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Option 2: Maintain present provision until sufficient experience in the third-party reimbursement and fee-collection has been developed.

PRO:

:...

This approach admits that the revenue-generating capacity of the Corps is still unknown. The approach would allow sufficient time to ensure that the amount of revenue generated will accurately reflect the amount prospectively deducted from the appropriation.

CON:

This approach largely avoids the issues presented by the conflict between the intent of Congress in the enactment

of this provision and the general philosophy of OMB to reduce government expenditures. Moreover, it does nothing to press

community recipients of Corps services towards developing inde

pendent health financing strategies.

Option 3: Permit revenue generated from fees for service to be used

as source of program expansion.

PRO: This would permit program expansion without burdening appropriations and with minimal effect upon other budget priorities. Furthermore, it would demonstrate the success of the Administration's policy of relying on existing financial mechanism to eventually assume the cost of providing these services. It would allow the expansion of program resources

through revenues obtained from more affluent areas which can pay for the services to deprived areas which cannot readily pay for

these services.

CON: Eliminates total control of program through the appropriation

procedure.

It will not provide as much incentive to

collect fees as would exist where such revenue is used to off

set appropriations.

RECOMMENDATION: Option 3

The current policy of forcing the Corps

to recover a direct share of its appropriation is contrary to
the Congressional intent. There are other unfortunate effects
of this policy. The Corps would be forced to make its placements
in large measure on the basis of relative projected amounts of
reimbursements from communities rather than relative need for

services. Because of the lack of experience in relating re-
imbursement patterns to community types, the Corps would be
required to concentrate on the more affluent areas where
reimbursement is more probable rather than the severely under-
served communities which may be poorer and more isolated. This
limits the Corps' effectiveness in reaching the special
population groups which are the object of Departmental priority.
Moreover, the Corps' effectiveness in planning future growth
and deployment patterns would be severely hampered. Without
an assured source of funding, the Corps must plan on a hand-
to-mouth basis, which discourages innovation and responsiveness
to communities and their needs. Full steady funding in the
manner originally intended by Congress will enormously increase
the effectiveness of the Corps' programming. Additionally,
program expansion generally by revenues from fees would be very
popular with Congress. If receipts increased over reasonable
limits for program expansion, the differential could then be

Should the Act be amended to allow the Corps the flexibility to select variable methods for recovering its reasonable costs from the

communities, rather than the exclusively fee-for-service approach

now mandated by the law?

Discussion:

The current language of the law is based on the presumption that the Federal Government would itself be the collection agent for fees charged by its doctors, operating for the most part in single practice. The emphasis on building self-sustaining medical service resources and the necessity for developing teams of physicians

and others to overcome the isolation which causes so many providers to leave underserved areas have led the Corps to the development of larger and more sophisticated administrative structures to manage the community resources.

Additionally, the necessity to establish

fee scales in accordance with local madical practice (a prerequisite

to professional society participation) has led to a divorce between actual "costs" to the Corps for providing medical care and the "charges" actually made.

Option 1: Amend the Act to allow the Corps to provide the flexi

bility for variable reimbursement methods.

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PRO:

The present language of the law has constrained the Corps

from developing simple and effective procedures for recovery of costs, particularly in communities where relatively sophisticated mechanisms for the delivery of services have or will be established. Accordingly, this requirement increases administrative costs and administrative complexity and thus frustrates the intent of the provision.

CON: This action is unnecessary,

The Corps should retain

control over and accountability for both the fees charged and costs recovered. To divorce them may lead to book-keeping payment of "costs" from other revenue sources including Federal grants, which undermines the purposes of the Act and its selfsufficienty provisions. The Corps already has the administrative flexibility to make variable arrangements as necessary.

Option 2: Maintain the present language of the statute and seek to incorporate the necessary flexibility in the program regulations.

PRO: Administrative problems are best dealt with through in
administrative mechanism and therefore legislation is

unnecessary.

CON: OGC has raised some question as to whether an administrative

remedy providing lump sum payment without sufficient

safeguard to ensure that fees have been charged to the recipient of the services would be consistent with the specific statutory language requiring the payment of fees for services.

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RECOMMENDATION: NHSC

RATIONALE:

Amend the Act to increase flexibility.

The Corps must, by necessity, deal with a group of rather sophisticated community organizations. The Federal collection system underlying the original provisions of the Act is simply impossible to administer at a reasonable cost in time and money. Given the emphasis on community-based management, it would be more rational to give the Corps administrative flexibility to deal with these agents as simply and effectively as possible. While the present language can be interpreted in a fashion to allow most of the necessary arrangements to be made, it is desirable to bring the law into explicit agreement with the unavoidable evolution of program's practice.

This wil1

minimize the possibilities for future misunderstandings between
the Corps and communities. The Act should be amended to state
simply that the Corps shall recover as much of its costs in
each placement as possible, and leave the choice of mechanisms
(fee-for-service, prepayment, lump-sum reimbursement by a

community group, etc.) to the descretion of the Secretary

depending on the situation in the community concerned.

Approved:

Comment

Disapproved: