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generally in the case of the large bill. The small office visit, and so forth, where he feels more free and a greater chance of collecting the bill, that is where the heavy incidence of the direct billing method takes place. He takes the risk there in collecting and the costs of collecting, and so forth, but what I would like to point out is the inconsistency here that the Secretary sees no such incentive; in fact, he tells us there is an incentive the other way in his proposal, but in describing the present Medicare proposal, he describes a move away from assignment to the economic motives and results in the cutback.

Now, yesterday, Mr. Chairman, I spoke at some length about the very basic differences in the philosophy of the approach of these two programs and it seems to me that is apparent, without underscoring it, to the members of this committee, but there was, in last Sunday's Post an article of such discernment and perceptiveness, preceding these hearings, I do not know that the author even knew that these hearings were scheduled but he could very well have been preparing this paper for these hearings because it runs just to these points. It is by Prof. Rashi Fein, who is a medical economist. He is the professor of economics at Harvard Medical School and a faculty member of the Kennedy School.

This runs so much to the point of the issue now before this committee that I would like to ask, sir, it be made a part of the record.

Senator MUSKIE. Without objection, it will be made a part of the record.*

Mr. CRUIKSHANK. Thank you. If you have no further questions, I am finished at this point.

Senator MUSKIE. Well, I think we have touched on the significant points here in this morning's hearing. I find that this bouncing back and forth of hypothetical examples can be very confusing and, of course, the Secretary wanted to steer away from any implication that the program represented any reduction for any significant number of people and anything we would get in the record to illuminate that point is instructive. I think your willingness to respond to his testimony has been very helpful.

I would like to suggest if, upon further reflection, there are other points you would like to make, we would, of course, welcome them for the record.

Mr. CRUIKSHANK. Thank you, sir.
Mr. SEIDMAN. Thank you.
Senator MUSKIE. Thank you very much. We stand adjourned.
[Whereupon, the subcommittee adjourned at 1:15 p.m.]

*See appendix 3, item 2, p. 987.

APPENDIXES

Appendix 1

ITEM 1. LETTER AND ENCLOSURE FROM HON. CASPAR WEINBERGER,

SECRETARY, DEPARTMENT OF HEALTH, EDUCATION, AND WEL-
FARE, IN RESPONSE TO QUESTIONS SUBMITTED BY SENATOR ED-
MUND MUSKIE IN A LETTER DATED APRIL 5, 1974
THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE,

Washington, D.C., May 21, 1974.
Hon. EDMUND S. MUSKIE,
Chairman, Subcommittee on Health of the Elderly, Special Committee on Aging,

U.S. Senate, Washington, D.C. DEAR SENATOR MUSKIE: In reply to your letter of April 5 requesting responses to questions relating to the administration's comprehensive health insurance proposal, we have prepared the enclosed material, which we hope you will find helpful. Sincerely,

CASPAR WEINBERGER,

Secretary. Enclosures.

Question 1. You have said in your statement that the total increase in Federal spending for the aged will be approximately $1.8 billion. Please submit a breakdown of (1) amounts which will be spent for each of the added benefits, such as catastrophic coverage, drugs, mental; (2) the total amount of savings (and extra charges to the elderly) of the cost-saving provisions; and (3) the interrelationships among these items.

answer.

New FEDERAL EXPENDITURES FOR AGED (65 AND OVER) UNDER CHIP FEDERAL

HEALTH CARE PLAN

Items resulting in increased Federal expenditures :

1. Newly eligible aged persons.-
2. Coverage of outpatient prescription drugs.-
3. Coverage of long-term hospital and psychiatric care--
4. Reduced cost sharing for classes I, II, and III---
5. Net loss as a result of the elimination of the SMI premium.--

Cost (in billions)

$0.3

1. 5 0.3 1.2 0.6

Gross increase in Federal spending----

3.9

Items resulting in reduced Federal expenditures :
1. Increased cost sharing for class IV beneficiaries--

-0.6 2. New HI taxes on Government employees and reduced Federal spending in other programs (largely Medicaid).

-1.5

Gross savings---

-2.1

$1.8

Net increase in Federal expenditures for the aged--

Question 2. To help evaluate the impact of cost-sharing provisions for various income groups of the elderly, could you please submit (1) a breakdown of the elderly population by income level ; (2) whatever information is available on present health care costs (total and out-of-pocket) and utilization by income level ; and (3) comparative figures for the non-elderly population.

Answer.

