Kemerer:

5

Continuing Testimony

12 April 1984

having the same board hear a second appeal. Although the law clearly states
that the Secretary of DHHS is to make final determination, this regulation
is ignored. I have never had any communication with any of the several
Secretaries despite repeated requests.

Nor is there any willingness to discuss the rationale for adverse policy decisions. Again, despite repeated requests, the scholarship office has never explained why Emergency Medicine residents are deferred while Radiology residents are not. Certainly, deferment of Emergency Medicine residents undermines the ideological basis of the second PHS scholarship program, which emphasized primary care in an attempt to decrease utilization of emergency rooms. Once Emergency Medicine residents were deferred, simple logic and fairness demanded that all specialities be deferred. No wonder the scholarship office refuses comment on this issue.

You, Senator Percy, are quite incensed that I rejected the Gallup offer. It required a year of effort on my part and finally, Congressional intervention, before the scholarship office would recognize the possibility of using a scholarship recipient in a radiology post with the Indian Health Service, even though vacancies had been listed for several years in the Annual Indian Health Service Vacancy Listing. Of course, they never bothered to send such a listing to suggest a way to avoid default.

Declaring treble damages to be interest rather than penalty would allow a tax deduction. For those in the 50% tax bracket, failure to make this item deductible converts an apparent treble damage penalty into a sextuple damage penalty. I doubt that such a high penalty was desired by those in Congress who drafted this legislation. In addition, it discourages repayment because those with the larger debt know full-well that no possibility for repayment exists, despite high earnings, short of winning a lottery.

Finally, the refusal of the scholarship office to accept reasonable settlement offers, delays repayment. This year the PHS wanted me to repay $700 per month on a $20,000 annual income. This amount, which is not tax deductible, is more than my mortgage payment. Nor will they treat the debt as an educational loan and allow defined interest rates over a fixed term. There is nothing wrong with agreeing to accept repayment of a $100,000 debt over 10 years at 10% interest. In fact, such a settlement is probably the only way to collect. Instead the scholarship office antagonizes by re-evaluating ability to repay on an annual basis and assesses high floating interest rates. The repayment rates are designed to keep income after repayment and taxes in the $25,000-$30,000 range, which is inadequate for a family in most areas. To wit, with such a net annual income, most banks will finance a house in the $50,000-$60,000 range, which will not purchase a single unit dwelling.

A more rationale approach to legitimate debt repayment would include deferment of all specialities until residency is completed. Then a fixed term, fixed interest rate loan would be granted. The interest rate would reflect the true cost of lending money rather than a usurious rate. The length of term would obviously depend heavily on the sum, and for certain amounts 30 years would be quite appropriate. A fringe benefit would be that the scholarship office would no longer be in violation of the federal Truth-In-Lending Law. Finally, treble damages for

Kemerer: Continuing Testimony

6

12 April 1984

default should be re-evaluated. These were imposed during an era of
physician shortage and high earnings. Now the tables are turned. Already a
physician surplus exists which has been projected to reach 70,000 in 1990 by
GMENAC, and salaries are declining because of the new cost containment
measures such as DRG's.

You seem very concerned that physicians would chose to repay money rather than fulfill the social obligation implicit in the scholarship award.

Perhaps you could discuss with Dr. Edward Martin his attitude toward service. I have made numerous service offers including transfer to the military, the VA system, a private practice option at the former Wyman Park Public Health Hospital, cost review and quality assurance with the Health Care Financing Administration and a research option which is specified in the second contract. Today I asked Dr. Martin why my proposal to serve at Wyman Park was rejected. This is a struggling 130 bed facility which has but one radiologist and rather ancient equipment. I have a classmate fulfilling her scholarship obligation there. Dr. Martin replied in a very angry tone, "because I have decided that you will never fulfill your obligation by service." Perhaps you would be kind enough to set Dr. Martin's priorities straight, Senator Percy.

Scholarship officials are remarkable. One advised me to sign a contract for Gallup, even though I expressed grave reservations, by saying that I could always renege. Had I followed this advice, I would not have be subjected to the public humiliation you have accorded today. But I have never signed a contract which I did not in good faith intend to honor. However, circumstances change, and I determined after doing 2 years of clinical rotations in medical school that internal medicince was not for me. This came as a complete shock to me and my friends. Still, the PHS required that I commit to primary care long before I had any first-hand knowledge of the differences among the various specialities.

