Now, this chart shows that 99 percent of the hospital days accumulated by Medicare hospital patients were for less than 60 days; that only 1 percent were for stays longer than 60 days. Do the Social Security people question this chart at all or its relevance ?

Secretary WEINBERGER. No, I think they prepared it.

Senator MUSKIE. I think that was my impression but I can never be sure and I'd like to nail it down.

As I understand, you use the average hospital stay for Medicare patients, which is about 12 days. Is that an accurate conclusion?

Secretary WEINBERGER. Yes, that is accurate. We might make a stipulation about the source of the data. The Social Security Administration complied and published the data about hospitalization, medical care, and medical costs, and we have looked at these particular copies that you gave us this morning and they clearly are derived from those sources.

Senator MUSKIE. Then, I wonder if you would look at chart 4. Now, this is based upon the theoretical $110 hospital charge per day. I guess that is not just theoretical; that is about what the average hospital charge per day is.

Secretary WEINBERGER. That is getting to be a bargain, Mr. Chairman.

Senator MUSKIE. Let us use that figure for the purpose of comparison. In my testimony yesterday, I posed a hypothetical situation and I would like to have you tell me whether or not that is a realistic picture of some of the consequences of your proposal.

Looking at chart 4, Medicare now poses a deductible $84 but no insurance charges until after 60 days of hospitalization. Now, this is shown by the straight line of $84 at the bottom of the chart.

CHART 4.

PRESIDENT'S PROPOSAL INCREASES HOSPITAL COSTS

FOR MEDICARE PATIENTS

BASED ON $110 HOSPITAL CHARGES PER DAY

Secretary WEINBERGER. Mr. Chairman, you appreciate the fact that Medicare patients do pay a premium? They have to pay something to get Medicare.

Senator MUSKIE. Yes; under the President's proposal, there would be a $100 deductible and 20 percent insurance charge after the deductible is satisfied, beginning on the very first day. Thus, in our illustration, there would be a charge of $102 for the first day, $22 for each succeeding day, until the maximum charge of $750 is reached and that maximum would be reached on the 31st day-which is beyond the 12-day average of most Medicare patients.

Secretary WEINBERGER. It is also quite an untypical case, Mr. Chairman, because it assumes there are no physician charges; it assumes there are no drug charges; it assumes there is nothing else in there but just plain hospitalization and I have never seen a case like that.

Senator MUSKIE. Let me proceed.

Secretary WEINBERGER. Yes, sir.

Senator MUSKIE. For the 12 days we are talking about an average, it would cost $344 under the President's proposal, compared to the present charge of $84. Is not that so?

Secretary WEINBERGER. You have got to have an idea of the income of the person who is involved because our program has income related cost sharing and if in the sample we cited in our state

ment

Senator MUSKIE. This illustration is on the $5,000 income? Secretary WEINBERGER. Under the illustration cited in our statement, where an elderly person is hospitalized for 10 days, he has a

total bill of $1,650, of which the physician's bill is $450. Under current Medicare, he would have to pay $222 and under our program, if he is in the lowest levels of income, he would pay only $90.

If he was in an income category of about $3,000, he would pay $270 and he would pay $410 if he had an income of $5,000. On the other hand, the $222 out-of-pocket cost for Medicare is something less than realistic, because over half the doctors treating Medicare patients are free to charge more than that and might very well do so, and so you can have a comparison based on the highly odd case of a person who only goes to the hospital and has no other charges or you can have a comparison based on a normal situation in which there are drug bills and physician bills and then you have to know his income to get a proper comparison under our program.

CHART 6.

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

Senator MUSKIE. Now, I would like you to look at chart 6. I would like to ask whether or not this chart is an accurate description; I assume it is because, there again, it is based on data from the Social Security Administration.

Secretary WEINBERGER. Mr. Chairman, again, we tried to establish some understanding of what is meant by "annual average charge," and I assume this means all drug charges and not just drugs for chronic care.

Senator MUSKIE. I understand so. What I was told this chart represents is this: About 25 percent had no charges for prescription drugs, while a total of almost 40 percent had drug costs-that is prescription drug costs-of less than $50. And another 18.3 percent

had charges of between $50 and $100, so less than half of their drug costs would be covered. I simply want to know whether that is an accurate description of the distribution of drug costs and the impact of the administration's $50 deductible approach.

