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The administration's proposal does include some improvements for the elderly-proposed coverage of outpatient drugs, improved mental health coverage, and catastrophic coverage. But the cutbacks included in the plan make it inadequate to meet the health needs of older Americans.

To set the framework for our examination of the administration's health insurance plan as it affects the elderly, I had charts prepared to analyze the new administration proposals, and I turn to them now.

Chart 1 illustrates how the total per capita medical bill for the aged has mounted since the beginning of Medicare while there has been a downward trend in the proportion that is paid by Medicare in recent years. The proportion that is covered by Medicare hit a peak of 45.5 percent in 1969; by 1973 this had dropped to 40.3 percent.

I might add that this slide downward to 40 percent is new information. It has just been acknowledged by the Department of Health, Education, and Welfare.

In other words, the Medicare program now covers only two-fifths of the health care costs of the aged. The amount not covered—$620 per person per year-is substantially more than the average per person bill of $145 in fiscal year 1966, before Medicare was in effect. Medicare beneficiaries write us letter after letter of the burden of these increased medical costs, and asking how they can hope to pay medical bills even with increases in Social Security benefits. So, even as it exists today, Medicare needs to be improved.

Turning to chart 2, this gives some information on what kinds of health costs the elderly incur. The chart shows that more money is spent on hospital care for the aged than any other type of health care. Of the total expenditure of more than $22 billion for the elderly in

CHART 2.
AMOUNT OF HEALTH CARE EXPENDITURES FOR THE AGED,
BY TYPE, AND PROPORTION COVERED BY MEDICARE,
FY 1973

Type of Expenditure

MILLIONS OF DOLLARS 4,000 6,000 8,000

2,000

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Other Professional Services $353

22.9% Drug & Drug Sundries?

$2,074 Eyeglasses & Appliances

$452 Nursing-Home Care . .

COVERED BY
MEDICARE

6.5%

$3,175 Other Health Services.

3.8%

Source: Social Security Administration

1973, $10.9 billion was spent on hospital care. Physicians' services were next with almost $1 billion followed by a total of $3.2 billion for nursing home care.

When we look at the proportion of each service which was covered by Medicare, we see that hospitalization was 60.9 percent covered and physicians' services 52.8 percent covered.

Nursing home care, which was the third largest expenditure, had only a miniscule 6.5 percent covered by Medicare. By far the biggest share of Federal support for long-term care is provided by Medicaid.

The bars on the chart which do not have any cross-hatching are those services which are not covered at all by Medicare. They are dentists' services, prescription drugs, eyeglasses, and appliances. Of these three services, the biggest expenditure by the elderly was more than $2 billion for prescription drugs. Alternatives to institutionalization such as home care are not even listed separately, but are included in the "other" professional services of which Medicare pays only 25 percent.

So this chart illustrates two points. First, that hospital care has a dominant role in the health care delivery system for the aged—and that dominance must be taken into account when we consider changing Medicare. Second, the chart shows how Medicare must be expanded into a reas like home health, nursing home care and drugsto cover adequately the elderly's health expenses.

Turning to chart 3, it shows how out-of-pocket charges have increased since Medicare was started. Hospital insurance deductible and coinsurance charges have risen 110 percent, and the monthly premium charge under part B medical insurance has risen 123 percent.

CHART 3.
MEDICAL CHARGES SOAR

1966

1974

PERCENT INCREASE

$40

$84

110%

HOSPITAL INSURANCE
DEDUCTIBLE
CO-INSURANCE
HOSPITAL

1st - 60th DAY
61st - 90th DAY
LIFETIME RESERVE DAYS ..

NONE
$10 DAILY

$20

NONE
$21 DAILY

$42

110% 110%

NURSING HOME/EXTENDED CARE

1st. 20th DAY
21st - 100th DAY

NONE
$5 DAILY

NONE
$10.50 DAILY

110%

MEDICAL INSURANCE

PREMIUM

$3.00

$6.70*

123/3%

$50.00

$60.00

20%

DEDUCTIBLE.
CO-INSURANCE

20%

20%

Increase scheduled for July 1974.

These increasing charges under Medicare are one reason why it covers only 40 percent of per capita health bills for the aged. These charges impose a severe burden on older people and I am convinced that it is time that this upward trend be halted. To this end, I introduced legislation in the last session of the Congress which would have frozen the hospital deductible and coinsurance at the 1973 rates. This proposal was adopted by the Senate as a part of the amendments to H.R. 3153 but was referred to committee by the House. The $84 deductible rate, and coinsurance increases subsequently went into effect January 1, 1974, thus increasing the upward trend.

In chart 4, we see how the President's proposal to combine parts A and B of Medicare and impose a 20 percent coinsurance charge would affect costs for hospital stays. This chart assumes an average cost of $110 for hospital charges per day.

It also assumes for illustrative purposes that there were no other coinsurance or deductible charges prior to hospitalization.

Medicare now imposes a deductible of $84 but no coinsurance charges until after 60 days of hospitalization in a benefit period. This is shown by the straight line at the $84 level at the bottom of the chart.

Under the President's proposal, there would be a $100 deductible, and 20 percent coinsurance charge after the deductible is satisfied, beginning on the very first day and $22 for each succeeding day until the maximum charge of $750 is reached. The maximum would be reached on the 31st day.

This proposal, it can be seen, will certainly increase costs for patients with short-term hospital stays over the current Medicare program. Medicare, as we saw in chart 2, covers a larger proportion of hospital

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CHART 4.
PRESIDENT'S PROPOSAL INCREASES HOSPITAL COSTS
FOR MEDICARE PATIENTS
BASED ON $110 HOSPITAL CHARGES PER DAY

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expenditures than any other type of care, but this proportion is likely to drop under this proposal because most hospital stays under Medicare are short term.

According to the American Hospital Association, the average hospital stay for persons over age 65 was about 12 days in 1973. In our illustration, the 12-day stay would cost $344 under the President's proposal compared to the present charge of $84.

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Turning to chart 5, this has a distribution of hospital stays in 1971 which illustrates how few patients have long hospital stays. Only 1 percent of the patients had stays of longer than 60 days. It is only this 1 percent which now pays coinsurance for hospitalization covered by Medicare. Under the President's proposal, everyone hospitalized would have to pay coinsurance charges unless they had already incurred $750 in cost-sharing charges in the same year.

Chart 6 gives us some information to help evaluate the value of the administration's proposed coverage of out-patient prescription drug costs above a $50 deductible. This chart shows the results of a survey of supplementary medical insurance enrollees-those with Medicare part B insurance—and their charges for prescription drugs in 1971, the latest figures available.

About 25 percent had no charges for drugs. A total of almost 40 percent had drug costs, but of less than $50—so the coverage of drugs with a $50 deductible would not help them. Another 18.3 percent had charges of between $50 and $100—so less than half their drug costs would be covered. Although because of rising costs there have been

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some changes in the distribution of drug charges since these figures were collected, they indicate that under the administration plan many of the aged would still have to pay for all of their drug costs or a good portion of their drug costs.

CHART 6.
AVERAGE ANNUAL CHARGE PER SMI* ENROLLEE
FOR PRESCRIPTION DRUGS, 1971

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CHART 7.
MEDICARE HOME HEALTH COSTS INCREASE-
BENEFITS DECREASE

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