Per Medicare enrollee, Part A benefit payments in fiscal 1967 ranged from $66 in Mississippi to $191 in Nevada. The national average was $134.

Part B payments varied from $23 in Alabama and $24 in Alaska, Kentucky, Mississippi, and South Carolina to $72 in California. The national average was $38 in fiscal 1967.

Differences of this magnitude cannot be explained solely in terms of charges per unit of service. Because of higher charges, more people in California meet the deductible, and thus a greater proportion of their cost is covered by Medicare than in the Southern States.

Some idea of the Medicare limitations can be obtained from the size of payments that must be made for old-age-assistance recipients after Medicare charges have been met. (Non-OAA recipients, of course, pay such charges from their own pockets.)

In one State, New Hampshire, welfare paid the following average amounts on Medicare bills:

Inpatient services_
Outpatient services...

Home health agency services..

Physicians' services...

$59. 75 5. 89 47.88

15. 40

Thus, far more than the averages shown could easily be uninsured by Medicare for an individual beneficiary after his Medicare benefits were exhausted.

B. MEDICAID: UNEVEN PROTECTION AND UNCERTAINTY

Medicaid programs are designed individually by each State using certain minimal Federal criteria and guidelines. The majority of the 50 States have such programs and these provide the five basic services required; namely, inpatient hospital care, outpatient hospital care, skilled nursing home care, physicians' services, and laboratory and X-ray services.

Among the 40 States and three other locations 27 provide the five basic services to medically needy persons; 16 limit the benefits to the categorically needy.

Prescribed drugs and home health services are made available in 36 States, with 23 of the 36 paying for them for both categories of needy. Thus over half the States do nothing to help the low-income aged with drugs. Lesser numbers of States furnish dental services, appliances, and types of treatment not included as physicians' services. The medically needy aged citizen living in California or Connecticut, Minnesota, New York, or North Dakota is eligible for 19 or 20 kinds of services while his counterpart in Alabama or Tennessee, Alaska, or Indiana has not been eligible for any title 19 services.

Forty-one percent of the people eligible for Medicaid are at least 65 years old. Because Medicare absorbs much of the hospital costs and a share of physicians' costs, only 45 cents of each Medicaid dollar is spent on the elderly. Much of this expenditure is for nursing home care and drugs; these services are either limited or not included under Medicare. The lack of coverage of many needed services that poor, ill people should have and the fragmentation in the delivery of the services that are provided are both disturbing. All too often, when a question

of funding comes up, cuts are made in Medicaid at the expense of the clients, not the providers.

Medicaid could be a useful vehicle for improving the delivery system for care of people were it not riddled with contradictory policies in its implementation.

III. CAN PRIVATE HEALTH INSURANCE HELP?

The Division of Research and Statistics of the Social Security Administration periodically reports on the extent of private insurance purchased by or on behalf of the U.S. population. According to this source about half the aged population has supplemented its Medicare coverage with some form of private protection. The private policies are financed by the aged themselves or result from employee benefit provisions continued after retirement. Like private insurance generally, these policies vary widely in the scope of benefits (table II) and in the cost of premiums.

TABLE II.-PRIVATE HEALTH INSURANCE ENROLLMENT AS OF DECEMBER 31, 1967: NUMBER OF PERSONS AGED 65 AND OVER WITH SOME COVERAGE OF SPECIFIED SERVICES OR EXPENSE

While 47.8 percent of the population aged 65 and over has some coverage for hospital care (where Medicare and Medicaid leave little for the individual to pay in ordinary circumstances), much lower proportions of the elderly have other kinds of private insurance protection.

Only 15 percent had obtained insurance for home and office care from physicians; only 10 percent had insurance for out of hospital drugs. Fewer than 83,000 aged had any dental insurance.

Many of the policies the aged hold are designed to pay the two deductibles and the Part B coinsurance of Medicare and not a great deal else. Some apply only to hospitalized illness in the traditional Blue Cross-Blue Shield posture.

