                                                           9

                   Regulatory Activities

                   The program of review of capital expenditures under Section 1122 of the
                   Social Security Act will expand somewhat in  FY  1975.  The  present  39  States
                   participating in the program will probably  increase  by  three  to  four.  We
                   assume the level will remain approximately the same in FY 1976.  @ -

                   The Administration has proposed, as an  additional  means  of  containing  rising
                   health care costs, a program of rate  review.  This  would  be  voluntary  with
                   the States, and we estimate that 20 States will participate  in  FY  197'D  and
                   .40 in FY 1976.  The rate review and capital expenditures review programs
                   will be coordinated with existing programs  for  review  of  applications  for
                   Federal funds., which will continue to be performed by  the  new  Health  Systems
                   Agencies. For FY 1975, twenty-four  headquarters  staff  will  be  required  for
                   administration of these programs, and twenty-six  will  be  needed  in  regional
                   offices for review, monitoring, and assistance to the review agencies.  During
                   FY 1976 a minimum of twenty-six headquarters  staff  and  forty  regional  office
                   staff will be needed to administer the expanded program.

                   Plannin.q Technology and Technical Assistance

                   Major efforts in the development of planning technology  will  be  made  in  FY
                   1975, buildinn on the initial efforts of FY 1974.  Through contracts and
                   grants, as well as by staff efforts, the "tools" of health planning wi   '11  be
                   developed or refined: criteria and  standards  for  determining  the  need  for
                   specialized health care services; techniques  for  development  of  health  plans
                   for areas; model data sets for specialized planning; etc.

                   As these i,,iethods, and standards are developed, the technical assistance  staff
                   will disseminate them to health  planning  agencies.  @lhile  headquarters  staff
                   will provide a modest amount of  one-to-one  technical  assistance,  their  major
                   effort will be in activities which  will  assist  all  agencies.  These  include
                   preparation of manuals; packaging  of  slide  presentations;  distribution  of
                   bibliographies, abstracts and PL:,-)Iished materials from a national health plan-
                   ning information center; and administration of contracts for specialized
                   technical assistance. The staff  of  thirty-six  headquarters  staff  needed  in
                   FY 1975 will rise slightly to ihirty-nine in FY 1976 as the newly established
                   Health Systems Agencies draw  increasingly  on  general  technical  assistance
                   resources. Assistance to individual States  and  local  agencies  will  be  pro-
                   ,vided by Regional office staff who are included in other sub-program categories.

                   Facilities Construction/1,1@odernization

                   While not included in the Planning bill, the Senate  has  before  it  a  separate
                   Construction  bill  spons'ored by Senator Kennedy.  In  broad  outlines  it  pro-
                   vides for Federal grants, loans,  and  loan-guarantees  for  specific  projects.
                   There is no State agency and the  present  Hill-Burton  formula  is  abandoned.


                                                                                      1 0

                       The Administration has testified in favor of a  program  along  the
                       iines of this bill, but limited to direct Federal  project  grants.
                       To implement this program, $100 million  has  been  requested.  It
                       is estimated that aoproximately $50 million of this  would  be  for
                       the modernization of targeted hospital facilities, $40  million  -
                       would be for ambulatory care facilities, and the remaining
                       $10 million would be applied tO@-4ard modernization of high risk
                       longterm care facilities, either as part  of  a  general  hospital
                       or of free-standing nursing homes.

                       The great majority of these positions are  required  in  connection
                       with onaoing Federal responsibilities for the Hill-Burton
                       program which carries a three year standard period for obliga-
                       tion of appropriated funds. Staff for this  program  would  be
                       engaged in financial analysis,  grants  management,  architectural
                       and engineering review, State agency monitoring, hospital
                       consultation, training, and program management.

                       In addition, certain architectural and  engineering  functions
                       performed by State agencies under the earlier  program  will  have
                       to be performed by the DeDartment under the new program.

                       Residual Functions

                       During FY 1975 it will be necessary to emoloy a minimum  Of  twenty
                       headquartersostaff and twenty regional office staff in the
                       administration of resources, grants, and contracts  which  resulted
                       from Drevious CFIP and RTIP legislative authorizations.  During  FY
                       1976 these requirements will be reduced to ten  headquarters  posi-
                       tions.

                       Residual functions associated with Regional i'ledical Programs  are
                       mainly the result of the need for proper  stewardship  of  Federal
                       Funds. Local Ri'lPs will be operating throughout FY 1975,  and
                       some of the projects they fund will be operating in  FY  1976.

                       A minimal grants management function is  required  at  headquarters
                       to process expenditure reports and other  financial  documents.  In


                       addition, during FY 1975 various program functions will be performed
                       in connection with the review of applications for previously
                       impounded FY 1973 funds.

                       Finally, the 218 areawide C@IP agencies and 56 State CHP agencies
                       will require monitoring, policy clarification and technical assistance
                       throughout FY 1975.  In FY 1976, current plans would require
                       only that recovery of Federal assets be completed and final expendi-
                       ture reports be submitted.

