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I might add, Mr. Chairman, that if we did not have the deductible and the coinsurance provisions in medicare that the 40-percent figure that I mentioned, the 40 percent of all medical costs of the elderly that are covered under this program would be increased, we think, to about 50 percent.

Senator SMATHERS. Say that again.

Mr. David. Yes, sir. We estimate that at present, of the total medical expenses of people 65 and over, the medicare program covers about 40 percent of those total expenses.

I might mention here that outside of what is covered by the medicare program there are all the long-stay cases in psychiatric hospitals and the expenses that are covered in veterans' hospitals, which are not under this program, long-stay nursing home care cases, and drugs, of course, private duty nursing, and a variety of other things that are not covered and are not really subject to coverage under any kind of an insurance program.

But we have 40 percent in total, this is our estimate, 40 percent of the total expenses of the people 65 and over that are covered by medicare. That 40 percent would be increased, we think, to about 50 percent if there were not the provisions for the deductibles and the coinsurance, by which I mean, as you know, the payment by the patient of 20 percent of the cost.

Senator SMATHERS. However, as I understood you a moment ago, you don't want to eliminate all of that.

Mr. David. No, I think it is much too early to say that it would be feasible or prudent or desirable on the basis of what we know now to eliminate those deductibles. We are recommending, though, that the deductible on the outpatient hospital services, the $20 deductible be eliminated.

Senator SMATHERS. This may not be the time to ask it, but it keeps occurring to me and maybe any one of you can answer. I was down making a speech in a town in Florida and the president of the local medical society apprehended me, I guess that would be the right word, and said, “I have a genuine complaint." I asked him what it was.

He said:

It does not make sense under the Medicare Program to have the doctors who are today generally operating out of clinics with therapy machines and with radiologists operating the clinic for us to take a doctor out of there and go out 14 miles to see some out-patient. When we get out there we can't carry the equipment we need to take care of him so we have to tell him when we get out there, “You come back in." So what has happened? You have an hour out of the office driving out and driving back. We don't have the facilities with us. The only thing we can carry is the black bag unless we are strong as Teddy Kennedy, in which event we can carry a few more things. But we don't have the facilities with us so all we do is go out there and say to these people to come back to the office the next day and we have to charge them or get it charged to the clinic. It does not make any sense.

What kind of an answer would you give to that?

Mr. David. Mr. Chairman, that trip out there for 14 miles is not in any way connected with the requirements of the medicare law or regulations or program in any way. There is nothing in medicare that calls for this doctor to make the 14-mile trip that he would not otherwise make.

Senator SMATHERS. Isn't there some provision in the law which does require that if a doctor signs up or takes an assignment of some kind that patients may call him?

Mr. David. No, sir.

Dr. SILVER. The law makes no such requirement, Senator. It only involves reimbursement. The law does not prescribe in what fashion the physician is to be paid.

Senator SMATHERS. I thought he made a good point. The fellow was not so concerned about the fact that it would be the money involved, he said it was the time involved.

Now, you have a doctor there who raised his hand.

Mr. Weiss. Of course, time is money. One is that this is not the usual situation. According to the information we have, only one out of every 20 physician visits are out of the office or out of the clinic or out of the hospital.

Senator SMATHERS. I would suspect that is right, but one out of 20 is a pretty high percentage, I would suspect, in a situation where the doctors are getting together for, I think, sensible reasons. You can ask one fellow to look at your back and one fellow to look at your foot, and the dentist could do this, and so on.

The clinics are naturally becoming hospital centers and I think it is a good idea. The whole point this fellow was making, and he made it vociferously to the point that I got the idea that this was a rather common practice, that somewhere if they participated in this program they were required to go out and see these people.

Mr. DAVID. No, sir.

Dr. SILVER. This is a general problem in medical practice in the United States today. There was a time when most or almost the whole of medical practice was in visiting patients and in seeing them in their homes, and today this has been reduced considerably.

Senator SMATHERS. Right.

Dr. SILVER. For many of the reasons you point out, that so much more can be done and needs to be done in the hospital or in the doctors' office. But it is a general problem of medical practice.

Patients still like the comfort and security of having the doctor come visit when they feel sick.

Senator SMATHERS. I want to ask you this question as a blanket question because I am going to send this doctor your answer: Is it a fact that there is no provision of the medicare program which requires the doctor to make a visit to a patient's home on the call of the patient in order for the doctor or the patient to qualify under the medicare program!

Mr. DAVID. There is no such provision.
Dr. SILVER. No such provision.
Senator SMATHERS. No such requirement?
Mr. David. Nothing remotely resembling it.

