INTRODUCTION

Opponents of congressional action to establish a program of hospital insurance for the elderly maintain that such action is not needed because of the existence of the Kerr-Mills program of medical assistance for the aged and the growth in private health insurance coverage of older people.

This subcommittee has described the strengths and weaknesses of the Kerr-Mills program in previous reports. The analysis contained in the pages which follow is concerned with the ability of private health insurance to meet the needs of the elderly.

The principal areas of concern in appraising private health insurance

are:

1. The number of older people covered by insurance. 2. The adequacy of the insurance held.

3. The premium cost of insurance-price as it affects the ability to acquire and retain insurance protection.

This report is, in large part, based upon new and extensive data heretofore unavailable. We believe this information contributes to the making of an authoritative and meaningful document which should prove helpful to the Congress.

Much of the information contained herein was developed during the months of preparation for the hearings held by the Subcommittee on Health of the Elderly in April 1964 on the subjects of "Blue Cross and Other Private Health Insurance for the Elderly."2 Comprehensive questionnaires were submitted to and completed by the three largest commercial insurers of the aged; the Blue Cross Association, the four principal "State 65" insurance plans; the Health Insurance Association of America; and others concerned with the provision of health insurance to the aged.

Significant material for this report was also forthcoming from the testimony at the April hearings of representatives of the commercial health insurance industry, Blue Cross, government, and consumer

groups.

Thus, the Subcommittee on Health of the Elderly has had the opportunity to evaluate private health insurance coverage for the aged on the basis of a vast body of information, much of which was previously unavailable. At this point, we feel it appropriate to express our appreciation to those insurance companies which invested a very substantial amount of time and effort to compile data on their programs for the aged.

The conclusions of the subcommittee, based upon analysis of all available information, are outlined in the summary which follows.

"Medical Assistance for the Aged-The Kerr-Mills Program, 1960-63," October 1963; "Performance of the States, 18 Months of Experience With the Medical Assistance for the Aged (Kerr-Mills) Program,” June 15, 1962; "State Action To Implement Medical Programs for the Aged," June 8, 1961. "Blue Cross and Other Private Health Insurance for the Elderly," pts. I-III, 1964.

1

SUMMARY

Private health insurance is unable to provide the large majority of our 18 million older Americans with adequate hospital protection at reasonable premium cost.

The Subcommittee on Health of the Elderly of the Special Committee on Aging has arrived at that conclusion following many months of intensive study of the health insurance needs and problems of the elderly.

The investigation by the subcommittee developed a substantial body of information heretofore not compiled or available. In large part, these new data (included in the body and appendix of this report) lead to the following findings concerning the inability of private health insurance to meet the needs of the aged:

1. Only 9 million of the Nation's elderly-one-half of the totalheld hospital insurance policies at the end of 1962. The other half— predominately the very old, those in poor health, the unemployed, and those with the lowest incomes-were without hospital insurance coverage of any kind. They are the most difficult to insure even in terms of acquiring the cheapest and most inadequate of policies, and, additionally, are the very ones who need the protection the most. 2. The health insurance industry has reported a substantially greater number as insured-10.3 million. The subcommittee is convinced that this is an inflated figure, concocted to create an illusion of great strides by private health insurance in extending coverage to the aged. In reality, however, the "stride" was no more than a "limp." Based on our hearings and investigation we are convinced that facts were distorted and manipulated in an effort to create an impression that Congress need consider no further action to meet the hospital insurance needs of the elderly.

For example, the Health Insurance Association of America told the Ways and Means Committee of the House of Representatives in November 1963 that "more than 2 million" aged were covered by individual company mass enrollment programs. The source they cited was their own publication which upon inspection was revealed to state "well over 1 million"-not the same as "more than 2 million." But reports to this subcommittee from the companies concerned show that at most not more than 750,000 people are covered under the individual company mass enrollment programs.

The inaccurate data furnished by the health insurance industry was used to support the "Minority Views" included in our subcommittee report of October 1963 on the Kerr-Mills program which contained the following statement:

*** there has been an intensive development and sale of new health insurance plans for older people. These have included mass enrollment plans requiring no physical examination. Several companies have sold over 1 million each of such plans. [Emphasis supplied.]

Again, reports to the subcommittee from the companies involved, indicate that all of the individual company mass enrollment plans put together insure not "several million" but less than 750,000 different people.

3. Only one in four older people holds adequate hospital insurance under the definition of adequacy established by the American Hospital Association. Well over one-half of all commercial hospital insurance policies pay only $10 or less a day toward hospital room and board charges which now cost an average of $20. Commercial insurance coverage of hospital "extras"-drugs, laboratory fees, X-rays, etc.-is equally poor. This is significant because these services cost about as much as the room and board bill.

4. For many years Blue Cross has come closest to providing adequate hospital insurance for the aged. But now Blue Cross, under competitive and cost pressures, is employing a variety of devicesdeductibles, coinsurance, and dollar limits on benefits-which reduce the extent of protection. Those aged who have been adequately covered in the past will find their hospital insurance covering smaller and smaller proportions of their bills in the future.

5. The older Blue Cross subscriber is being subjected to double barreled pressure. Not only are his benefits being cut, but his premium charges are being increased with painful regularity. The cost problem is further aggravated by another development to the point where the older Blue Cross member is virtually being priced out of the market. Blue Cross plans have or are seeking to abandon the concept of "community rating" in favor of "experience rating." "Experience rating" bases premium charges on the extent of use of insurance benefits. The aged, who use far more hospital services than other subscribers, will be particularly affected. As an example of the impact of "experience rating," the chairman of the New York State Joint Legislative Committee on Health Insurance Plans told the subcommittee that premium charges to the elderly might rise as much as 100 percent within 3 years under the "experience rating" system proposed by the New York City Blue Cross Plan―the largest in the country.

6. The best of the commercial health insurance plans-the so-called "blue ribbon" policies-are so expensive that they are beyond the economic reach of most elderly persons. Although they offer only partial protection, such policies now cost an elderly couple from $500 to $600 a year, with the strong probability that further premium increases will be forthcoming.

Since the median income of aged couples in 1962 was only $2,875, it is obvious that the vast majority of them cannot afford this kind of protection.

7. The so-called "State 65" programs, where several insurance companies combine to operate a pooled-risk plan, have made virtually no progress in meeting the needs of the aged. They are. costly now and will cost even more in the future. They have built-in factors such as lack of growth in numbers covered and the increasing age of participants which raise serious questions concerning their long-term stability.

In summary, the extensive data and testimony presented to the subcommittee led us to the firm conclusion that private health insurance with respect to the aged-is losing ground, not making progress.