Now we must turn our attention to the second major category--extremely poor internal office management. This operation far surpasses the expected amount of disorganization in most bureaucracies. "Rarely have files been available for reference when I have called on the phone or even when an appointment is scheduled. Delays of 6-10 weeks are typical in response to letters. Several times the scholarship office has delayed receipt of mail by placing their ZIP code after my address. For a long time it appeared that my file was lost since followup letters rarely made any contextual sense. This was confirmed when, 18 months after I wrote a letter granting power of attorney to my lawyer, they requested another letter for the same lawyer.

There are too many people involved in processing scholarship matters and they rarely seem to communicate one with another. Also, the recipient never is in contact with the appropriate offical who can act on a specific issue. After a while, a recipient begins to feel like a ping-pong ball, which does little to improve compliance.

Senator Percy, you and the scholarship officials are offended that some of us have asked lawyers to protect our interests. You suggest that this really slows the system down. Nothing could slow this system down. In fact the periodic input of a lawyer probably prevents the scholarship office from losing complete track of the case.

Kemerer:

Continuing Testimony

7

12 April 1984

In closing, Senator Percy, I conclude that serious problems exist in the administration of the Public Health Scholarship Program which increase the default rate and decrease debt repayment. These include the major areas of personnel policy and office management. Serious personnel problems include, a very primitive, counter-productive manner of handling scholarship recipients, basic inequities in deferment policy and an unrealistic attitude toward debt repayment. The office procedures are best described as a nightmare of bureaucratic disorganization with no clear lines of communication or tight internal control.

On a more personal note, I must ask what political considerations prompted your Kangaroo Court today? The scene was obviously prearranged since every effort was made by your Parklawn associates to prevent debt settlement, Why did the hearing chamber nearly empty once court was over, even before Dr. Eshelman had a chance to testify? Did you pack the courtroom? Why did you quote so very inaccurately and unfairly from the Request for Waiver that I filed on 18 November 1983? How say you?

Dear Senator Percy:

I am currently a Ph.D. candidate in Cellular Biology at Tufts University as well as an applicant to the 1988 medical school class of several universitjes. As a permanent resident of Illinois (Flossmoor) and a college friend of Helen Watson-Blodgett, I've admired your career and the issues you've addressed. I state this respect only for a sense of familiarity in my statement to follow.

Not many of the issues you have addressed has hit home as acutely as the Senate Government Affairs subcommittee on National Health Service Corps grant repayments. Most current medical students and applicants would gladly do more than a "year-for-year" repayment of loans. The former recipients of these grants have lost sight of what their incomes and lives would be like had they not been awarded such a grant. With the cost of medical school on the rise, and Health Education Assistante Loans Interests at a premium, a graduate from George Washington University School of Medicine ( $20,000/ yr. for tuition alone) fs faced with loan payments of greater than $3500/month on a resident's salary. Because I am planning a career in academic medicine (combining patient care with basic research), I could never hope to get ahead on a house physician's salary. This simple fact of survival leaves:me with no other alternative than to train for a high paying private practice job or apply to the Health Professions Scholarship Program (HPSP) in the Army. The military scholarhips have also become very competitive (313 scholarships awarded per year). In order to remain involved in medical research, I am applying for an Army scholarship with full awareness that my payback is a minimum of four years with a great likelihood of doing three more as a resident. I am 27 years old and this means that I will be 38 before my training and payback are complete.

Geven all of this, I have no sympathy for the former recipients of the discontinued National Health Service Corps Scholarships. They should consider the value of their salaries as including the repayment of loans plus interest. This would potentially increase ther:actual worth of these grants another $30,000/year. The location of assigments.should be considered to be one of the compromises one is faced with in order to be able to eventually practice the type of medicine one desires as well as live decently during medical school. The thousands of applicants to the military HPSP have hopefully considered that the location of assignments during a war would not be pleasant. Granted, war is not pleasant for anyone.

I would love to see the reinstatement of the NHSC program. The defaulters are ruining the chances for future medical students to appreciate the benefits that was such avecipients as Drs. Kemerer and Eschelman once enjoyed. Boston, Massachusetts 02111 617-956-6685 Thanks for listening.

Sincerely,

Michelle s. Marks

Thank you very much for supplying Dr. John McGuire of Alamogordo, New Mexico with materials relating to government loans to students for medical education. This material was most helpful.

At our Annual Meeting held May 2-4, 1984, the enclosed resolution was adopted unanimously by our House of Delegates. The resolution has been introduced before the Annual Meeting of the American Medical Association to be held in Chicago on June 17-21, 1984.

We will inform you of the action taken by the AMA on this resolution.