Dr. SILVER. The doctors don't sign up for medicare, a patient goes to see his doctor and then the bill that is incurred under those circumstances

Senator SMATHERS. Suppose they come in and they are treated for awhile and you put them on an outpatient status, they are required to be on outpatient status. At that point is there a provision which would require that the doctor make the trip, 14 miles out to the farm?

Mr. DAVID. No.

Senator SMATHERS. And 14 miles back and take an hour and a half out of his office.

Dr. SILVER. There is no requirement in law, it is a matter of conditions of medical practice. If he is responsible for the patient, when the patient calls him, he has an obligation.

Senator SMATHERS. If he is doing it under his own decision.
Dr. SILVER. Yes.

Mr. David. The only thing I can think of, and this is a pure speculation, is that the doctor has heard so much about socialized medicine, and he has heard so many times medicare is socialized medicine, he actually believes it and he thinks that maybe we have gone over to socialized medicine and that the Government has set up all the rules and has told the doctors that they have to go and make this trip. There is nothing at all resembling that in the medicare program.

Senator SMATHERS. All right. This fellow told me about taking some necessary gear for treatment in the back of his car and finally ended up breaking some of the gear and this general condition was chaotic because the machine would not work out there. He had to bring it all back broken and he had to call the insurance company, et cetera. But your answer is a flat blanket"no"?

Mr. DAVID. A flat blanket "no".
Senator SMATHERS. All right.

EXPENSES NOT COVERED

Mr. David. Mr. Chairman, I might mention some of the expenses that are not covered by medicare programs. This relates to the point that I mentioned about 40 percent of the costs of the elderly are covered. The items not covered include such things as drugs, eye glasses, hearing aids, psychiatric care and hospital care beyond 90 days. Also excluded are expenses deriving from the coinsurance provisions that I mentioned and the deductibles.

The hospital and other benefits of part A of medicare probably pay for 25 percent of the aggregate costs of older persons and part B probably pays for another 15. That is where we get the total. For persons who are hospitalized the combined benefits cover perhaps half of their aggregate medical expenses. In other words, people who are hospitalized have higher expenses, and medicare covers a higher percentage of those expenses than is the case where the person is not hospitalized.

For older persons with very large medical bills in the year, of course, the portion covered would be much higher because the deductible has a smaller effect in those cases.

Mr. Chairman, we would like to submit for the record copies of several articles in the social security bulletin which present the statistics that we now have available, and also we have for the record if you would like to have them a number of charts that show data projected to the end of June to reflect the progress made in medicare in the first year of operation.

Dr. SILVER. I believe you have those in your folder, already, Senator.

Senator SMATHERS. All right. We will insert it into the record as part of the appendix.6

& The material submitted for the record begins on p. 159.

(Subsequent to the hearing, Senator Smathers asked the following questions in a letter to Mr. David :)

JUNE 30, 1967. DEAR MB. DAVID :

1. On pages 26 and 37 of the typewritten transcript you discussed potential effects of reduction or elimination of deductible or coinsurance in Parts A and B in Medicare. To judge by your remarks, careful estimates on consequences of reductions in deductibles are now available. I would like a summary of such estimates.

2. On the matter of deductibles, I have enclosed statements from Mr. Langer and the Reverend Cervantes of St. Louis and Mr. William Hutton of the National Council of Senior Citizens. I would like to have your comments on their arguments for reduction or elimination of deductibles.

You also referred to H.R. 5710 and said it would simplify hospital procedures. I would like additional commentary on that bill.

3. In your testimony, you referred to a survey of health service expenses of older persons before and after Medicare, and you said preliminary results would be available "fairly soon". Will they be available by July 15? If not, we would like to have them as soon as they are available.

4. What is the rationale for the limitation in the Social Security Act upon mental health benefits under Medicare?

5. The President, in his message to Congress of January 23, 1967 entitled "Aid for the Aged", stated :

"I am directing the Secretary of Health, Education, and Welfare to undertake immediately a comprehensive study of the problems of including the cost of prescription drugs under Medicare."

Can you provide any information for the record as to how that study is progressing, and when a report on this subject will be issued ?

Once again, I would like to thank you for your help and interest. We will welcome any other information you may care to send to us as the Subcommittee inquiry continues. Sincerely,

GEORGE A. SMATHERS. (The following reply was received :) DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE,

OFFICE OF THE SECRETARY,

Washington, July 19, 1967. DEAB SENATOR SMATHERS : Please find enclosed the replies of Mr. Alvin M. David to your questions during testimony on June 30, 1967. Sincerely,

JOHN T. GRUPENHOF, Special Assistant to the A88istant Secretary for Legislation.

