Dr. ESHLEMAN. I don't think I have sufficient information to judge

this case, but I do want to say that section 333(f) of the Public Health 1947: Act with respect to the National Health Service Corps does indicate 1:17:11 that consideration should be given for the spouse of obligated recipiLowen ents with respect to placement.

It was the intent, I believe, the legislative intent, when the National For the Health Service Corps was established, that physicians be placed in Os de shortage areas with the hope that their practice would take hold, mere Yrk thrive, and remain in the area, and that is why the Congress, in its

wisdom, put that particular clause in the legislation. T julgariants But I really haven't sufficient information to comment further on 5. to put the this one case. or good

Senator PERCY. Here is an application for scholarship that I think you will recognize. I will just quote from it:

I have had the opportunity to observe directly the scarcity of health care at he orci providers in rural areas in California, Mississippi, and North Carolina. As a

health professional, I consider it a responsibility to provide care in such areas

rather than compete for fees with other physicians in the more popular parts .

of the country. Thus, I plan to continue practicing medicine in medically under

served areas for the duration of my professional life. lerstand

Do you recognize that application ?

Dr. ESHLEMAN. I expect you are reading from my own application. Fion de

Senator Percy. It is your own application. That is right. If1 of

Dr. ESHLEMAN. Yes. Yes.

Senator PERCY. Would you want to talk about your own situation here?

Apparently after graduating, as I understand it, you began practicing in West Berkeley, a shortage area, but you found that you couldn't make enough money. In a letter describing why you don't want to complete your obligation at a shortage area chosen by HHS, you state:

For a variety of reasons, my wife, my son, and I desire to remain in northern California. My wife and I both were born in San Francisco and have many relatives in the bay area. We are weary of moving. There seems to be no compelling

at therler

reason to move.

Now, you see, I must be two places in my job, Illinois and Washington. My children-I have a daughter and son-in-law in Sausalito. She is getting her doctorate at Berkeley. I have two other sons, both their wives and their children, in Seattle. That is not exactly around the corner from either Illinois, Chicago, or Washington. We have the same kinds of problems.

I don't think there is a person in this room that doesn't have some problems of being separated from their families. Should that be an overriding concern when you said that, “I plan to continue practicing medicine in medically underserved areas for the duration of my professional life.” And that is the premise and the condition on which you represented yourself in applying for not a loan, a grant, a gift, from the Federal Government and the taxpayers, serving a social purpose.

And now you say that it doesn't seem to fit in with your lifestyle. You want to live in northern California, and you want to be able to stay with your relatives.

Dr. ESHLEMAN. Let me reply to your question, and then perhaps afterwards, if I could give the testimony I prepared.

Senator PERCY. We are especially pleased to have with us this morning two National Health Corps scholarship recipients, Dr. Verne Kemerer of Baltimore, Md., and Dr. Alan Eshleman, of San Francisco, Calif. Dr. Eshleman is also here in his capacity as vice president of the Association of NHSC Scholarship Recipients.

I understand that both you gentlemen graduated from medical school with financial aid from the taxpayers under this program, that you both breached your contracts and have so far not paid

what you owe. You are just 2 of the 1,700 doctors who have done this. We look forward to hearing your side of the story. TESTIMONY OF VERNE F. KEMERER, JR., M.D., BALTIMORE, MD.,

AND ALAN ESHLEMAN, M.D., OF SAN FRANCISCO, CALIF. Dr. KEMERER. Thank you, Senator Percy. I would like to express my appreciation to the committee for hearing my circumstances, because I think it's quite different than what I have heard presented here today.

First of all, I would say that I appreciate your efforts to collect financial student loans, but they are quite different than this. First of all, there is no triple damages on student loans and there is a fixed rate of interest, 7 percent, 3 percent, depending upon the era in which they were made.

The PHS is quite a different thing. In fact, the statement is made that I got a free medical education. That is not strictly true. I actually owe $20,000 in medical education debts to other sources such as Baltimore Federal Savings & Loan and a couple of other banks around town. So that is not really a free medical education. I had the unpleasant experience of owing both time and money, so that is double jeopardy. In addition, this whole story begins because I didn't sign a contract that obligated me to triple damages. I came in under a change of laws. I came in under the last law or the last year, no public health law, which required dollar for dollar payback at 8 percent, and this whole program is targeted toward senior medical students so they would be out in the field and begin to repay their debtor or their time as soon as possible.

