THE BULK OF MEDICAID PAYMENTS IN NEW YORK CITY GO TO PRIVATE HOSPITALS. IN 1975, $100 MILLION WENT TO PRIVATE DOCTORS FOR OFFICE VISITS AND $160 MILLION WENT TO THE CITY'S VOLUNTARY (PRIVATE, NONPROFIT) HOSPITALS FOR AMBULATORY CARE. HOSPITALS WHICH ONCE SERVED A COMFORTABLE, ALMOST EXCLUSIVELY WHITE CLIENTELE HAVE BECOME A MAJOR SOURCE OF PRIMARY CARE FOR THE POOR BLACK AND HISPANIC POPULATIONS OF THE CITY. THE MEDICAID PROGRAM, ENACTED AS AN AMENDMENT TO THE SOCIAL SECURITY ACT IN 1965, WAS DESIGNED TO MAKE FIRST-RATE MEDICAL CARE AVAILABLE TO THE POOR AT REASONABLE COST. ACCESS TO MEDICAL CARE HAS BEEN INADEQUATE DUE MAINLY TO THE LOW MEDICAID RATES FOR DOCTORS' VISITS AND THE EXCESSIVE PAPERWORK INVOLVED, SINCE PAYMENTS MUST BE COLLECTED DIRECTLY FROM THE GOVERNMENT RATHER THAN THROUGH THE PATIENT. THUS, HOSPITAL OUTPATIENT DEPARTMENTS (OPD'S) HAVE BECOME MAJOR PROVIDERS OF PRIMARY CARE IN NEW YORK CITY. SINCE PATIENTS SHOULD HAVE THE FREEDOM TO CHOOSE THEIR OWN HEALTH-CARE PROVIDERS, MANY CHOOSE THE PRIVATE HOSPITALS THAT ARE COMMONLY BELIEVED TO HAVE A HIGHER STANDARD OF CARE. VOLUNTARY HOSPITALS NOW PROVIDE ABOUT HALF THE OPD MEDICAID CARE AND, CONCURRENTLY, HAVE EXPERIENCED A SHARP INCREASE IN EMERGENCY ROOM VISITS, MOSTLY FROM NONEMERGENCY CASES INVOLVING MEDICAID RECIPIENTS. WITHIN A YEAR AFTER MEDICAID WAS IMPLEMENTED, AVERAGE OPD CHARGES QUADRUPLED, FROM $5 TO $20. SOME HOSPITALS HAVE NOW TURNED OUTPATIENT SERVICES INTO PROFITABLE OPERATIONS. THE BILLING PRACTICES OF HOSPITALS SERVING MEDICAID PATIENTS REQUIRE INTENSE SCRUTINY, SINCE MANY OF THESE PRACTICES ARE QUESTIONABLE. GOVERNMENT INTERVENTION IS SUGGESTED, ALONG WITH OTHER APPROACHES. BECAUSE MEDICAID SCANDALS DISCOURAGE CONGRESS FROM PURSUING FURTHER EXPANSION OF MEDICAL ASSISTANCE, ALTERNATIVES TO THE PRESENT MEDICAID SYSTEM ARE CONSIDERED, INCLUDING NO MEDICAL CARE OR AN EXTENDED INSURANCE PROGRAM RUN LIKE MEDICARE. NO REFERENCES ARE PROVIDED. (PRG)