Secretary WEINBERGER. To me, the chart displays experience in drug charges for Melicare patients, up until this time. It does not provide, in its raw form, any effective information about how the administration's drug coverage would be applied except that you have established that there is a cutoff point at which the deductible would cover the full charge. That is the way I read it.

Senator MUSKIE. So the question is the extent to which charges under the administration's proposal in the future would rise above the $50 deductible.

Is there any basis on the experience up to now to make a projection, other than this?

Secretary WEINBERGER. I am not certain I understand the question, Mr. Chairman.

Senator MUSKIE. I assume that inflation, you know, would take some of these charges above the $50 deductible. But beyond that, is there any reason to believe that this distribution of 1971 was an elaboration or

Secretary WEINBERGER. No, I do not think so. As I read it--if I could add up the figures very quickly--about 35 percent of the cases would involve charges, where once the deductible was met, the individual would receive a benefit that he does not now receive under Medicare.

On the other hand, this is a 1971 set of figures, Mr. Chairman, and we are talking about a bill that will be in effect, we hope, by 1976 so there will be some movement of those bars back and forth. I would think, given the kind of inflation in drug prices that we have been talking about-though I would hope our new drug policy would reduce that inflation somewhat-that close to 50 percent of the people requiring drugs would be getting a benefit who do not have it and would not have it under the existing Medicare and Medicaid programs.

Senator MUSKIE. Without a question, you are providing benefits that are not now available.

Secretary WEINBERGER. The point of this chart is that some people would not benefit and, unfortunately, some people would have to pay the $50, but that is the point of insurance; it covers you against unexpected illnesses that may or may not happen to you and some people may not get to use all of the benefits. I would think they would be happier than those who did get to use all of the benefits.

Senator MUSKIE. I understand but let me make this point first. This information is the latest that we are able to get from the Administration. I do not criticize you for that. If we had 1972 figures, I would be delighted to have them but 1971 is the best we have got.

Second, what we are talking about here in this subcommittee is the aged; and most of them do not have supplementary income-they have to depend on their Social Security payments to pay for even these drug costs. We are trying to analyze the extent to which this pro

gram represents meaningful relief to them and I am not passing judgment on that point. I am simply trying to get the reaction of your experts to the data that we have and its relevance.

Secretary WEINBERGER. As far as we know, the data itself is accurate and the way we read it would be that somewhere between a third and a half of these people who require this particular service would get a benefit that they do not now have. In other words, 100 percent of the people do not get this benefit now and somewhere between a third and I would guess a half would get it under our plan. That is essentially what the chart means to me. Here again, the point is if you want to analyze it-that the benefit is literally designed to accrue the greatest advantage to those who have long term and continuing drug costs, high drug costs, and it is consistent with other aspects of the plan.

DEDUCTIBLE REDUCED FOR VERY LOW-INCOME PERSONS

On the other hand, the deductible is reduced for persons of very low income, recognizing the income factor. So that would bring a few more bars into play here as to people who would benefit and on that basis, I would raise that estimate but, essentially, the chart shows that a great many people who currently get no benefit at all would get a benefit under the proposal we have set forth.

Those who do not need drugs would be getting a potential benefit for a year when they might use them.

Senator MUSKIE. Did I understand you to say this deductible does not apply?

Secretary WEINBERGER. It is reduced sharply. It is not $50 for the

poor.

Senator MUSKIE. But how much?

Commissioner CARDWELL. For persons with incomes of $1,750 a year or less, it drops to zero.

Secretary WEINBERGER. Below $1,750 they pay no premium or deductible, so it would not be $50 for everybody.

Senator MUSKIE. Could you give us, incidentally, any data on the number of persons represented in each of these income groups?

Now, as I understand it, the first group is from zero to $1,749. The second, $1,750 to $3,499; the third, $3,500 to $5,249; the fourth, $5,250 to $6.999. Are those the four groups?

Secretary WEINBERGER. And the fifth group, $7,000 and above. Senator MUSKIE. Do you have any data on how many, among the elderly especially, fall into each of those income groups?

Secretary WEINBERGER. We can certainly get it. I would assume the Treasury Department would have it. We do not have it with us this morning but we can get it.*

Senator MUSKIE. Now, with respect to the first group, the maximum liability is 6 percent of income?

Secretary WEINBERGER. Yes, but no deductible for drugs and no other deductible, no contribution and coinsurance is 10 percent with a maximum liability of 6 percent of the income.

*See table, p. 907.