6

The Blue Cross Association recently reported that prior to Medicare there were 5.6 million people aged 65 and over among 57 million Blue Cross members or about 10 percent of their enrollment. They also reported that by the end of 1967 some 5.2 million aged had enrolled for their coverage which complements Medicare. Statistics prepared by BCA on just under 2 million such enrollees in 28 Blue Cross plans showed that a total of 233 per 1,000 aged enrollees used the benefit in 1967. There was almost no need for full-pay days (days beyond the Medicare benefit of 90 days)-only 5 days per 1,000 enrollees. The deductible and co-pay benefit applied to 167 days per 1,000 enroiles. Since Medicare is used at a rate of at least 3,100 days per 1,000 beneficiaries, the Blue Cross benefits are not heavily used except for meeting the initial deductible of $40 of the hospital bill (now $44).

Other insurance policies provide straight dollar indemnities for each day in the hospital, sometimes increasing the amounts at the 21st and 90th days.

Usually incompletely, other cash indemnity plans cover ambulatory care and include prescriptions, eye examinations, physical examinations, etc., that are excluded from Medicare.

Prepaid group practice plans have worked out ways of dovetailing benefits so that their Medicare members can continue to receive routine physical examinations, eye examinations, prescribed drugs, and other services not included in Medicare's benefits.

Overall, however, it is apparent that many of the same reasons why voluntary health insurance could not provide the kind of protection the aged needed still hold.

Premiums for adequate benefits are beyond the means of many; the complementary coverage purchased is more often than not limited so that benefits are paid only when the Medicare patient is in the hospital. It is true that a number of the collectively bargained health plans have provided for benefits indefinitely, for pensioned union members and their spouses, but other older people have felt that the premium they are obliged to pay for Part B Medicare benefits was as much as they could spend. The sum of $8 monthly or $96 annually for a couple, in addition to the deductibles and coinsurance the beneficiary must meet, and the expenses for drugs, etc., takes all their modest budget can manage.

"Blue Cross Reports," December 1968, pp. 7-8.

PART TWO

HOW MEDICAL COST INFLATION INTENSIFIES THE PROBLEM

Health care expenditures per aged person in fiscal 1967 averaged two and three quarters times those of people under age 65. (Chart F.) It becomes clear, then, that inflationary tendencies in the health field will have intense impact upon care provided for the elderly, and that public and private sources of this support are certain to be strained during periods of dramatic cost increases. When medical care is excluded from the general price index, medical care prices rose two and a quarter times as fast as other prices in the period since 1957-59.

I. EXTENT OF TODAY'S HEALTH CARE INFLATION

During the period 1960-65, when prices generally were rising less rapidly than at any time since 1946, the Consumer Price Index for daily service charges of hospitals also slowed down-from an annual 8.3-percent rise to a 6.3-percent rise.

In that year marked by the beginning of Medicare in July-medical care prices rose nearly twice as fast as the annual rate for the 1960-65 period.

But the deceleration stopped abruptly in 1966.

In 1967 the index for hospital charges rose by 19.1 percent and in 1968 by 13.2 percent.

Physicians' fees rose 7.1 percent in 1967 and 5.6 percent in 1968. In the 3-year period ending December 1968, hospital daily charges have risen 52 percent and physicians' fees 21 percent. Overall, medical care services had risen 25 percent.

FIVE SPECIAL PROCEDURES

The Social Security Administration arranged with the Bureau of Labor Statistics in the summer of 1965 to collect prices for three surgical procedures (cholecystectomy, prostatectomy, and fractured neck of femur) and two in-hospital medical services (myocardial infarction and cerebral hemorrhage) that are common among older persons, though not necessarily limited to them. Prices are collected for these five procedures but are not incorporated in the regular sample of the CPI. It was believed that fees for such services might be sensitive to the new Medicare program and hence would provide baseline data to assess the impact of the program on physicians' fees.1 These five special procedures are the reason for hospitalization for many elderly people. The average increase of 21 percent found for doctors' charges generally for the 36 months ending December 1968, compared closely with increases of 17 to 21 percent for the five procedures.

As reported in Research and Statistics Note No. 6, 1969, Social Security Administration, Office of Research and Statistics.