The second law, as you well know, was brought about to target primary care. The emphasis was placed on medical students. A triple damage provision was involved in both. I got involved in this because the first contract required a 2-year time repayment for 1 day of financial aid from the PHS. In addition, I know of people who have paid back part of their time, say, 1 year of the 2 years, and because circumstances didn't work out, for instance, in one case, the guy was told there would be 40 other doctors with him and he would work every fifth night at an Indian reservation.

In fact, only two doctors were provided and he worked every other night, and he left after 2 years, and PHS said, “You owe us the full amount. You don't owe us X over two, you owe us the full amount; no pro rata." I think that is unfair. I think those of us caught under the change of contract should have had an option to serve 1 year of payback, period, and not be brought back to the second program which was an entirely different program.

a

Also, the second program, although it started out with the best of ideals of primary care, over the years, has granted deferments to almost every medical specialty. Roughly 70 percent of all medical residents are in a specialty which will have them deferred. There are about 30 percent. Those are people in surgery, pathology, and radiology, who are not preferred.

Now, I think that there is an issue here. The American dream has always been to do as much as you can, you work hard, you put your time in, your intelligence, and you drive to the top of the pile, but

you also have choices, choices of life style. The average person, I think, looks at all physicians as the same. I know I did before I went into medicine. I went into medicine late in life. There is a big difference in life styles. I don't mean income, I mean hours, night call, weekend call, et cetera.

There is a big difference in life style between a pediatrician, a surgeon, and a radiologist. Because, myself, I decided to go into one of the specialties that they refused to defer, although certainly, there was a tendency to defer, because it started out deferring internal medicine, pediatrics, and family practice. The next year they added Obgyn, which is a 4-year program, and psychiatry.

No one can say those are truly primary care. They now defer ophthalmologists, dermatologists—skin doctors—and anesthesiologists. I don't think that in any sense of the word is primary care, and anybody else who can finish his training in 3 years.

Šo the interesting thing is that probably the most cost-effective specialty in today's world

when we are so concerned about the high cost of medical care is radiology, because we can bypass a lot of surgical procedures. We can serve on cost review commissions because we understand practice patterns. We are one of the few generalities left in medicine, and yet the PHS in its wisdom says, “Dr. Kemerer, you cannot serve." And I say, "I have a license.” At that time you didn't have to have a license to serve in the PHS, but I was licensed as a surgeon, and they said, “You cannot serve.' "

So I have spent 4 years. I actually started discussing with PHS. I am not one of these absentee guys. Even before I entered residency, I discussed some mechanism to resolve this conflict. I have talked with them on at least 10 different occasions over the phone. I have physically been in their office three times in the last 6 months. None of this has brought any resolution. I was in an office just Tuesday. I made this appointment 10 days ago, before I even knew of the existence of this committee, to settle this

debt. I wanted, and I made the appointment 10 days in advance and I made it early in the afternoon so there would be time to run the computer or whatever. I wanted to know the exact amount I owed them, because I have gotten three different amounts. I wanted the exact amount of interest and late charges, and then I asked I be given a fixed rate of interest. The IRS sets a fixed rate on tax debtors. It is 11 percent. This program has a hooker that there is an interest rate tied to Treasury notes. It has been as high as 18 percent. All I am asking for is that there be a defined rate of interest, just like you have with a car payment or a house payment or a mortgage.

sir. If you

You know that every month you are going to pay w dollars and that isn't going to change. That is important, because I filed an appeal. I listed an appeal for waiver. Unfortunately, there is no way to say, “Look, let me pay you back what you spent on my rehab,” which was about $15,000, and some reasonable rate of interest, which I think is 8 percent, because that is what student loans are tied to, sir. If are saying, sir, these are student loans, let's repay them. The triple damage is a sixfold damage because doctors are taxed at the 50-percent rate marginally. That is a significant point.

Anyway, I was told that on my current income, and I make $21,000 a year as a resident, and my wife makes somewhat less, I was told we would have to pay $700 a month. That is more than my mortgage. I am a deadbeat, as you say.

Senator PERCY. Dr. Kemerer, let me ask you. Were you offered a job in New Mexico ?

