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differs marketedly from other state reimbursment programs. - fact, although several other states (e.g., Maryland and Georgia)

have in place reimbursement systems which use DRGs for making

rate adjustments, New Jersey is the only state to have applied a

DRG-based system to all acute care general hospitals and classes

of payers.

With this in mind, the evaluation effort focused on

two related questions.

First, from a political standpoint, how

did this rather sweeping policy innovation come about?


second, is there something truly unique about New Jersey that

allowed for the development of such a system, or can we expect to

see the system diffuse to other states?

In order to answer these questions, the evaluation team's

political scientists gleaned data from newspaper clippings, posi

tion papers, government documents, and; most importantly, conducted extensive interviews with all of the key participants. [3]

From their research emerged both a detailed chronology of events

as well as a careful examination of the actors and institutions

that shaped them.

Unlike some of the other, more quantitative, portions of the

evaluation, it is difficult to adequately capture the answers to

the two questions posed above in the limited scope of this survey


However, in response to the question regarding the

evolution of the system, the analysis points to a confluence of

factors which acted to create the conditions required for the

advent of the system.

Among the more salient elements respon

sible for the system's introduction were:

(1) pressure from Blue Cross, whose premiums are regulated by the state, to control

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reimbursement rates to hospitals, (2) the publication of a report

charging that the hospital industry in New Jersey was, in effect, regulating itself, (3) the election of a new Governor and his

subsequent appointment of a Commissioner of Health who was deter

mined to bring rate regulation within the state's purview and to restructure the incentives that hospitals faced, (4) the avail

ability of a federal grant for developing an experimental reim

bursement program, and (5) the poor financial

positions of the

state's urban hospitals.

In addressing the question of whether or not the New Jersey

system could potentially be transferred to other states, the

authors of this part of the evaluation noted in their conclusion


"New Jersey was unique. What happened there will not
happen anywhere else. But it should be clear that some
of the broad social forces that led to New Jersey im-
plementing a DRG program operate in other parts of the
country as well. High and rising health care costs,
troubled urban hospitals, beneficial Blue Cross legis-
lation, fiscal crises in the states, high Medicaid
budgets, and political entrepreneurs who are ambitious,
dedicated, and skillful all exist elsewhere. The list
of feasible alternatives from which reformers can choose
is short and the problems of the health system are un-
relenting. In other states those problems might not
lead to case-mix regulation. They might not lead to
DRGs. But they might. The more the New Jersey system
is seen as an effective response to the problems of the
hospitals and of the state, the more likely it is that
DRG rate regulation will be adopted elsewhere."[4]

While much remains to be learned from the New Jersey ex

perience with the DRG system, in short, it is our view that the

system has led, and will continue to lead, to the adoption of

better management practices on the part of hospitals, increased

- communication between physicians and hospital administrators,

more accurate data, and a heightened awareness of the costs

[blocks in formation]

will reduce hospital costs and hence expenditures on the part


consumers of hospital care.



1. In an effort to develop an allocation statistic which is more sensitive to the amount of nursing resources actually consumed, the New Jersey Department of Health has recently completed analysis of the number of nursing minutes required by patients in each major diagnostic category. The use of the new statistic in the DRG program is currently under consideration by the State's Health Care Administration Board.

2. The members of the evaluation team were drawn from Coopers and

Lybrand, the National Health Care Management Center of the University of Pennsylvania, Agnew Peckham and Associates, Inc., and Yale University's Center for Health Studies.

3. Dunham, A.B. and Morone, J.A. "A Political History of DRG Rate Regulation in New Jersey". In DRG Evaluation Volume IV : Political Evolution and Organizational Impact. Princeton, N.J.: The Health Research and Educational Trust of New Jersey, 1983.

[blocks in formation]

Grimaldi, P.L. and Micheletti, J.A.Diagnosis
Related Groups :

A Practitioner's Guide. Chicago,
Pluribus Press, 1982.


May, J.J. (ed.) Diagnosis Related Groups. Topics in Health
Care Financing, Vol. 8, No. 4.
(Summer 1982).

New Jersey Hospital Reimbursement Under S-446 : Elements and Effects 1981.. Princeton, N.J.: New Jersey Hospital Association, 1981.


Perspectives on Diagnosis Related Groups. Cleveland, он:
Greater Cleveland Hospital Association, November 7, 1980.

Wasserman, J. DRG Evaluation Volume I : Introduction and Overview. Princton, N.J.: The Health Research and Educational Trust of New Jersey, 1982.

Mr. RINALDO. Mrs. Abrams.