                       Program Direction and Administration

                       At headquarters, this category would include the Office of the
                       Director of the program as well as the staff concerned with
                       administrative management.  Twenty-four staff are needed for these
                       functions in FY 1975 and this figure would not be expected  to
                       change in FY 1976.

                       In the regional offices, these would include the branch  heads
                       and their clerical support.  Twenty staff would be needed in
                       F Y 1 9 7 5 a n,-4 --nty rv 1076.

                       Major Program Ininacts and Outputs

                       The proponents of a Comr)rehensive Health Insurance Plan and other
                       national health insurance proposals widely acknowledge the need
                       for a comprehensive approach to protect all Americans  against
                       the rising costs of medical care to assure adequate access  to
                       care and to improve medical care Quality.  The benefits, cost-
                       sharing, and reimbursement methods of most health insurance
                       DolicieS Dromote such nia.ior problems 'as overuse of hospital --,ervicp.-,.  nd r-


                                                                                             1 2

                     utilization of preventive services and outpatient care, and excessive rates
                     of inflation.  Strong measures must be taken to place any system of national
                     health insurance within a framework  of  effective  local  planning,  capital
                     expenditures review, reimbursement regulation, and quality control in
                     order to.' moderate and cure cost increases, services shortages, and improper
                     use of services.
                     Under the Administration health  insurance  proposal,  State  agencies  would
                     determine reimbursement rates, subject to Federal guidelines, for all covered
                     services.  States would be required to-consult with both providers and con-
                     .sumers in establishing these rates.  Furthermore, under this proposal, any
                     State participating in the health insurance plan must also implement a pro-
                     gram of capital expenditures review as authorized  by  Section  1122  of  the
                     Social Security Act.  If a health care facility makes an unapproved capital
                     expenditure, it becomes ineligible to receive reimbursement for services under
                     any Federally-sponsored program.  The crucial administrative role in these
                     determinations will be played by local Health  Systems  Agencies  and  State,
                     Agencies supported in part by the Federal Health Resources Planning program.
                     In addition the planning agency network will provide  a  focus  for  rational
                     planning for services, facilities and manpower.  As a result of a sound plan-
                     ning process, unnecessary duplication of  facilities  and  services  will  be
                     identified and prevented. Technical assistance grants and  contracts  @-,,ill
                     be used to stim,-,Ia".-e needed services as well as to allow for  redirection
                     of existing resources.
                     The increase from a level of $175 million in FY '75  to  $205.1  million  ill
                     FY '76 for Health Resources Planning reflects our basic assL,,:iiptions about
                     the rate of implementation of this new program.  1,4e are assuming that even
                     if the legislation passes early in FY '75, it will not be possible to have
                     Health Systems Agencies started all across the country during the sal,-,e fiscal
                     year.  Some will of necessity start in FY '76.
                     In addition, since most of the new Aoenc,ies will be  in  the  organizational
                     staoe during FY '75,. a vet,v smai' amount of funds is included for Technical
                   .Assistance Grants and Contracts in FY '75 ($2.5t4).  By FY '76, howeve-
                     these agencies will be developed enough to begin ipipleillenting sections  of
                     their comprehensive plans.  Thus, vie have established a level of $12 million
                     for such grants and contracts in FY '76.
                     The two other areas of increase are tied to the  number  of  agreements  with
                     States to carry out certain regulatory functions.    Projected expenses  for.
                     capital expenditures review and associated planning (Section 1122) vlill rise
                     from $12 million in FY '75 to $14 million in FY '76.
                     In the case of rate review agreements, we are estimating that 20 States will
                     be involved in the program, in FY '75 at a cost of $6  million.  In  FY  '76,
                     40 States are expected to have started such programs  at  an  expanded  level
                     of activity and a budget of $16 million.


                                                                                           1 3

                     Thus, in sum, the $30.1 million increase reflects  the  following  basic
                     assumptions and related costs with regard to the  rate  of  implementation.

                                                                                FY '75      FY '76
                     Number of Heaith Systems Agencies (HSA)                       130         150
                                                                                $42.9M      $49.5M
                     Number of HSA Technical Assistance Grants & Contracts         125         600
                     HSA TA Awards                                              $2.5M       $12.0@vl
                     Number of State agreements for capital  expenditures  review  40          40
                     Cost of Agreements                                         $12M        $14M
                     Number of State rate review agreements                        20          40
                     Cost of Rate Review agreements                             $6M         $16M
                     Planning Technology and TA Projects                        $5M         $7m
                     Direct Operations                                          $6.6M       $6.6M
                           Sub-Total Funding Required                           $75-.OM     $105.1m
                     Facilities Construction/llodernization                     $100.oi,,i  $100-OM
                           Total Funding Required                               $175.om     $205.IM

                     Major Outputs o-r the Health Resources Planning program are summarized  in  the
                     following table.


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