Dr. KEMERER. Yes, sir.
Senator PERCY. What was the salary they offered you!
Dr. KEMERER. $54,000.
Senator PERCY. What did you do, accept it?

Dr. KEMERER. What I did, sir, was my wife was a Federal employee. There are 2,000 Federal employees. “Transfer her there so we can have enough income to get back East and see the folks, to see the West, and we will go."

They said, "She is not an Indian. Congress has passed a law. You can only hire Indians in major industries," and Gallup, N. Mex., has Federal employment.

Senator PERCY. We are talking about a job for you.
Dr. KEMERER. Yes.
Senator PERCY. And you were offered a job for $54,000?
Dr. KEMERER. Yes, sir.
Senator PERCY. And you turned it down?

Dr. KEMERER. Because the Government discriminated against my wife's employment.

Senator PERCY. Let me just ask you: Did you sign this contract, no tice of scholarship award ? It was given to you voluntarily. You had the conditions clearly printed here. Did you read those conditions, and is that your signature on there saying that you accept those conditions and accept this money?

Dr. KEMERER. That was the second contract I signed. I felt that I was forced into it because I already

Senator PERCY. You were forced into it? Dr. KEMERER. I already owed 2 years of service. Senator Percy. County technique or Chicago Mafia technique, or what? Who forced you into it?

Dr. KEMERER. I think New Jersey Mafia would be easier to deal with, sir. I tried time and time again to work out a repayment schedule. I suggested other possibilities as service. In the military, the Air Force sent a flyer that said, “We pay residents in the last 2 years of residency $30,000 extra a year because we need them.”

Of course, I couldn't avail myself to that offer because of the PHS thing. I went 3 months ago to the Navy and said, "Can you buy out my contract? I will be happy to serve in the Navy.” And they came back a week later and said, "We can't negotiate with these people.”

My first contract, which you may not have a copy of, says that I am entitled to

Senator PERCY. Have you paid anything on this contract at all?
Dr. KEMERER. Not yet. I am trying to. I can't get, sign-
Senator PERCY. You haven't paid a cent.

Dr. KEMERER. I can't sign another contract with the PHS that is open ended and doesn't specify the terms. I got into this whole mess by signing the first contract. You are holding the second contract. The first contract opened the door. It said dollar for dollar repayment; 8 percent interest; and at the time we knew that there would be a different program the following year, but we did not know what it would be, but we knew from that first contract we were obligated for 2 years of service, and if 2 years of service were not given, we would owe PHS every cent of that first contract.

I don't think those are fair terms. I think the Mafia may be easier to deal with. Senator PERCY.

Did you breach this contract ! Dr. KEMERER. I have not breached this contract, sir. I have Senator PERCY. Have you paid back anything? Dr. KEMERER. I have done everything in my power to compromise. Senator PERCY. Have you offered to serve ? Dr. KEMERER. I have offered to serve.

Senator PERCY. If you had accepted the job in New Mexico at $54,000 a year, you would have been fulfilling this contract, and yet you refused.

Dr. KEMERER. I felt on principle it was not fair for the Government to force me to do one thing, and with all the equal opportunity laws, with the Civil Rights Act in 1964, with the Civil War amendments to the constitution which prohibit discrimination, that it was unfair to make my wife give up her Federal career so that I would fulfill this contract. I felt the Government was hitting us both ways.

We looked for a residency program in Florida, and she was a Federal employee, and she went across the street to the VA, a year in advance, 9 months in advance, put her name in. When it came time, they called her up for a transfer.

Senator PERCY. Let me get to the point of what I am trying to get at. If you could be a little more concise in what you are saying here, I understand you are disputing whether you should have to pay interest and penalties on what you owe, is that correct? You are disputing that?

Dr. KEMERER. I 'm not disputing interest. I am disputing triple damages. I think interest should be at a reasonable rate, not running between over 13 and 18 percent.

Senator Percy. In order to clarify the situation, you are not disputing the principal ? Dr.

KEMERER. I am not disputing the principal.
Senator PERCY. Have you paid anything on the principal?

Dr. KEMERER. They have given me nothing that I could sign that would not obligate me vaguely.

Senator PERCY. Why haven't you paid anything on the principal? Dr. KEMERER. Because they would

Senator Percy. How long was this loan? Did you sign this? What is the date of this? This is August 11, 1977.