STATEMENT OF ESTHER ABRAMS Mrs. ABRAMS. I have been a resident of Princeton for 38 years, and I have also traveled to Trenton for many activities, so I am very happy to see both our Congressmen on the Select Committee on Aging.

I am proud and appreciative of the opportunity to testify here today as a representative of the Older Women's League. Ours is the first national organization to focus exclusively on the concerns of older women. Our members are working for changes in public policy that will reduce the inequities older women face today.

By far, one of the greatest problems older women share is obtaining access to affordable health care. On the whole, women in the United States experience aging very differently than men do. The most important of these differences are found in longevity, marital status, and income.

Women make up 60 percent of the population age 65 and over, and by the age of 75 there are twice as many women as men. Thus, because of the age differences in longevity, women outnumber men 2 to 1 in the older age categories, where health care costs and use are highest.

Then, too, there are very large differences in the proportions of men and of women over age 65 who are living with a spouse. Forty percent of women age 65 to 74 are widowed, while this is true of only 8 percent of men in that age group.

For those age 75 and over, 70 percent of the men, but only 22 percent of the women are still married. This is partly due to longevity, but also due to the fact that men generally marry younger

In 1981, of the approximately 7.5 million elderly living alone, 6 million or 80 percent were women. Of the elderly poor, 75 percent are women. At any adult age, there are very large differences between the incomes of men and women, but for those age 65 and over, the differences become dramatic and appalling.

For men over the age of 65, the median total money income in 1981 was $8,173; for women $4,757. In that same year the official poverty level for a person living alone was only about $300 less than the median income for all women over the age of 65.

Although women are 60 percent of the elderly, they comprise 75 percent of the officially poor of these elderly.

There are some differences in the types of health problems men and women face in their later years. Older men have higher rates of fatal diseases, such as heart disease and cancer. Older women tend to suffer more from long-term chronic diseases, such as arthritis, diabetes, visual impairment, and osteoporosis. Thus men 65 and over have more surgery and more days of hospital care, women have a longer average length of stay reflecting the differing martial status. A larger portion of older women than men are transferred from hospitals to other facilities for continued care. And, finally, women comprise 70 percent of the residents in nursing homes. All three related, no doubt, to the large percentage of older women who live alone.


Thus, since women are so likely to end up living alone and often in near poverty, and since they must from an early age stretch a smaller income over a longer life span, their great concern about being able to afford health care during a time of ever-increasing costs is very understandable.

Even though the elderly are happy to have medicare, this by no means pays for all their health care. Thus, lack of coverage and growing out-of-pocket expenditures are a major problem for the aged poor, the majority of whom are women.

First, medicare requires that beneficiaries share cost through deductibles and copayments. Second, patients must make up the difference when physicians charge more than what the Government deems reasonable charges. And, finally, many health needs are not covered by medicare, and most significantly by women. These are things like at home prescriptions, hearing aids, dental and eye care, and long-term custodial care.

Older women, on average, now spend one-third of their median annual income on health care.

Inflation of medical costs has greatly exceeded general inflation over the past 10 years. Combined with budget cuts during the past 3 fiscal years, the result has been a heavier financial burden for older persons, and rising prices and increased cost sharing for health care.

Proposals in the administration's fiscal year 1984 budget, many rejected by Congress last year, would further increase the cost of health care services for most older persons. The changes will hit hard at older women particularly, since they have a higher incidence of chronic diseases than men, but also less income than men to pay for the care they need.

The administration has proposed cuts of over $1.8 billion in medicare for fiscal year 1984. Almost all of these cuts will mean increased costs to medicare patients. Under the guise of catastrophic coverage, the administration proposes requiring medicare patients to pay part of the cost of hospital stays from the 2d to the 60th day of care, in addition to the existing 1st day deductible of $350.

Current copayments now required after 60 days in the hospital would be dropped. It may seem like a good idea to insure older persons against financial devastation from a long hospital stay, but the proposal is actually a gift horse for the elderly. The average length of stay in the hospital is only 11 days. Even for women age 85 and over, the average length of stay in 1978 was only 12 days. Only about 2 percent of medicare beneficiaries would benefit from this proposal

The administration's rationale for this proposal is to discourage beneficiaries from overutilization of services. Not only is there no evidence of this abuse by the elderly, but conveniently ignored is the fact that doctors, not patients, order hospitalization.

The Reagan administration has also included in the budget several other proposals which would result in increased cost sharing, delayed eligibility, all of which will make less accessible adequate health care for older women.

The health care system, including medicare, is based on an acute medical model with cure rather than care as its central focus. To

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