RESPONSE TO QUESTIONS PASED IN JUNE 30, 1967, LETTER TO MR. ALVIN M. Dave

FROM SENATOR SMATHERS IN CONNECTION WITH HEARINGS ON COSTS AND DELIVERY OF HEALTH SERVICES TO OLDER AMERICANS HELD BY THE SUBCOMMITTEE ON HEALTH OF THE ELDERLY

1. We are not able to estimate the extent to which the deductible and coinsurance provisions have served to deter people from obtaining health services. There have been studies of other programs which give some indication, but no definite finding, that a difference in use seems to have occurred where the beneficiary pays a share of the cost compared with where he does not. These studies provide no data on the effect of cost sharing in relation to the medical necessity of the care.

We have developed estimates on the cost of eliminating the deductible and coinsurance amounts under part A and part B of the medicare program. The enclosed statement, Attachment A, prepared by Mr. Robert J. Myers, Chief Actuary for the Social Security Administration, provides information on the estimated costs associated with the elimination of these provisions.

2. Several witnesses commented on the deductible and coinsurance amounts under medicare and we share with these witnesses a concern that health services be available to all aged persons who need them and that medicare beneficiaries should not be deprived of care they need because they cannot afford to meet the deductible and coinsurance amounts. However, we are not prepared to make any recommendation to modify the deductible or coinsurance provisions. One point to consider in this connection is that a reduction in cost-sharing which carried with it a substantial increase in premiums might have the effect of reducing enrollment in medical insurance with the entire medical care costs being borne out-ofpocket rather than only the deductible and coinsurance. Such larger out-of-pocket payments would have a greater inhibiting effect on use of care than would present cost-sharing. Mr. Robert Langer pointed out that States are faced with a heavy financial burden in making payments towards the cost of medical care for assistance recipients who are medicare beneficiaries and that the States are severely hampered in the assistance they can provide for their non-aged population. Of course, the States have been relieved of almost all of the cost for hospitalization of medicare beneficiaries and this reduction in the State burden amounts to a significant portion of the health care expenses for these beneficiaries that the States were responsible for before the enactment of medicare.

The enclosed statement, Attachment B, entitled Simplification of Medicare Procedures for Hospitals, furnishes additional information concerning the provisions of H.R. 5710 that I indicated would simplify medicare procedures for hospitals.

3. I am informed that the first results of the April 1966 survey of health service expenses of aged persons before medicare are expected to be available by the end of September and a full report by the end of the year. I will send you copies of these reports as they become available.

4. The law places a lifetime limit of 190 days on inpatient psychiatric hospital services that can be paid for under medicare. (However, this limit does not apply to any hospitalization for physical illness that a mentally ill person might undergo.) There is an additional restriction on the hospital insurance benefits available to a person who is an inpatient of a psychiatric hospital at the time he first becomes eligible for medicare. In the latter type of case, inpatient days in a psychiatric hospital during the 90 days immediately preceding the first day of eligibility are deducted from the 90 days of inpatient hospital services to which he would otherwise be entitled under medicare during the spell of illness beginning with his entitlement. Without these restrictions on hospital insurance coverage for persons in psychiatric hospitals, medicare would be paying in many cases for custodial-type care.

There is also a restriction on the amount of medicare benefits that will be paid in any one year for outpatient psychiatric care. This restriction was modeled on similar provisions in private insurance and specifically on the high-option indemnity plan of the Federal Employees Health Benefits program. We understand that these private insurance limitations were developed because some expensive psychiatric services are based in greater part than other medical services on a choice by the patient not necessarily related to the seriousness of his illness, as to the amount and nature of services he receives, as, for example, in the case of psychoanalysis. It was decided to follow the private insurance precedent and apply an annual maximum on the expenses for these services for which reimbursement can be made; this annual maximum is the lower of $312.50 or 6272 percent of the total bills for these services in a year.

5. On June 1, the Secretary of Health, Education and Welfare announced that a special task force had been selected to conduct a comprehensive study of prescription drugs. This study is now underway. The Chairman of the Task Force is Dr. Philip R. Lee, the Assistant Secretary for Health and Scientific Affairs. In announcing the formation of the Task Force, the Secretary stated that it would "examine a wide range of factors which are involved in the use of prescription drugs and will offer its recommendations within six months." [Enclosures]

JULY 5, 1967.

MEMORANDUM

From: Robert J. Myers.
Subject: Cost Effect on Medicare Program of Eliminating Deductible and Co-

insurance Provision. Request has been made for the cost effect of eliminating all deductible and coinsurance provisions under the Medicare program. This proposal will be considered separately for the Hospital Insurance system and for the Supplementary Medical Insurance program.

Under the original cost estimates for the HI program, its estimated level-cost was 1.23% of taxable payroll. On the basis of this cost estimate, the estimated

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