ESTIMATED INCOME DISTRIBUTION OF PERSONS 65 AND OVER ANTICIPATED FOR FISCAL 1975

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The following tables on present (fiscal year 1973) health care costs (total and out-of-pocket) and utilization of health care services for various age groups will appear, with analysis on age differences in medical care spending, in the May 1974 Social Security Bulletin.

Highlights for fiscal year 1973 reveal that:
--Of the $80 billion personal health care bill in fiscal year 1973, 15 percent

was spent for the young, 57 percent for persons aged 19–64, and 28 percent

for the aged. -An aged person had an average medical bill of $1,052, compared with $384

for a person in the intermediate group, and $167 for a youth. -The average hospital bill for an aged person was 10 times that of a youth

and nearly triple that for a person in the intermediate age group; for physicians' services, his bill was three and one-half times that for a youth and

double that for the remaining group. --Public funds paid for nearly three-tenths of personal health care spending

for the two younger groups and two-thirds for the aged. - Medicare met two-fifths (40 percent) of the aged's health bill-slightly

lower than the 42 percent figure in 1972. The smaller proportion results in part from the increase in the SMI deductible, which rose from $50 to $60 as of January 1973. The overall proportion met by all public programs was slightly higher in 1973, however, due to an increase in Medicaid spending for

the aged. -All third parties—Government, private health insurance, philanthropy and

industry-paid seven-tenths of the aged's health bill and more than threefifths of the bill for persons under age 65.

14, 383
11, 662
4, 402
1, 315
7,084
1, 856
1,239

500

14, 917 3, 424

235
201
518

66
1, 973
1, 888

3,071
3,592
1,027

364
1, 481
317

80
746

1,723 3, 234

947

321
1, 407
306
20

1, 348 357 80 43 74 11 60 746

17, 582 8, 326 3, 281

834
4, 322
1, 193

402
1, 392

11, 244
7,268
3, 156

764
4,089
1, 142

54 480

6, 338 1, 058 125

70
233

51
348
912

8, 644 3, 168

330

318
1, 798

412
2,730

250

1,416 1, 159

299

229
1,588

408
1, 164

20

7, 228 2,009

31
89
210

1,566

230

$45, 605

$27, 156

$11, 495

$8, 189

$3,305

$41, 162

$10, 997

$20, 106

$7,257

$12, 851

15, 143
12, 882
4,793
1, 370
7, 544
1, 957
1,376

540

17, 548 3, 744

255
228
613

77
2,104
2,586

3,518
3,636
1, 122

351
1, 596
| 336

87
849

1,772 3, 221 1,030

300
1,499
323
44

1, 746 415 92 51 97 13 43 849

19, 362
9, 332
3,572

895
4,643
1, 264

435
1,659

$30, 162
11, 594
8, 155
3,437

812
4,358
1, 204

82
520

7, 768
1, 177
135

83
285

60
353
1,139

9, 807 3,658

355

352
1,920

435
2,958

621

1,777 1, 508

326

258
1,687

430
1,251

20

8,030
2, 150

29
94
233

5
1, 707

601

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TABLE 1.-ESTIMATED PERSONAL HEALTH CARE EXPENDITURES, BY TYPE OF EXPENDITURE AND SOURCE OF FUNDS, FOR THREE AGE GROUPS, FISCAL YEARS 1971-73

Iin millions)

All ages

Under 19

19-64

65 and over

Type of expenditure

Total

Private

Public

Total

Private

Public

Total

Private

Public

Total

Private

Public

1971

Total.

$65, 662

$42, 441

$23, 221

$10, 678

$7,959

$2,178

$37, 332

$28, 197

$9, 136

$17, 650

$6,283

$11, 369

Hospital care
Physicians' services.
Dentists' services
Other professional services.
Drugs and drug sundries
Eyeglasses and appliances.
Nursing home care.
Other health services.

29, 300
15, 086
4,637
1, 516
7.602
1,922
3,212
2,388

1972

Total.

$72, 716

Hospital care
Physicians' services.
Dentists' services.
Other professional services.
Drugs and drug sundries.
Eyeglasses and appliances.
Nursing home care.
Other health services.

32, 691
16, 626
5,048
1,598
8. 157
2,034
3, 480
3, 127

19731

Total.

$80,048

Hospital care
Physicians' services.
Dentists' services
Other professional services.
Drugs and drug sundries.
Eyeglasses and appliances.
Nursing home care.
Other health services.

36, 200
18,040
5,385
1,680
8, 780
2, 109
3,735
4,119

* Preliminary estimates.

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