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The solution to rising health care costs is an expansion of the employer-based health care system now in place, said former Health, Education and Welfare Secretary Joseph A. Califano.

Califano, who addressed the 10th anniversary dinner of Independent Health at the Hyatt Regency Buffalo on Thursday, said he believes that managed health care will become the predominant method of delivering care in the private sector. The federal government must step in to provide a rational system, and it makes sense to expand on the system already in place, he said.

"I don't think anybody is sure what the best thing to do is," he said.

He suggested the federal government should mandate that employers provide a minimum health care package. The government would have to provide a subsidy for small businesses so they could afford it, he added.

His suggestion would leave 25 million to 30 million people without coverage.

"Those people, the government has to pay for. They have to pay for the old people, and they have to pay for the poor people," Califano said.

Califano is a senior partner in the Washington office of the law firm of Dewey, Ballantine, Bushby, Palmer and Wood. He served in the Defense Department during the Kennedy and Johnson administrations, and was a special assistant to President Johnson on domestic affairs. He was Health, Education and Welfare secretary in the Carter administration from 1977-1979.

Health care was one of his biggest issues when he became secretary, he said. He gave a speech to the American Medical Association on health care costs in the fall of 1977, and has remained interested in the issue ever since, he said.

"I'm surely part of many of the mistakes. I was there with Lyndon Johnson and helped craft Medicare and Medicaid and go through all those programs in the 60s," he said.

When Medicare and Medicaid were proposed in 1964, the administration did not want to reimburse hospitals and doctors on the customary service basis, but the programs could not get through Congress without that type of lth care
reimbursement, he said.

One of the problems with the health care system today is that physicians are paid when they perform a service or procedure, he said.

"The advantage of something like Independent Health, or any managed care system, is that economic incentives are not to operate, not to cut, not to do something," he said. "The economic incentives are to try and keep the patients healthy."

Americans will spend $670 billion on health care this year, and by the end of the year will be spending more than $2 billion a day, he said. Almost one-fourth of the money spent, $155 billion, is wasted on unnecessary procedures and tests, according to Califano. He attributed much of the excess health care to malpractice suits.

"They're performed because these guys, rightfully, are scared somebody will sue them and wipe them out, or their malpractice insurance will go through the roof," Califano said.

He endorsed California's $250,000 cap on recovering damages for pain and suffering and reducing lawyer's contingency fees. He also suggested that American take better care of themselves.

"We can do more for ourselves than any doctor, any hospital, any machine or any drug," he said.

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